What You Missed This Week in Video Games

“Game On” is The Fly’s weekly recap of the stories powering up or beating down video game stocks.

NEW RELEASES: Among this week’s notable releases is Nintendo’s (NTDOY) “Mario vs. Donkey Kong,” a remake of the 2004 Game Boy Advance title of the same name. The puzzle-platform game releases exclusively for the Switch on February 16. Also out this week is Ubisoft’s (UBSFY) naval combat game “Skull and Bones,” which launches for Amazon Luna (AMZN), PC, PlayStation 5 (SONY), and Xbox Series X/S (MSFT) on February 16.

DISNEY/EPIC: Along with its earnings report last week, Disney announced that it will collaborate with “Fortnite” creator Epic Games on an all-new games and entertainment universe that will further expand the reach of beloved Disney stories and experiences. Disney will also invest $1.5B to acquire an equity stake in Epic Games alongside the multiyear project. The transaction is subject to customary closing conditions, including regulatory approvals.

“Our exciting new relationship with Epic Games will bring together Disney’s beloved brands and franchises with the hugely popular Fortnite in a transformational new games and entertainment universe,” said Robert A. Iger, Chief Executive Officer, The Walt Disney Company. “This marks Disney’s biggest entry ever into the world of games and offers significant opportunities for growth and expansion. We can’t wait for fans to experience the Disney stories and worlds they love in groundbreaking new ways.” Disney added: “Disney and Epic Games have engaged hundreds of millions of players through Fortnite content integrations, season collaborations, in-game activations, and live events, including the Marvel Nexus War with Galactus, which drew more than 15.3 million concurrent players. Unreal Engine is used to produce assets and content across the Disney portfolio including in the development of video games like Kingdom Hearts 3 and Star Wars Jedi: Survivor; in cinematic editing and animation for film and streaming; and in the creation of more than 15 Disney Parks attractions like Millennium Falcon: Smugglers Run at Star Wars: Galaxy’s Edge. This all builds on Epic Games’ participation in the 2017 Disney Accelerator program, which seeks to impact the future of technology and entertainment.” Other investors in Epic Games include Tencent (TCEHY), Sony, and KKR (KKR).

MICROSOFT UPDATE: Microsoft Gaming CEO Phil Spencer told employees in an internal townhall meeting last week that the Xbox maker has no plans to stop making consoles, and that the Xbox hardware platform would continue to be part of a strategy that includes a number of different devices, Updater’s Shannon Liao reported earlier this week. The news comes amid reports of a variety of Xbox exclusive titles, including “Starfield” and “Gears of War,” potentially being released on other consoles.

Meanwhile, The Verge’s Tom Warren reported, citing sources familiar with the plans, that the Xbox maker is preparing to launch a select number of Xbox exclusive video games on PlayStation 5 and Nintendo Switch amid a slowdown in Xbox Game Pass subscription growth. The first two games set to be released on competing platforms are 2023’s “Hi-Fi Rush” and 2022’s “Pentiment,” Warren added. The Xbox maker also intends to launch 2018’s “Sea of Thieves” on non-Xbox platforms later in 2024, with other first-party titles under consideration as well, the author noted. Amid such reporting, Microsoft confirmed that it is planning an Xbox business update event on February 15 at 3PM ET, delivered via a podcast hosted by Xbox’s Phil Spencer, Sarah Bond, and Matt Booty.

UBISOFT RESULTS: Last week, Ubisoft reported a year-over-year decline in Q3 IFRS-15 sales, though net bookings for the quarter were “slightly ahead of guidance.” Excluding mobile that included the recognition related to the Assassin’s Creed Jade licensing partnership last year, net bookings were up 43.1% year-on-year in Q3 and 45.1% year-on-year in the first nine months, driven by high-quality new releases and back-catalog strength the company added.

Yves Guillemot, Co-Founder and Chief Executive Officer, said, “Ubisoft recorded a solid third quarter, with net bookings slightly ahead of our expectations. This quarter provided us with positive momentum and marks the beginning of our turnaround to consistently creating and delivering high-quality, long-lasting games. Our performance was driven by the releases of Assassin’s Creed Mirage and Avatar: Frontiers of Pandora, by the continued strong trajectory of The Crew Motorfest, as well as by the robust performance of our backcatalog. The latter was propelled by the success of Rainbow Six Siege, which achieved sharp net bookings and playtime growth, and by the overall Assassin’s Creed franchise that benefitted from the launch of Assassin’s Creed Mirage. The robustness and longevity of our back-catalog is a tribute to the attention we have had in consistently delivering high-quality titles that are loved by fans.”

Looking ahead, Ubisoft reiterated its FY24 non-IFRS operating income guidance and noted that the extend of its FY2024-2025 line-up will be revealed in May and will notably include “Assassin’s Creed codename Red” and “Star Wars Outlaws” on the premium side, as well as “The Division Resurgence” and “Rainbow Six Mobile” on the free-to-play side.

TAKE-TWO RESULTS: Take-Two (TTWO) also reported quarterly results last week, with Q3 adjusted EBITDA declining marginally year-over-year and net bookings falling in line with consensus estimates. “We achieved solid third quarter results, including Net Bookings of $1.3 billion. Grand Theft Auto V and Grand Theft Auto Online, the Red Dead Redemption series, and Zynga’s in-app purchases, led by Toon Blast, exceeded our expectations, as we launched engaging new content, partnerships, and activations. This was partially offset by some softness in mobile advertising and sales for NBA 2K24,” said Strauss Zelnick, Chairman and CEO of Take-Two. Looking ahead, the company cut its net bookings guidance for FY24.

Following the report, analysts were mixed, with several cutting their price targets and others raising their price targets on Take-Two. Stifel analyst Drew Crum lowered his price target on the shares to $175 from $188, saying that Q3 results were generally in line with expectations, but upside was limited by weaker mobile advertising and “NBA 2K24” sales during the period. Meanwhile, Oppenheimer analyst Martin Yang raised the firm’s price target on Take-Two to $185 from $170, saying the company the reduced outlook was driven mainly by updated release windows for a number of immersive core games.

OTHER STORIES TO WATCH:

• Overall consumer spending on video games in the United States totaled $57.2B in 2023, according to data released by the Entertainment Software Association and Circana (read more)
• Sega’s (SGAMY) “Persona 3 Reload” sold 1M copies globally in its first week (read more)