New consoles take gaming sales to higher level

Surging demand for the latest blockbuster video games and consoles has so far belied the squeals of pain from other retailers facing up to a high street squeeze.

Surging demand for the latest blockbuster video games and consoles has so far belied the squeals of pain from other retailers facing up to a high street squeeze.

The rude health of the £2bn market was revealed last week in record sales volumes during the three months to April – despite official figures showing a second month of sales falls across retailers as a whole.

The main catalyst behind the sector’s buoyant performance was the UK launch of Nintendo’s Wii Fit – complete with exercise board – which aims to take the appeal of gaming to a wider family audience than the male teenager stereotype.

April saw the Wii Fit sell 250,000 copies on its opening weekend – the UK’s fourth biggest game launch – and followed just weeks after its latest blockbusting Mario Kart racing game hit the shelves.

Compare this with miserable trading for the likes of clothing giants such as Next and Marks & Spencer over the month, as well as the continued misery of the “big ticket” players like Currys owner DSG International as the housing market stutters.

Meanwhile Woolworths was selling a Wii Fit every 90 seconds, according to Nintendo, while an HMV spokesman says the gaming industry is going through “a golden period”. There are no signs of a spending slowdown here.

“We’ve had the Xbox 360, the PlayStation3 and the Wii in close proximity. It’s got the whole games industry and game buyers very excited,” he said.

Other new titles such the latest instalment of the the hugely popular Grand Theft Auto series kept up the momentum in April as gamers keep up spending in a halcyon patch.

Overall, an estimated 2.5 million Wiis have been sold since the console was launched in December 2006. Sony’s PS3, which followed last April, has shifted around one million units, with Microsoft’s Xbox weighing in with 1.2 million sales.

However, other products such as Nintendo’s handheld DS console have also targeted children as well as older players through games such as Brain Training.

According to computer games research firm GameVision, nearly one in three members of the UK population above the age of six are now active players.

Its latest survey of more than 2,000 adults and 350 children reveals the real growth markets are among younger and older gamers.

Usage by players aged between six and 14 has risen more than 12% in the last year, while the number of gamers older than the traditional 15-34 bracket have increased by more than 35%, although the research suggests they tend to be more casual players. Among 15-34 years olds, year-on-year growth has been much slower at 0.5%.

And overall, more than 44% of game players are now women – another blow to the the spotty male teenager stereotype – as numbers grow almost 16% year on year, according to GameVision.

Wider industry figures published this week by the Interactive Software Federation of Europe (ISFE) showed that the UK has the highest average age of video game player in Europe, at 33.

ISFE said that British parents are regularly grabbing the controls to play console games, with some 42% of players being parents, as high-tech entertainment moves from the bedroom into the living room.

Michael Rawlinson, managing director of the UK-based Entertainment & Leisure Software Publishers Association (ELSPA), said: “Gaming is now enjoyed by an incredibly diverse audience.

“And the UK is a particularly mature market – we have the oldest, most passionate gamers across Europe. The fact that gamers are growing up and enjoying gaming with their children illustrates the enduring nature of the medium.”

On a corporate level, games retailers have benefited while investors desert the wider sector. An examination of general retailers in the FTSE 350 index shows their value falling by almost half in the past 12 months amid worries over the impact of dearer mortgages, household bills and petrol costs on consumer spending.

However, among the listed players Game Group – which a year ago bought specialist rival Gamestation – has gone from strength to strength, with its share price almost doubling in the past 12 months. Its latest update revealed a hugely impressive 20% rise in like-for-like sales in the 13 weeks to April, spurred by an “unprecedented range of popular products”.

Meanwhile HMV – whose music sales came under heavy fire from cheap supermarket competition and digital downloads – has seen the beginnings of recovery thanks to the strong games market, to which it has paid increasing attention.

Shares in HMV have risen by around 15% in the past year, and its most recent figures show same-store sales growth at its UK and Ireland HMV stores more than 11% ahead during the year to April 28.

Altium Securities analyst David O’Brien agreed that the games sector was benefiting from the quality of the goods on offer and a bigger “installed base” – that is, more console sales.

“Relative to the rest of the sector, they will outperform retailers per se. There are good products out there. The installed base will continue to rise, particularly when we see further price reductions in hardware.”

Mr O’Brien praised Nintendo’s targeting of women and children through the Wii Fit and DS consoles, but also expects to see average game prices fall from £40-£50 to around £30 by Christmas as competition increases from food retailers such as Tesco and Asda.

This could give cause for concern, but the sector is less worried about supermarket encroachment. While it was easy for the big food players to muscle in on price alone with simple products such as CDs, games retailers are backing their specialist staff with detailed knowledge of the product – as well as the game trading services offered by those such as Game Group – to help fend off the competition.

From a consumer viewpoint, spending on these cheaper items is much more likely to hold up when the plans for a new sofa or car have been put on the back burner. On the evidence so far, a nation of finger-twitching gamers seems set to ride out the downturn in front of their television screens – or balancing on exercise boards.

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