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

NPD Q2: According to the Q2 2022 Games Market Dynamics: U.S. report from The NPD Group, overall total consumer spending on video gaming in the U.S. totaled $12.35B in the second quarter of 2022, a decline of 13% when compared to Q2 2021. Non-mobile subscription content spending was the quarter's only growth category, with all other categories falling. Mobile content contributed most to the overall decline. Data from Sensor Tower shows U.S. consumer spending in mobile games during the first quarter fell 12% from Q2 2021.

"While our projections foresaw a downward trend in mobile spending as life in the U.S. began its return to a new normal and consumers had fewer opportunities to engage with these titles, the current economic environment has certainly contributed to a more expediated decline. Still, the expenditure by U.S. consumers in mobile games remains higher than it was pre-pandemic," said Randy Nelson, head of insights at Sensor Tower. "We originally forecast U.S. mobile game industry revenue in 2022 to exceed that of 2021, but the economic uncertainty of the coming months will undoubtedly impact how that unfolds." Overall content spending in Q2 reached $10.97B, a 13% decrease over Q2 2021. Subscription content was the only segment to post positive gains. Hardware and accessories declined 1% and 11%, respectively.

EARNINGS: Last week, Microsoft (MSFT) reported downbeat fourth quarter results but provided upbeat revenue growth guidance for fiscal 2023. Of note, the company said Xbox content and services revenue decrease 4% year-over-year in constant currency, driven by lower engagement hours and monetization in third-party and first-party content, offset in part by growth in Xbox Game Pass subscriptions. Microsoft added that Xbox hardware revenue decreased 11% during the quarter. On its quarterly call, however, the company noted that over 4M people have streamed Epic's "Fortnite" via Xbox Cloud Gaming. Investors in Epic include Tencent (TCEHY), KKR (KKR), Disney (DIS), and Sony (SONY).

Meanwhile, Sony also reported quarterly results last week, including a year-over-year increase in revenue for the first quarter. The company also increased its FY22 consolidated sales guidance but cut its profit outlook. Of note, Sony warned of weaker PlayStation game sales, as the company said it PlayStation 5 shipments only increased 4% year-over-year in the quarter. Sony attributed the struggles with hardware sales mostly to supply chain disruptions that are affecting shipments rather than a lack of components.

On the software side, Activision Blizzard (ATVI), which agreed earlier this year to be acquired by Microsoft, reported better-than-expected second quarter net bookings, though adjusted earnings for the quarter were in-line with consensus estimates. Of note, the game maker's quarterly net bookings actually decreased year-over-year, with monthly active users also declining to 361M in Q2 from 408M in the same period a year ago. Bloomberg's Jason Schreier attributed these metric declines to weaker-than-expected sales of "Call of Duty: Vanguard," the company's most recent "Call of Duty" release.

OTHER STORIES TO WATCH:

• Sony told regulators in Brazil that it believes Xbox owning the "Call of Duty" franchise could affect users' console choice, VGC reports [more]
• Backbone introduced the Backbone One PlayStation Edition for iPhone (AAPL) users [more]
• A full remake of 2003 game "Star Wars: Knights of the Old Republic" has been delayed indefinitely, Bloomberg reports [more]
• Electronic Arts (EA) and LaLiga have entered into a multi-year partnership [more]
• Logitech G (LOGI) and Tencent Games announced a handheld cloud gaming partnership [more]