The U.S. video game industry has been aiming for a recovery with increased sales in 2023, and that momentum continues this year. With inflation under control and price pressures easing, consumers have recently increased spending on discretionary items, boosting video game sales.
Total spending on video games in the U.S. will be $57.2 billion in 2023, up from $56.6 billion in 2022, according to a report from the Entertainment Software Association and Circana. This includes sales for all categories including physical and digital full games, downloadable content, and portables. Subscription spending across PC, console and virtual reality platforms.
Total spending on content was $48 billion last year, up from $47.5 billion in 2022. This was primarily due to his 13% increase in digital download spending across console games.
Hardware sales were strong, totaling $6.6 billion in 2023, while accessory sales increased 4% to $2.6 billion from $2.5 billion in 2022.
Video game sales hit an all-time high during the peak of the pandemic as consumers increased their investment in indoor entertainment. However, the situation changed rapidly once pandemic restrictions were lifted and the economy reopened. Outdoor entertainment options are back.
This caused video game sales to decline in 2021 and turn for the worse in 2022 as inflationary pressures began to hit consumer spending. The Fed has adopted a strict monetary tightening campaign, raising interest rates by 525 basis points since March 2022.
Rising prices caused consumers to cut back on spending on discretionary items. There was also a lack of quality title releases in 2022, further impacting sales.
However, the inflation rate has started to moderate from its peak of 9.1% in June 2022, and is currently hovering around 3.1%. Easing prices has allowed people to spend more freely. Also, last year saw a flurry of new titles being released and starting to attract gamers to the market.
The industry is poised for near-term growth as the Federal Reserve prepares to start cutting interest rates this year, which should further ease price pressures.
Up-and-coming stocks
microsoft (MSFT – Free Report) is one of the leading video game manufacturers and manufacturers of hardware and accessories. MSFT has expanded its reach in the industry and is a console pioneer.
Microsoft's expected profit growth rate for this fiscal year is 18.6%. The Zacks Consensus Estimate for current-year earnings has improved 4.4% over the past 60 days. MSFT has a Zacks Rank #2 (Buy).You can view See the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Light and Wonder Co., Ltd. (northwest – Free Report) is a leading developer of technology-based products and services and related content for the gaming, social and digital gaming industries worldwide. LNW operates in three business segments: Gaming, SciPlay, and iGaming.
Light & Wonder's expected profit growth rate for this fiscal year is 113.7%. The Zacks Consensus Estimate for current-year earnings has improved by 6.3% over the past 60 days. LNW currently carries a Zacks Rank #3 (Hold).
electronic arts (EA – Free Report) is a leading developer, marketer, publisher and distributor of interactive games (video game software and content). EA delivers game content and services through multiple distribution channels as well as directly to consumers (online and wirelessly) through online portals. EA games can be played on video consoles, personal computers, mobile devices, tablets, and e-readers.
Electronic Arts' expected profit growth rate for this fiscal year is 29.7%. The Zacks Consensus Estimate for current-year earnings has improved by 0.8% over the past 60 days. EA currently carries a Zacks Rank #3.
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