News Game Plus - Week Ending April 26
NPD CHARTS MARCH
Gaming was bound to see an increase in the month of March as we finally were able to play some highly anticipated titles that ended the drier spell of January and February. Games like Animal Crossing: New Horizons, Doom Eternal, Resident Evil 3, and Persona 5 Royal headlined the month. However, it was anyones guess as to just how well March gaming sales would be or even if they would be much higher. There was always the possibility that it was just being reported on more than normal due to the lack of gaming stories available.
With the NPD group revealing the data for March it was clear that it wasn’t just being reported on due to lack of content but that sales definitely trended upwards for the month. There is a lot of information to digest from the report but seems like no better place to start than overall sales for the month. 1.6 Billion dollars was roughly the amount that was spent in the gaming industry last month, which includes pretty much everything but digital sales from certain publishers. Considering how much digital sales likely increased last month and have been increasing steadily as time passes these sales could be even higher.
As we generally have been reporting on the NPD almost every month, one thing that has become evident is how game sales have been shrinking due to the lead up to the next generation. Most people that were planning on buying a gaming system have either bought one or are now waiting for the next generation. Likely in large part to the global pandemic and the self quarantine initiative, the gaming industry was up 35% compared to March of 2019.
Since NPD started tracking sales this was the second highest March that they have on record with the highest sales in the month coming way back in March 2008 with 1.8 billion. You could even make the argument that if all digital sales were included, then it might even have reigned supreme. Back in March of 2008, the Wii, PS3 would have been on the market for around two years and the Xbox 360 would have been on the market for three. Compared to today and how two of the three major consoles are coming to an end of their life cycle and these sales are impressive.
Sales across the board were up around 30-35% in hardware, software and accessories but even that massive spike coudln’t offset the decline that 2020 has seen so far with Q1 of 2020 down around 4% compared to Q1 of 2019. Almost half of the sales of the month were attributed to software with almost 800 million. Leading the way was Animal Crossing: New Horizons, which according to the NPD report, had the third highest launch month for sales and units only trailing behind Smash from 2018 and from 2008. This is insanely impressive, for a few reasons, including that it only had a little over a week on the market, and it wasn’t a tentpole Nintendo franchise like Zelda or Mario. The amount of quality Nintendo games that have been released since March 2008 and Animal Crossing New Horizons now has the third highest launch month is quite a feat. Congratulations to Animal Crossing: New Horizons and everyone who made that game possible.
As for the hardware side of the sales, all three consoles saw an increase in sales, compared to the same time last year. Microsoft and Sony both saw their consoles get an increase in sales by about 25% which is impressive considering how close we likely are to the launch of the PS5 and the Xbox Series X. Without a surprise, the Nintendo Switch was the big winner of the month showing an increase of over 100% compared to last March and now ranks as the highest sales for the console in the month of March. This includes 2007 when it launched on March 3 and went on to sell 906 000 units in its first month.
Focusing on the actual games, new games that charted in the top ten included Animal Crossing at one, MLB The Show at three, Resident Evil 3 at four, Doom Eternal at six, and Persona 5 Royal at 7. Important note is that Animal Crossing and Doom Eternal don’t include digital sales.
Takeaways from the top ten include Doom Eternal placing at sixth but Bethesda does not disclose Digital sales and their target market is more likely to purchase this game digitally during normal times, which means that during these quarantine periods their digital sales are likely to be amplified. I see Doom’s placement on this chart as misrepresented. Persona 5 placing seventh is also pretty great for a platform exclusive but also impressive because RPG’s don’t tend to get the mainstream success and it’s also an updated version of a game that was released in 2017.
GameStop Covid Updates
This week GameStop emerged from their quarantine to give us an update on how things inside the gaming retailer have been and what the road ahead looks like. As we know GameStop did not close their doors without a fuss as they declared themselves essential. GameStop claimed they were essential due to their offerings of working from home solutions including webcams, microphones and other hardware of that nature. I wasn’t even aware that GameStop sold this type of hardware, if I am ever in need of this type of equipment, I usually check Amazon first, then best buy and then local specialty stores. It does seem like a large coincidence that by the time they closed their doors was after Animal Crossing and Doom Eternal had been shipped.
