The Fun Slows for Videogame Companies

Activision Blizzard Inc.

ATVI 0.04%

—which is in the process of being acquired by

Microsoft Corp.

MSFT -0.55%

for around $75 billion—said last week that its sales and net income fell in the quarter ended June 30, while

Electronic Arts Inc.

EA -0.92%

and

Take-Two Interactive Software Inc.

TTWO -2.23%

each reported slower revenue growth compared with a year ago.

“The new normal is better than prepandemic, but it’s also softer than we would’ve liked,” Take-Two Chief Executive

Strauss Zelnick

said in an interview on Monday. “It’s a slower year.”

In addition to economic factors such as inflation, Mr. Zelnick cited his company’s recent retreat from Russia for what he described as “good but not fantastic” June quarter results. “That business is now gone,” he said, adding that Take-Two’s newest acquisition, mobile game developer Zynga Inc., had a significant business in Russia.

Console makers Microsoft and

Sony Group Corp.

said their videogaming revenue declined in the three months through June.

Nintendo Co.

reported lower net sales and operating profit for the quarter.

Companies that make chips for gaming computers also said business was shrinking.

Advanced Micro Devices Inc.

said sales of its gaming graphics cards fell during the quarter, while

Nvidia Corp.

on Monday warned that its second-quarter sales would fall short of its previous forecast amid a drop in gaming revenue in recent weeks.

More updates on the videogame industry are expected when

Roblox Corp.

and

Unity Software Inc.

report after the bell Tuesday.

Game companies are facing a tough comparison with a year ago, now that people are traveling, going to concerts and engaging in other activities they couldn’t do during the pandemic, said KeyBanc analyst Tyler Parker. “There’s been a big shift toward more experiential spending,” he said.

Overall, U.S. videogame-industry sales fell 13% in the second quarter to $12.35 billion from a year earlier, after falling 8% in the first quarter, according to NPD Group and Sensor Tower. For the full year, the market-research firms expect sales to decline 8.7% to $55.5 billion, the first annual decline since 2016.

“We’re confident in our core franchises,” Electronic Arts CEO

Andrew Wilson

said on a call with analysts last week. “But we are seeing kind of a macro slowdown.”

Globally, consumer spending on videogame software is expected to grow 2.1% this year, down from 7.6% in 2021 and 24.6% in 2020, according to estimates from Newzoo BV.

The number of people who play videogames worldwide is expected to grow 4.6% this year to reach 3.2 billion, the game-industry tracker said.

The industry has also been hurt by a recent lull in the number of hit games.

“There are not a lot of big new releases right now to juice numbers,” said MKM Partners analyst

Eric Handler.

“When you’re in a creative business like this, there’s always going to be some ebbs and flows.”

The most recent Call of Duty and Battlefield games, launched last holiday season by Activision and Electronic Arts, respectively, didn’t resonate with players as well as past installments, the companies said. Take-Two didn’t put out a major new game in late 2021 as it had in previous years.

Still, Mr. Handler is optimistic now that more people are playing videogames than before the pandemic and a more robust slate of new releases is coming.

“I expect next year we’ll see revenue accelerate,” Mr. Handler said.

Write to Sarah E. Needleman at [email protected]