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  • Writer's pictureHahn Lee

Getting Back into Video Games

Updated: Jul 5, 2020

July 3, 2020

I used to cover the video game sector during my equity research tenure at Jefferies between 2002-2003. At the time, PlayStation 2 (PS2) was the dominant gaming console having launched in March 2000, but Microsoft wanted to make inroads into the category, so Gates & Co. launched the original Xbox in November 2001.

That was the golden era, I suppose, as the PS2 is the best selling console of all time with 155 million units sold worldwide (the Nintendo DS ranks second with 154 million units sold). The original Xbox ranks 19th overall with 24 million units sold - not great, but also not bad for a debut. I wish I owned the Topps Xbox rookie card.

Current generation console sales have PlayStation significantly outpacing Xbox. Sales of the most recent Sony console, the PlayStation 4 released in 2013, remain robust. In May 2020, Sony announced that PS4 lifetime sales stood at 110.4 million units, making it the second highest selling home gaming console of all time. By stark contrast, sales of the Xbox One, originally released in November 2013, have been modest, but still meaningful. While Microsoft does not release Xbox sales figures, industry data suggests that the Xbox has sold approximately 46.9 million units (as of May 2020), which would rank it 15th on the lifetime sales list.

Despite the market share gap between the PlayStation and Xbox hardware, I really admire that Microsoft stuck it out and continues to iterate on the Xbox, while launching new gaming businesses (e.g. Xbox Live) to grow its platform. For the fiscal year ended June 30, 2019, Microsoft’s gaming revenue was $11.4 billion. Gaming revenue increased $1.0 billion or 10%, driven by Xbox software and services growth of 19%, primarily due to third-party title strength and subscriptions growth.



($ millions)

Fiscal Years Ended June 30:

  • 2019 -- $11,386 (+10% YoY)

  • 2018 -- $10,353 (+14% YoY)

  • 2017 -- $9,051


While consumer behavior has changed significantly over the last decade and a half with the emergence of mobile / social gaming, esports, VR, etc., I am excited to get back into analyzing the sector… especially ahead of this fall’s launch of the next generation of consoles -- the PS5 and Xbox Series X.

More to come...

(Sources: Forbes, company filings)

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