Game On: U.S. video game spending fell 15% in January, says Circana

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

NEW RELEASES: This week’s biggest new releases is Capcom’s (CCOEY) action role-playing game “Monster Hunter Wilds,” which releases for PC, PlayStation 5 (SONY), and Xbox Series X/S (MSFT) on February 28.

CIRCANA JANUARY: Circana analyst Mat Piscatella SQNXF;NTDOY;EA;WBD;SGAMY-Call-of-Duty-Black-Ops–topselling-game-in-January-in-US-says-Circana&utm_source=https://thefly.com/news.php%3fsymbol=NTDOY&utm_medium=referral&utm_campaign=referral_traffic” target=”_blank”>said that Activision’s “Call of Duty: Black Ops 6” was January’s best-selling video game, also ranking 1st on PlayStation platforms while placing at 2nd on Xbox platforms. According to Circana’s Player Engagement Tracker, “Call of Duty HQ” ranked 1st in total MAU on Xbox Series consoles, and 2nd on PS5. The January Steam debut of Square Enix’s (SQNXF) “Final Fantasy VII: Rebirth” led to a strong sales boost for the title. “Final Fantasy VII: Rebirth” placed 3rd overall on the monthly chart after finishing December at 56. The “Final Fantasy VII Remake & Rebirth Twin Pack” ranked 16th overall during January. Nintendo’s “Donkey Kong Country Returns” was the only new release to appear on the monthly top 20 best-sellers chart, with physical sales alone enough to achieve the #8 position. Other top-selling games for the month in the U.S. were Electronic Arts’ (EA) “Madden NFL 25,” “EA Sports FC 25,” and “EA Sports College Football 25,” Microsoft’s “Minecraft,” Sony’s “Marvel’s Spider-Man 2,” Warner Bros. Discovery’s (WBD) “Hogwarts Legacy,” and Sega’s (SGAMY) “Sonic X Shadow Generations.”

MUSE AI: In a blog post last week, Microsoft introduced a World and Human Action Model named “Muse,” a generative AI model of a video game that can generate game visuals, controller actions, or both. “The paper in Nature offers a detailed look at Muse, which was developed by the Microsoft Research Game Intelligence and Teachable AI Experiences(Tai X) teams in collaboration with Xbox Games Studios’ Ninja Theory,” the company said. “Simultaneously, to help other researchers explore these models and build on our work, we are open sourcing the weights and sample data and making the executable available for the WHAM Demonstrator-a concept prototype that provides a visual interface for interacting with WHAM models and multiple ways of prompting the models. Developers can learn and experiment with the weights, sample data, and WHAM Demonstrator on Azure AI Foundry. In our research, we focus on exploring the capabilities that models like Muse need to effectively support human creatives.”

Following the announcement, developers and parts of the larger gaming community reacted negatively, according to Wired’s Megan Farokhmanesh. “The primary issue is that we are losing craft,” said The Outsiders studio founder David Goldfarb. “When we rely on this stuff we are implicitly empowering a class of people who own these tools and don’t give a fuck about how they reshape our lives.” “It’s the classic issue of Xbox bleeding talent but also so heavily invested in GenAI that they can’t see the forest for the trees,” a AAA developer who asked to remain anonymous told Wired. “They don’t see that nobody will want this. They don’t CARE that nobody will want this … internal discussions about these sorts of things are quiet because EVERYONE fears being against this and losing their jobs due to the tumultuous time in our industry.” Other developers who spoke to Wired on the story also said they are afraid of the professional repercussions from speaking out against Muse, the author noted.

NETEASE CUTS: Chinese game publisher NetEase (NTES) has been directed to divest its overseas holdings, starting with hit game “Marvel Rivals,” which laid off its Seattle team, VentureBeat’s N. Evan Van Zelfden and Dean Takahashi reported late last week. According to sources, the team being fired “is just the start,” and that it is possible that NetEase plans to exit all international investments and holdings.

Bloomberg expanded on this reporting, saying that NetEase CEO William Ding has slashed hundreds of jobs at the company, closed or idled game development studios, and curtailed international investment as he refocuses on a smaller portfolio of games. Ding, a billionaire, has recently reasserted his leadership with a series of major decisions over the past year, the report said, citing people familiar with the company’s inner workings.

Additionally, GameFile’s Stephen Totilo reported that the Chinese conglomerate is actively shopping around more of its non-Chinese gaming studios and plans to divest itself of the majority of its overseas teams. Such a move is leading to the potential closure of over a dozen game studios if they can’t secure new post-NetEase funding, Totilo notes. This major strategy shift comes a few years after NetEase announced the creation or acquisition of nearly 20 Western and Japanese game studios geared toward making new big-budget video games.

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MORE VIDEO GAME NEWS:

• Microsoft pushed the release of Xbox Game Studios title “Fable” to 2026 from 2025
• Sales of Sony’s PlayStation 5 Pro have fallen behind the PlayStation 4 Pro’s pace, according to Circana’s Mat Piscatella
• Oppenheimer analyst Martin Yang raised the firm’s price target on Sony to $33 from $25 and maintained an Outperform rating on the shares