Sony and Nintendo Continue To Face Supply-Chain Headwinds

Issues Delivering Video Game Consoles

Sony and Nintendo are dealing with supply-chain problems: a common refrain these days. Analysts describe this as a near-term challenge facing both electronics companies but add underlying fundamentals are strong. Still, it’s worth noting the difficulties Sony and Nintendo have faced in trying to deliver products.

It’s common to hear reports about how hard it is to find Sony’s PlayStation 5 right now. The Japanese company increased sales of the video game consoles only slightly during the busy holiday shopping season, and executives say component shortages will be a drag on PS5 sales through at least the end of March—if not longer. Analysts say Nintendo has fared better with delivery of its now six-year-old Switch console, although the company also issued downbeat guidance citing logistics challenges and component shortages.

Online Game Sales Provide a Boost

Analysts say while shipping hardware remains a clear challenge for Sony and Nintendo, game sales are more stable. This is especially true for online game sales, which benefit from digital delivery. Sony appears to have benefitted this past year from lowered marketing expenses when compared to the 2020 PS5 launch, boosting profits.

Data shows Nintendo game sales are similarly holding strong. Market observers say software sales remain solid for both companies due to robust existing user bases. Plus, component shortages aren’t dragging down video game sales.

The Microsoft Activision Blizzard Factor

An interesting angle to consider when evaluating both Sony and Nintendo is how both companies will react to Microsoft’s (MSFT) purchase of video game maker Activision Blizzard (ATVI). The $75 billion deal set a record for tech company acquisitions. Microsoft now controls the mega-popular “Call of Duty” franchise and signalled its desire to dominate the space.

Sony quickly announced its plan to purchase game maker Bungie for $3.6 billion, and analysts predict a number of other deals are bound to happen soon as well. Others note Nintendo is typically more inward-focused as the company looks to develop its own branded games. Supply-chain issues are keeping in-demand video game hardware out of consumer hands, but online game sales are humming along.

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