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Video games go mainstream - market booming!
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You are currently in Business and Industry in Gaming, Media, Web, IT and Computing
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Mon May 05, 2008 6:46 pm Reply and quote this post
If you have sat stunned on the sofa as Niko Bellic, the antihero inthe Grand Theft Auto video game, metes out violence worthy of an 18certificate movie, there is worse to come. In June dads will beencouraged to strut around in the manner of rock icon Steven Tyler whennew title Guitar Hero Aerosmith hits the shelves.
The extremesdemonstrate the diversity of the £1.7bn UK games industry, which haspushed beyond its core gaming audience of maladjusted youths to becomefamily fare. It is now a bigger market by turnover than film box officereceipts and music, and is rapidly closing the gap on DVD sales.
Thegrowth spurt is down to the success of the third generation of gamesconsoles pitting Microsoft's Xbox 360 against the Sony PlayStation 3(PS3) and the Nintendo Wii, as well as the continued appeal of gamesfranchises such as Grand Theft Auto and Mario Kart. Last weekspecialist retailer Game said like-for-like sales had surged 41.2 percent in the year to January and its profits had jumped 156 per cent to£75.5m.
The performance chimes with a record first quarter forthe UK video games industry as a whole. Sales reached a new high of£418m in the three months to 29 March, according to monitoring websiteChartTrack. That was an increase of more than £100m on the same periodlast year and nearly 18 million games were sold.
But analysts areasking how long the honeymoon will last for a traditionally cyclicalmarket. Early signs that a peak has been reached have come fromMicrosoft, which recently announced plans to cut the price of the Xbox360 in some countries. Its Japanese rival Nintendo has surprised themarket by setting conservative sales targets for its handheld DS liteand Wii consoles this year. Those with longer memories remember toughertimes at Game, when a Christmas profit warning was regarded as almostinevitable. Its fortunes have been intertwined with the success of eachnew console. So as the Xbox, PS3 and Wii mature, will Game fall back onhard times?
Each successive console has a lifespan of five toseven years, which usually creates peaks and troughs in the market. ButJames George, a partner at OC&C Strategy Consultants, argues it isdifferent this time. He says: 'You have three or four consoles that areall successful. Of the first and second generation consoles,PlayStation was by far and away the most successful, with a 60 to 70per cent market share. Now you have devices at different stages intheir life cycle and that should help publishers to smooth out some ofthe bumps.'
Last year the Nintendo DS was the biggest UK sellerin volume terms, knocking the PS2 into second place, the first timesince 2003 Sony's PlayStation had not been the biggest format. Incontrast to Sony and Microsoft, whose consoles target serious players,Nintendo has attracted non-traditional users like women and the older'Countdown crowd' with easy-to-play titles such as Dr Kawashima's BrainTraining. And it is estimated that a fifth of those buying a Wiiconsole have never played computer games before. Since launching it inNovember 2006, Nintendo has sold 24.5 million globally. Sony isexpected to have only sold about 13 million PS3s in the same period.
Entertainmentretailer Zavvi says games sales are 50 per cent ahead of last year anddescribes the launch of Grand Theft Auto IV as 'amazing'. It isestimated that 609,000 copies of the £45 game were sold in the UK lastTuesday alone. 'Madonna's album Hard Candy came out last Monday andwill be one of the biggest albums of the year, but it just couldn'tcompete,' says Zavvi's Stephen Lynn.
Simon Soffe, Game's head ofinvestor relations, says the record-breaking sales achieved by thelaunch of GTA IV and Wii Fit shows computer games have entered the massmarket. Wii Fit is aimed at women and is played by standing on a boardthat looks like a bathroom scale and can detect shifts in weight.
Soffesays the trend is increasingly toward games played standing up in frontof the TV, rather than furiously punching buttons. New titles such asRock Band - which lets players form a group with guitars, drum kit andmicrophones - and Guitar Hero Aerosmith are expected to continue thistrend.
Quote:
'We are entering more complex territory,' he says.'Developers are creating games that make use of the power of consolessuch as the PS3 and Xbox and the results are almost cinematic. You canmove anywhere you like, walk down any street or open any door.'

Theacquisition of Gamestation transformed Game into the world'ssecond-largest games specialist, with its shares jumping 78 per centover the past year. Yet, despite Game reporting like-for-like salesgrowth of 20.1 per cent in the 13 weeks to 26 April, some analysts arebearish. They argue its margins will come under pressure as Argos andthe supermarkets move into the market ahead of the Christmas peak.
ButPali International analyst Nick Bubb says investors have nothing tolose, as he expects Game's one-time suitor, US giant GameStop, to makeanother bid. 'Even if this cycle doesn't turn out to be broader andlonger, Game will be bought by GameStop. That is bound to happen.'

Contributed by Editorial Team, Executive Management Team
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