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Growth ahead for more diversified game industry
July 18, 2008 / 11:59 AM / 9 years ago

Growth ahead for more diversified game industry

<p>President and Chief Executive Officer of Sony Computer Entertainment America Jack Tretton speaks at the Sony Computer Entertainment America news conference at the 2008 E3 Media &amp; Business Summit in Los Angeles July 15, 2008. REUTERS/Mario Anzuoni</p>

By Kiyoshi Takenaka - Analysis

LOS ANGELES (Reuters) - The video game industry looks set for at least another year or two of strong growth, driven by geographical expansion, a strong hardware lineup and growing pool of casual gamers, industry executives said.

In a move to capitalize on emerging economies, Sony Corp’s (6758.T) game unit said at the E3 video game trade show this week it will launch operations in Argentina, Columbia and Peru by March 2009, its first step into the South American market.

Rival Nintendo Co Ltd 7974.OS aims to start offering its Wii console in China this year.

Hardware makers’ broader reach beyond the established markets of North America, Europe and Japan would open up new business opportunities for hundreds of software makers and follow the lead of other technology sectors turning to emerging markets for growth.

“Game makers like us are now trying to get into such vibrant regions as Latin America, Eastern Europe, Russia and Asia,” Konami Corp (9766.T) Executive Corporate Officer Kazumi Kitaue said on the sidelines of the E3.

“With the overall market expanding like this, we should be able do better and better if we really buckle down.”

Another growth driver is the widest variety ever of game hardware available, which caters for a broader range of game players and enables software publishers to create multiple revenue streams from a single title.

Microsoft Corp’s (MSFT.O) Xbox 360, Sony’s PlayStation 3 and Nintendo’s Wii compete with one another for dominance in the console market. The biggest seller of all time, last generation’s Sony machine, the PlayStation 2, is also still thriving.

“The video game industry has never before had a market where this many hardware models co-exist actively,” Rakuten Securities analyst Yasuo Imanaka said.

“This creates a very favorable business environment for software makers,” he said.

Global video game sales are likely to grow 15.2 percent this year to $48.3 billion this year, followed by a 9.3 percent rise to $52.8 billion in 2009, according to PricewaterhouseCoopers estimates.

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The industry is also benefiting from a new group of casual, or light, gamers, as Nintendo has broadened the gaming population beyond the traditional user base of young males with its intuitive, easy-to-use games such as “Wii Sports.”

“The Wii ... has opened up an entirely new set of gamers that weren’t there before,” Electronic Arts Games Label President Frank Gibeau said.

“If you look at the DS and the Wii they are just adding people to the pie,” he said.

Underscoring Nintendo’s smash success, operating profit at the creator of such iconic game characters as Mario and Zelda more than doubled in the year ended March 31.

Slowdown in the global economy and its chilling effect on personal consumption, which cast a long shadow over other industrial sectors, have not become a major source of concern for game industry executives, at least not yet.

Microsoft said it is not seeing any weakness in its Xbox business from the soft U.S. economy and expects the company and the rest of the video game industry to weather downturns in consumer spending.

Video games offer many more hours of entertainment than a two-hour movie, Don Mattrick, a senior vice president at Microsoft’s entertainment and device division, told Reuters this week.

“Consumer spending is still going to exist, and people are going to prioritize,” Mattrick said. “I‘m bullish about our growth prospects as an industry and as Microsoft.”

Konami’s Kitaue expects the video game industry to see the best year in the current console cycle next year before a possible slowdown in the year after, followed by a shift of gamers’ attention to upcoming consoles -- the generation still in development.

Editing by Gary Hill

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