Comments on the video game industry from Alec Boccanfuso, research analyst at Gabelli Funds (Gabelli), Alec covers communications services and technology with a focus on interactive entertainment and outdoor leisure products.
Comments from Gabelli Research Analyst, Alec Boccanfuso:
1/2 ) Nintendo Switch 2 was fully revealed on April 2 with an initial pre-order price of $449.99 in the United States (pre-orders would start April 9th). This price point was already higher than most expected, and many thought this was pricing in tariffs already (which the head of Nintendo of America denied). Two days later, pre-orders in America were pulled and delayed to an unspecified date due to Liberation Day Tariffs (as many of the Switch 2 components/parts come from China and Southeast Asia). The console is still set to release on June 5th, 2025, at an unknown price.
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We would not be surprised if this launches with an updated price tag of $500–$550 if tariffs hold, as Nintendo already positioned this product as a premium console. This would put the price in line with the PS5 original base price of $500 when it launched in November 2020. Nintendo also delayed the pre-orders in Canada to align the timing of pre-orders and manage the inventory distribution more effectively. I also assume they were worried many U.S. consumers would try to backdoor purchase the console through Canada.
IThese dynamics will not move the ultimate release date of June 5th, but I could foresee a scenario where demand for the console comes in much lower than Nintendo or the Street anticipates, as a $500+ console (pre-additional game purchases) is a lot for a pressured U.S. consumer. On top of that, there are millions of consumers who will probably delay the purchase as they are content with their current Switch 1 devices.
3) In terms of electronics getting more expensive – that should be a yes (i.e., like the Switch 2). We can even look at an announcement this week by Razer, a leading gaming and consumer electronics company. The company announced yesterday that its upcoming Blade 16 laptop (meant to be the “gaming version of a MacBook Pro”) will no longer be available for pre-order in the U.S. You can no longer even purchase laptops on its website, as the company pulled the ability to directly purchase them on the website due to the tariffs.
Given Razer has components coming from China and Southeast Asia as well, you can assume the prices for the laptops will be much higher if tariffs hold. Micron also announced to its customers that there will be tariff surcharges on RAM and SSDs, which are two of the most important components in a computer and video game consoles – so prices will go higher. (RAM is basically for running games, and SSD is for storage.)
4) In terms of the software/video game itself, the majority of gaming purchases is digital through a gaming platform. As of now, software/digital video game sales should not be directly impacted by global tariffs, as these have not been subject to traditional import tariffs (as they are not physical products crossing borders). However, the topic of discussion has now been the pricing of premium “next-gen” video games. These games have been sold at a $70 price point since 2020 and became the industry standard more so around 2022/2023. This was an increase from the $60 price point that was in place between 2005–2020.
Interestingly, on April 2, Nintendo announced that its new Mario Kart World game will be sold at an $80 price tag, being the first company in the industry to up the price. This has sparked hostility by many fans already complaining about the $450+ price tag of the new Switch 2. I think this can be seen as a backdoor way for Nintendo to offset console tariff impacts onto the consumer, who will likely still purchase the $80 title, as a 14% increase is likely not going to drive consumers away from an industry-leading game like Mario Kart.
I think we will see other video game companies do this as well to offset potential tariff and inflation impacts onto the consumer. The big question is: since Nintendo has now set the precedent, where will even bigger games like Grand Theft Auto VI sell at later this year? ($80+ should easily be the base price now.) Many assume Take-Two can launch it at $100, but given the constraints on the consumer still, I am not sure that is actually likely. I see $80/$90 base.
5) If we go into a downturn, there could be further negative impacts on the gaming industry, as consumers will likely pull back spending on big-ticket consoles and even reduce the number of games they buy in a given year. With fewer consoles sold during a given year, it means the install base (or the total addressable market) for a console only title like Grand Theft Auto VI is smaller, which could lead to lower-than-anticipated sales.
That being said, premium video games (generation defining games like GTA VI) tend to be resilient during choppy markets, as consumers may pull back spending on other, more expensive leisure activities like travel and instead spend more time playing video games. In short, the biggest games of the year will likely be heavily insulated from the macroeconomic factors at play, but the hardware certainly will not be. Mobile gaming and games that rely on advertising spend will also have a rough time during a recessionary environment.
