LOS ANGELES -- Driven by an aging and expanding customer base and new technology platforms that meet their diverse interests, video games are on the verge of unprecedented growth.
That was the message delivered by Douglas Lowenstein, president of the Interactive Digital Software Association, Washington, during the trade group's recent Electronic Entertainment Expo here, which is also known as E3.
Citing numbers from investment banker, Jefferies & Co., New York, Lowenstein told an E3 media briefing that the North American video game market, including computer games, will grow 300% from $8.3 billion in 2000 to $21.4 billion in 2005.
"It's now irrefutably clear that video games have taken a permanent place with music and films to form the triad of American popular entertainment and culture," Lowenstein said.
One factor in this increase is that as game-players age, they don't outgrow their interest in games, he said. A study commissioned by IDSA from the Long Island Services division of Ipsos-NPD, Uniondale, N.Y., showed that 56% of the most frequent game players have been playing for six or more years, and that 60% of that group expect to be playing games as much or more 10 years from now.
"In a global sense, video games have the potential to become the dominant form of personal entertainment in the 21st century," Lowenstein said.
For supermarkets, both the growth trends and the demographic shift to older players means more rental and sales opportunities, industry observers said. With the advent of new systems like the Sony PlayStation 2, Nintendo GameCube and Microsoft Xbox, video game-rental revenues were up 9% in first-quarter 2002 over the same period in 2001, reported the Video Software Dealers Association, Encino, Calif.
All three companies significantly cut prices on their new systems right before E3, and that should drive additional sales and rentals. "We expect the demand for video game rentals and sales to continue to increase in the year ahead as the manufacturers continue to make their consoles more affordable for consumers," said Brad Hackley, VSDA's director of research.
The price cuts should spur rentals at Harp's Food Stores, Springdale, Ark., said Craig Hill, video specialist. Harp's rents both software and hardware, focusing on the PlayStation 2.W "e've been real strong on games anyway, and this will open us up more to the Xbox and the GameCube.," he said.
Software prices are also coming down, which makes game sales a possibility for supermarkets. "As long as we can stay competitive with Wal-Mart, we are going to start selling quite a few more games. We've already been doing a lot with the budget games, but maybe we can start getting into the A lines," Hill said.
Meanwhile, older platforms pose close-out opportunities in supermarkets. "We are still really strong on Nintendo 64," he said.
"The retailers that we are working with are having a banner year to date based on all the hardware that was sold in the fourth quarter," said Bill Bryant, vice president, sales, Ingram Entertainment, La Vergne, Tenn.
PlayStation 2 has been doing the best of the new platforms for G&R Felpausch Co., Hastings, Mich., said Mandy Budreau, video buyer. I don't think the Xbox or Gamecube compares. I see a lot of movie-driven games coming," she said.
