PlayStation and Switch sales are suffering as the gaming wars heat up

By Michelle Toh, CNN Business

Two of the world’s biggest video game companies are feeling the pressure as the console wars heat up.

Shares of Sony and Nintendo, the makers of the PlayStation and Switch respectively, stumbled Thursday as the two Japanese giants cut their forecasts for sales of the consoles.

The fall comes as both companies grapple with the ongoing global chip shortage, and just weeks after Xbox-maker Microsoft announced plans to acquire Activision Blizzard in a blockbuster deal worth nearly $70 billion.

Sony on Wednesday lowered its forecast for the popular PlayStation 5, saying it expected to sell 11.5 million units in the fiscal year ending in March. That’s down from 14.8 million units previously forecast.

The company’s shipments and guidance cut were “disappointing,” said Kazunori Ito, a director at Morningstar.

Sony’s overall games and network services unit, meanwhile, also posted an 8% drop in sales for the quarter ended December, compared to the same time the previous year.

The company’s shares fell 6% in Tokyo Thursday, despite beating analyst forecasts overall.

The group’s wins were largely attributed to its film and television division, including “licensing revenues from the Seinfeld comedy series, and the success of the latest Spider-Man movie,” Yu Okazaki, an analyst at Nomura, wrote in a note Wednesday.

On Thursday, Nintendo, too, said that it may continue to suffer from global supply chain issues this year.

The Kyoto-based giant once again reduced its sales forecast for the Switch, which was a big hit earlier in the pandemic.

It now expects to sell 23 million units by the end of the fiscal year, which concludes in March, down from previous projections of 24 million and 25.5 million units last November and May.

Nintendo’s stock closed down 2.8% Thursday, ahead of the presentation.

But the company’s overall results were broadly in line with expectations, according to Ito.

The shipments of Switch consoles was “not as bad” as the market had feared, he told CNN Business.

There were also some bright spots. Nintendo hiked its software sales forecast by 10% through March, to 220 million units.

That side of the business has proven “solid,” and drives the bulk of Nintendo’s profits, even allowing it to slightly raise its overall financial forecast for the year, noted Ito.

War of consoles

Analysts have warned that the sale of Activision Blizzard to Microsoft could pose a serious threat for Sony, which has competed with the Xbox for decades.

With Activision Blizzard, Microsoft would add popular series such as “Call of Duty” and “World of Warcraft” to its library — as well as the nearly 400 million monthly active players that come with them.

However, this week, Sony made news of its own by announcing its acquisition of Bungie, the developer known for its creation of titles like “Halo” and “Destiny.”

The deal would help Sony bolster its intellectual property and make its overall “gaming business more competitive,” analysts at Nomura wrote in a note Tuesday.

Nintendo, meanwhile, is expected to be more shielded from competition concerns related to Activision Blizzard because “people who want to play Nintendo’s games purchase Nintendo’s hardware,” Ito added.

“Therefore, Nintendo can [still] differentiate its platform from others.”

— Diksha Madhok contributed to this report.

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