Gaming industry sees a slowdown amid flurry of earnings

Yahoo Finance’s Daniel Howley joins the Live show to discuss gaming company earnings, AMD’s gaming chip segment, the PC market, and the outlook for gaming.

Video transcript

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- Welcome back, everyone. Plenty to chew on for gamers. After results hit this week, Activision Blizzard saw sales drop again, but come in ahead of expectations on Monday. And yesterday, EA Sports, it's in the game. Electronic Arts comfortably beat on the top line.

Today it was Nintendo's turn, reporting a drop in sales for the Switch on supply chain issues. So what is the big picture? Is talk of gaming's demise post-COVID exaggerated? "Yahoo Finance's" Dan Howley has the story and the answers for us. Dan.

DANIEL HOWLEY: Yeah, I'll say it is exaggerated, but looking at the results right now, they are not pretty, Right so you talk about Nintendo, they had unit sales down 23% year-over-year. Software sales were down 8%. Microsoft, their Xbox products and services fell 6% year-over-year. Hardware sales, down 11.

Sony, 13% decline in software revenue. Unit sales were down 6%. Activision Blizzard, though they did beat, their bookings were down more than 14%. EA net bookings, they were down for full games 41%. And console and PC net bookings were down, but mobile net bookings were up.

Just to give you an idea. Bookings are revenue from games overall, but with the online payments removed. So this basically shows you that there's this hangover happening in the gaming industry where people have nothing to do but sit on their couches for a year or two, and so they went and they bought games. And so now we're seeing them return back to normalcy, to a degree.

And so that's why we're seeing these unit sales fall. It's not just that though. There's other factors. Obviously, the war in Ukraine. A lot of companies pulled out of Russia. Russia is one of the 10 biggest areas for game sales, so that hits the companies. There's, as you alluded to, the chip shortage. That's hitting some of the console makers, their ability to actually put consoles on the market. So people can't purchase them.

Oh yeah, inflation is a problem. Are you really going to spend $600 on a console or $60 on a game when maybe you can't afford your groceries otherwise. So there's these different factors that are kind of coming to the surface. And I think when you look at the gaming industry in general, it does not look pretty.

Now that being said, this has been a very dry, dry year for games. There's been one really big cultural touchstone game, "Elden Ring," which by the way I beat and I put 150 hours in. But there's not been another huge game along those lines. And I think that also feeds into it.

Now there were some games that were going to be huge. Those are coming out next year. They got delayed. We're talking about things along the lines of the sequel to "Legend of Zelda-- Breath of the Wild." Bethesda has some huge games coming out. So we do have that coming in 2023.

So far in 2022, though, there hasn't been anything that's really knocked anyone's socks off. And they think it's the COVID hangover, it's the war, it's inflation, and it's the fact that there's not really any games that are just blowing up.

BRIAN SOZZI: Dan, I've got AMD shares down about close to 3% in the early going. Part of it is because they warned about the state of the PC market, but the other part I would argue, they saw a slowdown in gaming chips. Is it something specific to AMD or is it that slowdown you're talking about?

DANIEL HOWLEY: Well, it's specific to AMD in that they build the chips for the Xbox and the PlayStation. Those are still incredibly hard to come by. So there were people that maybe were able to get them at some point, but they still are incredibly hard to get. If you need a hookup, I can get you. I follow all the accounts on Twitter. So I've done it with my friends.

But I do think that it's part of the issue that the consoles are still so hard to come by. As far as PCs, you know, you guys were talking before the PC market, it's just collapsing, right? Everybody got home in 2020 and said, oh man, I need a computer at home, and now they don't need another computer.

You don't upgrade your computer like you might upgrade your phone, right, if you're the type of person that does it every two years. You don't need a new computer now. Right, this thing is chugging along. It's so old that you can't even see the S and C keys anymore.

BRIAN SOZZI: --was going to break off. Sorry.

DANIEL HOWLEY: Yeah, this is a perfect example. It's chugging along. People do that. So I think for gaming, for the graphics card space, people got those when they needed to. And so they don't need them right now, unless you're an enthusiast. Plus, let's not forget that there were some crypto miners who didn't necessarily-- or don't necessarily need those graphics cards anymore to power their rigs.

BRIAN SOZZI: Which might have implications to the forward outlook for NVIDIA. Dan Howley, we'll let you go chug along back upstairs to the office. Appreciate it.