Will Video Game Consoles Experience a Successful Black Friday?

At first glance, it appears to be a remarkable year for video game console sales, with significant growth observed in major markets. Notably, PS5 sales have surged by over 100% in certain European countries, while Nintendo Switch sales have seen impressive year-on-year growth despite approaching its seventh anniversary. However, beneath the surface, there are concerning trends that warrant attention. The global console market growth is largely driven by PlayStation 5, which has experienced exponential growth since 2022, attributed to the severe stock shortages that plagued the market last year. Although PS5 is currently delivering record-breaking numbers, this is partly due to pent-up demand resulting from the lack of availability in 2022. The success of the Switch is notable, but its growth is primarily concentrated in Japan and other export territories. In contrast, Switch sales have declined by 21% in the US and 7% across Europe. Meanwhile, Xbox has faced a challenging year, with declining sales in most major markets during its third year on sale. According to GfK, PS5 held a 43% market share of all console sales in the UK over the last 12 months, which has risen to 51% over the last six months. GfK games boss Dorian Bloch attributes this growth to unrestricted sales of the standard PS5 hardware model, aggressive price promotions, and the recent EA Sports FC 24 bundle. In contrast, Xbox Series consoles have seen a decline in market share from 26% to 23% over the same period, while Switch has experienced the largest decline, dropping from 34% to 25%. Despite the growth in console sales this year, there are signs of waning interest in certain quarters. This Holiday sales period, particularly Black Friday, is poised to be an intriguing one, as it marks the first time all three current consoles are fully available. Nintendo Switch has largely dominated Black Friday sales over the past three years, but this year, the platform holders are gearing up for a competitive sales window. In Europe, Nintendo is focusing on the Standard and Lite Switch models, with a bundled offer featuring Nintendo Switch Sports and Animal Crossing. The OLED model, targeting core players, will also receive a special version for Black Friday in the US. PlayStation is launching a new, slightly smaller PS5 model, accompanied by Spider-Man, Call of Duty, and FIFA bundles. With a high sales target for PS5 this year, Sony is expected to be aggressive during the sales window. Black Friday and the Holiday period will be crucial for all three platforms, but the industry is also mindful of eroding margins due to cost-cutting measures. GfK warns that consumer confidence is low, and people are being more cautious with their spending due to the high cost of living, which may impact sales of high-priced items like consoles. As Bloch notes, Q4 typically accounts for around 50% to 55% of hardware units, leaving ample opportunity for growth. However, the entertainment sector should be aware of the overall economic uncertainty, with the consumer confidence index falling by nine points to -30 and the major purchase index declining by 14 points to -34. The cost-of-living crisis is exerting significant pressure on consumers, leading to growing unease and cautious spending. As a result, many consumers will carefully consider major purchases, including consoles, with 48% of respondents in Oct 2023 stating they are either just managing, using their savings, or running into debt. Furthermore, 39% of respondents expect their household's financial position to worsen over the next 12 months. More detailed information on hardware sales in the UK can be obtained through a subscription with GfK.