Earnings Reports

Nintendo

This past week we got some information from EA and Nintendo and we are going to take a closer look at what we can see from all of these reports that would mean anything to the average gamer.

First up on the docket is Nintendo earnings report Q1 earnings that runs from the start of April until the end June 2019.

There isn’t really a rhyme or reason or way in which these stats can flow so let’s just dig into it. Overall it was a pretty great quarter for Nintendo who are still riding strong on the success of the Nintendo Switch and its evergreen titles.

This past quarter, Nintendo had two million plus selling games which was Mario Maker 2 in 3 days at 2.42 million and Mario Kart 8 deluxe at 1.2 which is impressive considering that game has been out for a while now. The pure definition of an evergreen title and that brings the total sales for that game to 17.89 million. Nintendo first party games have always had such a strong lifespan. With the addition of Mario Maker 2, Nintendo now has 16 games for the Switch that have sold at least a million copies. As you may have guessed, all 16 of these titles are first party Nintendo games, which brings us right to first party Nintendo software sales are up 82.9% vs the same time frame in 2018.

It will be interesting to see what the next million sellers are at the next reporting as that will go from July to September. This will bring us right to the launch of the new Nintendo Switch Lite as well as The Legend of Zelda: Links Awakening.  I anticipate seeing Mario Maker 2, Links Awakening, Mario kart 8 and probably a few more based on the new people that will be entering the ecosystem with the Nintendo Switch Lite. 

In terms of software sales, Nintendo boasted 22.63 units sold which is up around 25% vs same time frame last year which is pretty impressive at the rate the system and software keep pacing forward. This now brings the total amount of Switch software sold to a total of over 210 million units in just a little over two years on the market. The attach rate is pretty decent too as each Switch owner has approx. 6 games in their library. This is a solid attach rate for the system but nowhere near as good as Nintendo has been in the past with some systems like the GameCube, DS, and Wii as they all had about a 10 game sold per every console.

As for how the sales broke down for the quarter, Nintendo Switch had 2.13 million units sold which brings the grand total up to 36.87. A couple of interesting things note, the first being that sales were up around 15 percent based on the same time frame in the previous year and secondly, this now bumps the Nintendo Switch into the top 15 consoles of all time in terms of sales as it bumps the Nintendo 64 down a spot.

The only figure they gave that seemed a little odd was that Digital sales only made up about 25 percent of their total revenue. As the Nintendo Switch is a hybrid console that can be quite portable I would have expected that digital sales would have been much higher especially considering that the market average seemed to be closer to 50 percent and in some cases a lot more. I assumed that the hassle of trying to pack all the cartridges with you on the go would have been enough for consumers to purchase most of their content digitally. The only explantation I could come to is that Nintendo games just have a certain nostalgia to them that you can't find with other systems. This combined with the fact that most Nintendo games, especially first party titles retain their value until the end of the consoles lifecycle and this could explain why so many people are purchasing their software in the physical format still.

Electronic Arts

Switching gears a little and moving onto EA, they also had their Q1 FY2020 earnings report last week. They were also happy with their performance and as a result the stock rose about 10 percent after the report until the end of the week. Let’s take a closer look at what helped EA regain confidence that it had lost in the past few weeks.

Right away the biggest takeaway is that operating results came in significantly over expectations for Q1. Net revenue was 1.21 billion which came in over expectations by about 80 million and was up from 1.14 billion during Q1 the previous year. As mentioned when talking about Nintendo, it came as a little shocking how little their digital sales accounted for considering the era we are currently living in. Electronic Arts posted digital sales of 701 million for the quarter, which represents almost 76% of their total business for the quarter. The digital sales could be anything from full downloads, to live services games and subscription fees just to name a few. They said these digital sales were strongly driven by interaction in their live service games including Apex Legends, The Sims 4 and FIFA.

In regards to Apex Legends, EA noted that it has outperformed expectations with significant growth on a weekly and daily basis. They are quite pleased with its success that they are increasing their investment into Apex for content development. Hopefully this leads to more meaningful content and not just cosmetic and other methods for EA to get your money. They also noted that Apex is going to be a major competitor in Esports this year, which leads to believe they have some modes or changes coming that will change the way this game is streamed because right now its not winning the streaming war.

Finally, the mentioned how happy they were with the performance of season 2 and its robust changes including a better battle pass, ranked mode and map changes. They also noted that there will be a huge event happening in mid August and that they will be delivering one of the most fan requested features. I am not sure what that could be but one of the top requested features is solo or duo modes. We don’t have long to wait to find out more about this as we are only a few weeks away.

Modern Warfare MP Reveal

One game that EA and Apex Legends need to look out for is Modern Warfare. On Thursday we got a better idea of what this years Call of Duty multiplayer will look like, as Activision hosted a public event that was streamed on their YouTube as well as their Twitch channel. The event featured many of the worlds top streamers, a smart idea that has worked out for other games in the past including the aforementioned Apex Legends. Not only did we get a taste, but we also were informed of the open beta dates which happen in a little over a month on September 12th and will feature the much talked about feature cross play.

On the live panel, the developers mentioned that if the single player was a reimagining then the mulitplayer was more akin to a whole new game with a fresh but familiar feel. They wanted to make a love letter to Modern Warfare. Gun physics have been built from the ground up including all new recoil patterns as well as bullet travel properties. The game features fluid movement including mantling, side leaning and the ability to rest your gun on a solid surface for stability. In terms of map design, they wanted to get away from the traditional three lane maps that COD has been known for since the original Modern Warfare and get into new map design with realistic environments. Some realistic environments features verticality in buildings and doors playing a large part in the game now. It sounds similar to how Apex Legends uses doors. You can open and shut them, you can block them, you can peek them and you can blow them off.

