Game on: Video game consoles are flying off shelves again

We played the Nintendo Switch
We played the Nintendo Switch

So much for smartphones killing off video game consoles.

PlayStation game sales are fueling a Sony resurgence. Nintendo finally found its Wii successor in the uber-popular Switch. And Xbox subscriptions are soaring.

What's behind the console madness? Better games, exciting new hardware and a competitive user experience.

"Game companies have figured out what resonates with consumers," says SuperData Research CEO Joost van Dreunen.

Pokemon Go was a fad that came and went. But new console titles give old-fashioned video games staying power. A few major titles are coming during the holidays that could boost consoles even higher, predicts Michael Olson, a managing director at Piper Jaffray: Star Wars Battlefront 2, Call of Duty WWII and the newly-released Super Mario Odyssey.

"The games have become more engaging and entertaining, says Olson. "The games increasingly have social aspects through multi-player games or gamers watching others."

Video game console spending in the U.S. is up 27% from last year to $1.9 billion, says Mat Piscatella, an analyst at NPD. That's down from the 2008 peak, when consumers spent a record $3.2 billion on consoles. But the big sales bump could be the beginning of a comeback.

Sony

Four years into its run, the PlayStation 4 remains a hit.

Sony (SNYFY)said Tuesday it sold another 4.2 million of the bestselling video game consoles last quarter. The boom was driven by customer excitement over new video games, including Dragon Quest XI, Injustice 2, Destiny 2 and the annual releases of FIFA and Madden, says Olson.

That helped Sony post its strongest profit in nearly two decades: Earnings soared 376% during the last quarter, while its video game unit grew 36%.

Sony has now sold 67.5 million PlayStation 4s since the consoles arrived in 2013, well outpacing sales of the previous PlayStation 3 through the same timespan.

Nintendo

Nintendo (NTDOF) said on Monday that it expects to sell 14 million Nintendo Switch consoles by March 2018, up from its previous estimate of 10 million. That should boost Nintendo's video game sales.

Switch, which users can hook up to a TV or carry around with them, has been setting sales records since it launched in early March. It was boosted by the release of Legend of Zelda: Breath of the Wild.

Super Mario Odyssey -- Nintendo's latest installment of the gaming industry's best-selling franchise -- released Friday on the Switch.

Thanks to strong Switch sales and the expectation of more mobile game offerings, gains in Nintendo shares have reached a whopping 75% so far this year.

Microsoft

Just in time for the holidays, Microsoft (MSFT, Tech30) is giving its Xbox One a big makeover.

The new Xbox One X hits stores November 7, and it's being touted as "the most powerful console ever made."

Xbox sales plummeted 48% last quarter as Microsoft pulled inventory ahead of its Xbox One X debut. But subscriptions for its online Xbox Live service sales were up 21% last quarter, helping to offset the console swoon.

Amazon

And don't forget Twitch.

In 2014, Amazon paid $970 million to acquire Twitch, a streaming service lets users watch and broadcast video games.

Amazon (AMZN, Tech30)rolled out three games last year for Twitch and a Twitch Prime benefits program for gamers.

Watching friends or the top players compete is a huge attraction: Twitch has a 185 million audience, according to an October study from SuperData Research.

Smartphones

Analysts say fears of mobile gaming knocking out old-school consoles have been put to rest.

"The assumption by a lot of investors was that mobile games and other forms of entertainment like social media would have taken time and wallet share away from consoles, and the opposite has proven to be the case," says Olson.

Although mobile games attract more than 2 billion players and consoles only have around 250 million, the two can "peacefully coexist," says Michael Pachter, a research analyst at Wedbush Securities.

"Smartphone games are to console games what YouTube videos are to television series and major motion pictures," Pachter notes. "Console games are a much more immersive experience than most mobile games."

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