Nintendo's "insane turnaround" driving holiday sales - Analyst

With Black Friday and Cyber Monday now behind us, we can officially say that we're in the holiday shopping season, which is typically a massive spending period for the video games business and tech/entertainment in general. In fact, according to Adobe, this Monday was the biggest online shopping day in US history, with a record $6.6 billion spent - up 17% over 2016's Cyber Monday. Black Friday wasn't a bad haul either, with $5 billion in sales generated and Americans even spent $2.9 billion on Thanksgiving day itself.

Some of the biggest sellers, apart from Apple and Samsung products and devices like Chromecast and Roku, included video games, highlighted by the Nintendo Switch and Super Mario Odyssey. PlayStation VR and Xbox One X were also mentioned as hot sellers.

While we're all still waiting on official data to come in from The NPD Group, analysts we chatted with stressed that Nintendo is definitely the story here, as it has been for much of 2017. In fact, according to IDC, Nintendo is almost single-handedly driving the hardware market with its Switch bundle sales.

IDC research director Lewis Ward commented, "My preliminary total home console hardware shipment total in North America (US + Canada) in 2017 is coming in close to 15 million bundles, up nearly 30% compared to 2016's total of about 11.6 million bundles shipped. Nearly all of this increase is due to Switch: Nintendo shipped less than 400,000 Wii U bundles last year in North America. This year alone, Switch will ship over 5.2 million in the region. That's an insane turnaround.

"I think Black Friday shows that the audience for fancy graphics is limited and if you offer something new and unique like the Switch does, consumers will go for it"

David Cole, DFC Intelligence

"What I can say is that we shouldn't lose the forest for the trees: The biggest story in the console space in 2017 is that Nintendo's back with a vengeance. My research does imply that PS4 will nevertheless outsell Xbox One overall in North America in 4Q17 and for 2017 as a whole. I'm also expecting 4Q17 hardware bundle shipments to be up about 25% compared to 4Q16 in North America, and as I said, the big spike here is due to Nintendo's rebound."

Sony's already touted that it's had its best Black Friday in history, but Xbox One X seems to be performing admirably for a console priced at $499. Analysts had already doubled their estimates at the start of the month, but the question now is whether the high-fidelity 4K well is going to run dry.

"I think overall there is an issue of limited demand for a high-end game system," DFC Intelligence's David Cole remarked. "The Xbox One X is now selling to the people who have a lot of money and want the latest and greatest but that audience will dry out quickly. The PS4 overall is doing well but the PS4 Pro has underperformed.

"So I think Black Friday shows that the audience for fancy graphics is limited and if you offer something new and unique like the Switch does, consumers will go for it."

Even so, with the Xbox One X doing better than expected and Xbox One S seeing heavy discounting, Cole is expecting solid results for November and December, despite the fact that Xbox One "performed miserably this year."

On the software side, Nintendo's Super Mario Odyssey has been the proverbial lay-up, tagging along quite nicely with all those Switch bundles people have been fervently snatching up. From a third-party perspective, though, Cole and Wedbush Securities' Michael Pachter agreed that Call of Duty: World War II was the real winner. Cole also cited Ubisoft's Assassin's Creed Origins as a top performer that's breathed new life into the franchise.

"Going out on a limb here, but with Star Wars Battlefront 2 reviews likely hurting sales, will predict Call of Duty: WWII as best selling CoD ever," Pachter said on Twitter.

In an investor note, he added, "Activision Blizzard's Call of Duty: WWII appeared to be the most popular game available last week, with Best Buy offering the lowest price we saw at $39.99, representing a $20 discount. A Best Buy location that we visited had completely sold out of the game by Friday morning. Our positive checks followed two earlier disclosures by GameStop and the game's publisher. Last week, GameStop disclosed that launch sales of the newest Call of Duty were up 64% in dollar terms from those of its predecessor a year ago. On November 8, Activision Publishing announced worldwide sell-through over the game's first three days of over $500 million, with overall unit sales at launch that had doubled year-over-year globally.

"Our channel checks last week increase our confidence that the newest Call of Duty can sell-in well over 20 million units in its launch quarter, returning the franchise to the heights seen prior to last year's disappointing Call of Duty: Infinite Warfare."

It's worth noting that despite some negative sentiment around Star Wars Battlefront 2 due the loot boxes controversy, Pachter still maintains that the game will be able to produce ample sales. "We continue to believe that the loyal Star Wars fan base will enable the game to match the success of its 2015 predecessor," he said. The original Star Wars Battlefront has shipped over 14m units so far.