Latin American Market May be Key to Microsoft Xbox Success

Latin America is a video game loving region that is home to over 660 million people.  Many observers assume the market is dominated by mobile games.  However, there is a vibrant core gamer segment in Latin America that is very interested in the latest console and PC games.

The latest DFC Intelligence forecasts estimate that core console and PC games in Latin America are expected to grow from $2 billion in 2020 to $2.4 billion by 2025.  The main question is what console brand will be dominate in the region?  Can Xbox capture some market share from PlayStation in Latin America?

Like most non-English speaking regions, the Sony PlayStation has dominated sales in Latin America.  Nintendo also has a decent fan base but has somewhat underperformed in the region.

A major area to watch for with Microsoft’s overall Xbox strategy is whether they can gain some traction in Latin America.  Latin America is ripe for online distribution, cloud gaming and other areas Microsoft is heavily focused on.

In July and August, DFC Intelligence conducted some Spanish language surveys of over 4,000 core gamers in Latin America.  These are the influencers that tend to play the latest console and PC games.  While they may not be representative of the overall market (which leans heavily mobile) they are a good indication of where the console market may be going.

Like most non-English speaking regions, the Sony PlayStation has dominated sales in Latin America.  Nintendo also has a decent fan base but has somewhat underperformed in the region.

A major area to watch for with Microsoft’s overall Xbox strategy is whether they can gain some traction in Latin America.  Latin America is ripe for online distribution, cloud gaming and other areas Microsoft is heavily focused on.

In July and August, DFC Intelligence conducted some Spanish language surveys of over 4,000 core gamers in Latin America.  These are the influencers that tend to play the latest console and PC games.  While they may not be representative of the overall market (which leans heavily mobile) they are a good indication of where the console market may be going.

As expected there were significantly more PlayStation 4 owners than Xbox One owners (not quite 2 to 1).  Among PlayStation 4 owners 57% plan to buy a PlayStation 5 while 21% plan to buy an Xbox Series S/X.  68% DON’T plan to buy an Xbox Series and 31% of PlayStation 4 owners don’t plan to buy a PS5.

Among Xbox One owners, 44% plan to buy a PlayStation 5 and 40% plan to buy an Xbox Series S/X.  40% DON’T plan to buy a PS5, and 34% of Xbox One owners don’t plan to buy Xbox Series S/X.

These results are in line with DFC Intelligence forecasts that have PlayStation 5 continuing Sony’s lead in Latin America.  However, forecasts are constantly revisited and there are some trends that indicate Microsoft Xbox may have some more potential in Latin America.

The first thing to note is that PlayStation 4 owners are not totally committed to buying a PlayStation 5.  However, more interesting is potential with PC game players.  In terms of game platforms in Latin America the dominant ones, even among core gamers, are Android smartphone (82% usage for games) and Desktop PC (60% usage for games).

Microsoft’s cross-platform play strategy with PC could do well in Latin America.  Most Xbox games also include the PC version at no extra cost.  Most Sony games do not release for PC.  One major exception was the PlayStation 4 hit Horizon Zero Dawn that released last year. 

Brazil is another major wildcard.  Brazil is unique in several ways.  For one the primary language is Portuguese, and Brazil was NOT included in the recent DFC survey.  More important are import taxes that make for very high console prices in Brazil.

Over the years, DFC Intelligence has covered console market challenges in Brazil including first Microsoft and then Sony setting up manufacturing in the country, primarily in an effort to get around the console taxes which we explained way back in 2013. 

The tax issue in Brazil still persists.  In 2015 Nintendo pulled out of Brazil and only launched the Switch in the country in late 2020.  This was most likely in response to Brazil lowering the tax on industrial products (IPI) in October 2020.  However, taxes remain high.

Brazil PlayStation 4 Tax Explained

Nintendo Departs Brazil Game Market

Recently there has been a slight console price war in Brazil.  In August the price of the standard PlayStation 5 dropped from 4699 Brazilian REAL ($910) to 4399 ($853) and the digital from 4199 REAL ($814) to 3899 ($756).

Microsoft quickly followed suit with a price drop for the Xbox Series X from 4599 REAL ($891) to 4349 ($843) and the Xbox Series S from 2799 REAL ($542) to 2649 ($513). 

These prices remain high, but it is worth noting that the Xbox Series S does have a significant price difference.

DFC Intelligence is doing follow up surveys in both Spanish and Portuguese (as well as other languages) to focus in more detail on issues of pricing and game library.  The goal is to see if there is an increasing opening for the Xbox brand to challenge PlayStation’s global dominance. 

Perceptions around game console systems can quickly change.  Recently Sony announced that Horizon Forbidden West, the sequel to Horizon Zero Dawn, was being delayed until 2022.  Suddenly Microsoft’s first party lineup is looking stronger in comparison to Sony whose first-party production has slipped in recent years.

Right now, the assumption is that the PlayStation 5 will continue Sony’s lead in Latin America and many other markets.  Microsoft has a great deal of work to do on the Xbox brand and the company has generally underperformed DFC expectations internationally.  However, we are willing to give the benefit of doubt and plan to closely monitor the situation.  Stay tuned!