Trump Tariffs Further Complicate Gaming Consoles’ Vulnerability
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The Entertainment Software Association, which used to organize E3, released a statement Monday that the Trump administration’s proposed tariffs on products from Canada, Mexico and China would “negatively impact hundreds of millions of Americans” and harm the gaming industry’s “significant contributions” to the U.S. economy.
It’s fair to argue there are politically bigger fish to fry than tariffs’ potential impact on gaming hardware sales.
But the console industry was already in a tough spot.
U.S. hardware sales took a significant year-over-year hit in December, undoing the very small gain from Black Friday sales in November, per Circana. All in all, year-over-year sales of gaming systems went down 25% in 2024. Software sales grew slightly, but it wasn’t enough to stave off an overall decrease in U.S. video game sales for the full year.
PlayStation 5 and Xbox Series, the current high-end consoles, are midway through their lifecycles. PS5 has steadily outsold Xbox Series, but the $700 price tag for the newer PS5 Pro isn’t expected to lift sales to any meaningful degree, especially when its graphical upgrades have realistically hit the wall of what the human eye can perceive. Likewise, the base PS5 is expected to hit a ceiling of little more than 90 million units sold, about 10 million under where PS4 concluded its run.
Nintendo has its Switch 2 console on the way this year, meaning there’s little reason for consumers to continue buying the current Switch console, which will reach its 8th anniversary in March. Switch 2 can certainly lift hardware sales once it’s out, but there is still no release date.
Before Trump announced his sweeping tariffs, the console industry was already threatened by proposed tariffs on semiconductor chips manufactured in Taiwan. Such chips are key components of current hardware, so much so that shortages in chips during the pandemic lowered sales of newer consoles for two years.
Even without the implication of tariffs, the console industry was already facing a reckoning of sorts. The trend of exclusive games acting as selling points for specific console brands is actively disappearing from the Xbox ecosystem, in which most new games already release concurrently on PC.
PlayStation also releases exclusives on PC but typically does so a year after new titles debut on its home platform. Per Circana, the debut of “Final Fantasy VII: Rebirth” on Windows in January was the bestselling game of that week.
“Rebirth” first hit PS5 in February 2024 and was a decent launch for the console, but Square Enix producer Yoshinori Kitase later lamented the game’s initial confinement to one platform and stressed such games should be available to as many players as possible.
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A tough environment for hardware sales could theoretically steer more gamers to the cloud, which would be good for the staggering Xbox Game Pass subscription service, which offers cloud gaming at its highest tier.
However, Netflix is still bullish on games. Despite shutting down its AAA studio, the streamer revealed in its January earnings session it intends to offer couch co-op and party games streamed through its service, as opposed to being downloaded on an app. Co-CEO Greg Peters said Netflix thinks of this move as a “successor to family board game night” and an evolution of TV game shows.
Netflix may have moved away from AAA gaming, but success in the family-oriented arena is certainly something Nintendo is going to be mindful of if strict tariffs make it more expensive to sell Switch 2 consoles.
