Barclays' Gamers Guide For The Holiday Season

• Barclays' Christopher D. Merwin mentioned that Black Ops III seems to be up by double digits y/y.
• There are positive underlying growth trends in the video game industry, as it enters mid-cycle, Merwin noted.

In November, Black Friday price cuts for PS4 from Sony Corp (ADR) SNE and Xbox One from Microsoft Corporation MSFT helped boost hardware sales growth to 17 percent y/y, from 3 percent y/y in October.

Since the price cuts have been reintroduced for the Holidays, hardware sales growth could remain elevated through December, analyst Christopher Merwin said.

“Physical software sales (ex handhelds) were flat y/y in the month, despite a crowded release slate including Black Ops III, Fallout 4, and Star Wars Battlefront,” Merwin mentioned.

He added, however, that when accounting for y/y growth in digital downloads [which is estimated to be more than 25 percent of total industry-wide sales this Holiday Season, versus high-teens last year], software sales rose 9 percent y/y.

For Activision Blizzard, Inc. ATVI, physical sales for Black Ops III grew 4 percent y/y. This, coupled with a y/y doubling in digital sales, translates into 21 percent y/y growth, significantly ahead of Barclays' estimate of 6 percent for 4Q.

As for Electronic Arts Inc. EA, Star Wars Battlefront units were tracking broadly in0line with Barclays' 13M unit estimate for FY16. This is already fully priced into the company’s stock at current levels, Merwin commented.

Bethesda Softworks indicated that 12M copies of Fallout 4 were sold on its launch date. Fallout 4's Metacritic rating of 88 was also higher than 82 for Black Ops III and 74 for Battlefront.

The analyst wrote, “Despite Fallout 4's breakout success, Battlefront and Black Ops III still posted very strong sales figures for November - which underscores the positive underlying growth trends in the video game industry as it enters mid-cycle, in our view.”