Some of the new modes shown off at the event include a night mode in which you can choose to use night vision goggles but at cost. It seems as though you are trying to decide on the risk vs reward of using the goggles. Speaking of night vision, the high end edition of the games comes with a fully functional set of night vision goggles. There will be a variety of modes from the 2v2 close quarters mode called gunfight that we talked about last week to modes that feature 32v32. According to the developers this is just the tip of the iceberg and this is just what the game is launching with. It seems as though they just want to make sure they can ship the game with modes they have tested plenty already and will save the bigger modes for post launch. In regards to post launch all content including maps will be free to everyone so as to not divide the player base. Considering the cross play functionality there should be an issue with player base segregation. My big question here is that if post launch content is free then how are they going to monetize this game. Will it just be cosmetics and gun skins like most other games or do they have something else planned. Do they plan on talking about this before the game launches or they are just going to launch and release it upon the world.

The last thing I want to talk about with call of duty was the levelling and customizations available. Most guns have between 5-7 slots for custom gunsmithing with each slots featuring an average of about 10+ options. This feature looks great and will allow you to tailor the game to your specific play style. In terms of unlocking a lot of those attachments you will need to level up and the good news here is that levelling works across all modes. It doesn’t matter if you are a SP player, MP player or Spec-Ops player, your progress will carry from one mode to the next.

There was plenty to take in and digest from the videos Infinity Ward showed off as well as all the streamers who have uploaded footage. At the end of the day it’s another Call of Duty game that at least looks to be moving in the innovative direction rather than just putting a reskin on the game. The beta will launch soon and will be available a few days early on PS4 for those who preorder, so if you want to get your hands on the game before October 25th then be sure to check out the open beta when it drops early September.

Ninja Moves To Mixer

You can be sure that Modern Warfare will be a very popular streaming game when it launches. This week Microsoft made a very aggressive move to try to get Mixer to become the worlds biggest streaming site. Everyone is trying to make a play for Amazons Twitch audience and this week Microsoft signed a deal with famous Fortnite streamer Ninja to play exclusively on Mixer. This was quite a bold move by Microsoft as it without a doubt did not come cheap although no specific financial details were revealed or time frame. There are only a few examples that we can take from streaming as it feels like it still in its infancy. We know that Ninja was paid 1 million dollars from EA to play Apex Legends for 48 hours.

I think the move of Ninja to mixer is a very smart play by Microsoft and is more about Xbox and the long play than it is about the streaming wars. The long play here is that there is a new Xbox on the horizon. 

There isn’t much I know about Ninja other than the fact that he plays a lot of Fortnite and that he got his start professionally playing Halo. 

Microsoft has done pretty well for itself during the lifespan of the Xbox one. Not winning this console generation wasn’t all bad for Xbox. You could argue that losing this generation was the best thing that could have happened to them as it forced them to make lot of changes and reevaluate how they approach business. This brings us back to the Ninja exclusivity deal. When you look at the fact that he started playing halo professionally and the next Xbox is launching with a new halo  and you have a formula for success. We don’t know anything about the length or amount or terms of the contract but you can be sure that playing Xbox exclusive games is part of that contract. What better way to sell the newest Xbox and it’s crown jewel than to get one of the biggest streamers playing the game before launch. 

We are also constantly hurdling towards new technology and streaming is becoming more widespread every day. The ease of use the current Xbox has to stream on mixer could not be easier. I have to imagine that the next box will be just as easy if not easier. Even if kids aren’t a fan of halo, they will hopefully buy an Xbox for the steaming capabilities, and then after that the world we live in is all about subscriptions. Get the kids to sign up for Xbox live, to game pass to mixer pro and whatever else Microsoft might come out with before launch. If the next Xbox and the PS5 are quite similar as they always are then it will be who has the better marketing and messaging.  What better messaging for the kids than to buy the console that your favorite streamer uses to play halo infinite. 

This is a very expensive, slowly developing plan devised by Microsoft but one that should pay dividends when the next console generation starts.  Microsoft hasn’t become the powerhouse they are today by accident 

Game Stop Layoffs

As Microsoft makes moves towards digital and streaming, GameStop is making moves for physical and retro. In a story we just talked about a few weeks ago about the issues that have recently plagued GameStop. I mentioned that the current state of the company seemed like it was a little bloated in terms of the amount of stores it has. It seems that they are doing what they can to make sure that GameStop survive and hopefully thrive for the foreseeable future. Unfortunately, that means that this week the company had to make some layoffs.

Earlier this week there was an internal email that was leaked on social media regarding the layoffs. I spotted this article on IGN by Matt Kim. The email reads “This realignment results in an expanded size of GameStops regions and districts, therefore reducing the number of field leaders required to run the organization. Unfortunately, with these changes, there are more than 50 field leaders who have been impacted and will be leaving the GameStop team. This includes regional, district, loss prevention, and HR leaders. These leaders will be missed and we wish them success in their future endeavours”

Overall this seems in line with what is expected for a company that is taking on water quicker than it can bail it out. Im surprised about a few things after reading this, first, the fact that it has taken the company this long to realize it needs to implement cost cutting measures and second, that it was only around 50-60 employees. GameStop is a company with 22 000 full time employees and at least that amount in part timers as well. This isn’t even a quarter of a percent. I understand that it is still a unfortunate thing when anyone loses their job but there is going to be a lot more of this coming from GameStop in the future as the company will probably have to lay off a few to protect the rest of the employees who are dependant on the company.

There isn’t much else to talk about regarding this story I just thought it had some importance due to the fact that it was just brought up a few weeks back.