Publicity didn’t look good for the company as reports were coming out often regarding the working conditions inside and how GameStop was taking the safety of their employees into consideration. Cleaning supplies and toiletries were limited and if needed employees were told to go buy some and get reimbursed, social distancing was not being implemented at the store level and many other stories of the same ilk. GameStop did eventually close their doors on March 22 across the globe. Nearly a month removed, how does GameStop plan to adapt to the worldwide pandemic? No one knows how long this will continue, and although Microsoft and Sony still seem like they will be releasing GameStop life preservers this fall, a bigger concern is that GameStop is not the type of company that can afford to lose revenue.
Firstly, GameStop does seem to understand how dire the situation is and they are planning on cutting some of the executive salaries. The salary reductions will affect the senior management team and board of directors, who in case you forgot, does include former Nintendo of America President, Reggie Fils-Aime, as of April 20th. CEO, George Sherman will receive a reduction of 50%, CFO Jim Bell will receive a reduction of 30% and the entire Board of Directors will be reduced by 50%. There are also other employees across the company who will be receiving reductions between 10-30%. When brought onto GameStop, Shermans Base salary was 1.1 million approximately a year ago.
I couldn’t find any exact figures for their Board of Directors but it does seem like for large companies that are traded public on the NYSE, the average cost for the whole board is somewhere between 2-3 million. I have no idea how accurate this is and it is quite a wide range but the pay has to be pretty good if Reggie came out of retirement to sit on the board at a company in turmoil.
Overall, it goes without saying that these are very smart moves initially, especially when combined with other methods the company is taking to navigate these uncertain times. Sherman, along with the other reduced salaries are a good start, but could have been done a few weeks sooner as some of the worlds biggest companies had their CEO’s reduce their salary with some even forsaking their salaries completely around a month ago already. The key to business is to adapt fast and I guess adaptability is what got GameStop here in the first place.
The money the company will be saving on salaries from the senior team combined with having plenty of available cash on hand. According to the news release “as of April 4, 2020, the company had approximately $772 million in total cash and liquidity” Combine these methods with many stores being reduced hours and pay but retaining 90 percent of expected sales and GameStop should be just fine until the launch of the PS5 and the Series X, which will then give them plenty more time to try to continue to figure out how to stay relevant.
As for how sales have been going, Sherman has been pleased with the way that GameStop has adapted during the current times. Approximately two-thirds of GameStop’s locations have remained operating by using reduced methods. Similar to most companies that have remained operating with doors closed, GameStop has been offering the ability to buy online and pickup in store or ship directly from store, which does help speed up the process as the package doesn’t need to travel far. According to Sherman “We have retained over 90% of our planned sales volumes in our stores that are conducting curbside operations”
Without digging into their previous quarterly fiscal report, its likely that these are extremely reduced projections due to the spring typically being a slower period and the lifecycle ending on two consoles. Nonetheless, its great news that GameStop is able to retain such a high percentage of their anticipated sales. It’s likely that the amount of extra people that are gaming at the moment, as seen in the latest NPD is offsetting the doors closing on most stores.
As for some concrete numbers, in an update to their sales data GameStop reported that for the nine week period ending April 4, 2020 the company saw store sales decline around 23% but that does include the economic impact the pandemic had with many stores having reduced operations for at least a portion of March. The bright spot for GameStop when some of the data is looked at in a different light, is that year on year sales grew in the fiscal period that ended March 21, 2020 when all the stores closed to the public by 3%. This is great news for GameStop even during a supposed down year for gaming sales.
Moving forward is where GameStop begins to step in the mud in my opinion. I felt that GameStop reacted too slowly when closing down their stores, as many of the areas they operate in required that non essential business be closed to reduce the spread of covid-19. Although according to the news release, all GameStop stores in Australia have remained open. The statement GameStop gave was “ the company has begun the process of reopening stores in Italy, Germany, Austria, and the states of both South Carolina and Georgia and is preparing for the potential to reopen in other operating countries and states in the following weeks”
I don’t see the rush here to reopen the stores where everyone touches everything, especially if the stores have been retaining approximately 90% of the projected sales. Some of these areas are parts of the earth that have been affected by the pandemic the most including Italy. There is also nothing in terms of huge blockbuster games like Animal Crossing and Doom Eternal coming out soon. The next games that I think would be high sellers would be Minecraft Dungeons at the end of May with its global appeal and Ghost of Tsushima at the end of June. That is if the PS4 exclusive doesn’t get delayed similar to The Last of Us 2. Outside of those two games, I don’t see GameStop needed to capitalize on day one launch sales, which makes me not understand why they are rushing to reopen stores as I only see bad publicity coming from it.