Game sales explosion drives growth

Games are not child’s play anymore, with the toy and game retailing industry raking in hundreds of millions of dollars every year. By ROBERT BRYANT

By Robert Bryant

Games are not child’s play, with the toy and game retailing industry raking in hundreds of millions of dollars every year.

Booming computer and video game sales have reshaped the toy and game retailing industry, and the trend is set to intensify in the years ahead.

IBISWorld predicts that video games will account for about 40% of sales in the toy and game retailing industry, up from just 15% in 1998-99.

Interactive Entertainment Association of Australia data shows console and computer game sales in Australia reached a record high of $1.3 billion in 2007, a 43.6% increase on the previous year. Hardware sales accounted for $500 million, up from $270 million.

The games sector is dominated by electronics giants Sony and its Playstation PSP consoles, Nintendo and its DS and Wii platforms and Microsoft with its Xbox 360.

Sony Computer Entertainment Australia achieved revenue for the year to 31 March 2007 of $210 million, up 14.1% on the previous year. Nintendo’s Australian revenues almost doubled to $138.9 million a year, according to news reports.

The Australian retail game industry has been dominated in recent years by EB Games, which reportedly had 250 outlets and turnover of $309 million as at January 2006.

However EB is facing increased competition by major chains such as Harvey Norman and JB Hi-Fi as well as a range of new, smaller rivals. UK-based new entrant GAME has already grown from 20 sites to 51 and has plans for 100 by late 2008.

Computer games titles such as Gran Turismo (car racing), Grand Theft Auto (car racing with a law-breaking twist) and Pokemon (cartoon-based platform game) were bestsellers between 2002 and 2007.

The electronic game industry in Australia generates annual revenue of approximately $110 million and employed approximately 1600 people. Across the world, industry research suggests that games software sales reach approximately $20 billion per year.

Key drivers for the computer game industry in the future include:

• A move towards games with educational content that provide instructive and exploratory products for older school-aged children.
• The development of simpler game controls and older style, straightforward games that appeal to casual and less tech-savvy gamers.
• Games that utilise alternative controls such as electronic guitars and electronic dance mats to provide a more diverse gaming experience.
• Development of games with more appeal to non-traditional gaming audiences, particularly women and older people generally – children and young adults collectively account for 55% of game purchasers.

Major market segments

IBISWorld supplies business information databases, including industry reports, company reports and business indicator reports. www.ibisworld.com.au