GAME CONSOLES MATURE, PORTABLES ASCEND

DAN ALAIMO

LOS ANGELES -- While sales of the current generation of video game console systems seem to have peaked, and some analysts are even projecting declines in the year ahead, advances in portable games announced at Electronic Entertainment Expo, or E3 held here last month, continue to stoke the fires of the interactive entertainment business.

Additionally, price cuts announced on two of the three major platforms will bring more sales and rentals of games for the platforms. Nintendo of America, Redmond, Wash., said shortly after the show that it is working on a new game system that it hopes to have ready for next year's E3 show, according to media reports.

Both Microsoft Corp., Redmond, Wash., and Sony Computer Entertainment, New York, cut prices on their video game platforms to about $150 in time for E3. Nintendo GameCube is already priced under $100.

For supermarkets that have abandoned the video game business, much of this may seem immaterial. However, observers noted, they should pay attention to the continuing trend referred to as the "graying of the game audience," by Douglas Lowenstein, president, Entertainment Software Association, Washington, during his annual media briefing at E3, which the trade group owns.

This was the 10th anniversary of E3 and Lowenstein compared how the game business was in 1994 to 2004. "Back then, the core gaming market was teenage boys; today, the average age of gamers is 29, the core demographic is 18 to 35 years old and a third of game players are women. Literally, the faces of our audience have changed," he said.

Looking forward and alluding to the words of John Kennedy 44 years ago, Lowenstein said, "We are truly on the edge of a new frontier, and it is one of unquestioned opportunity and also of some peril. The consumers of tomorrow will be different than the consumers buying our games today."

Lowenstein predicted the graying of the game business will continue in the next decade. By 2020, according to U.S. Census data, there will be 174 million Americans between the ages of 5 and 44. "That's 174 million Americans who will have grown up with PlayStations, Xboxes and GameCubes from their early childhood and teenage years, and you can count on these people still being gamers," he said. ESA consumer research has found that more than half of all game players expect to play as much or more 10 years from now as they do today, he added.

"What this means is that the average gamer will both be older and, given their lifetime familiarity with playing interactive games, more sophisticated and discriminating about the games they play by 2014. It also means there will be a more mass market audience. Thus, we cannot assume that the gamers of 2014 will want the same experience they had when they were younger. They may be gamers for life, but they may not spend their lives playing games," Lowenstein said.

"In other words, game designers and publishers won't be able to get by just making games that appeal to their friends and fellow developers," he said.

Meanwhile, ESA's consumer research found that Americans are spending more of their leisure time playing video and computer games and that is coming at the expense of television and the movies. The study showed that 52% of gamers who spend more time playing games watch less television as a result -- 47% go to movies less; 41% watch movies at home less often.

"What we are seeing is that consumers are choosing video and computer games as their choice of entertainment for the 21st century," Lowenstein said.

In another study, NPD Group, Port Washington, N.Y., reported that boys ages 5 to 12 are now spending more time playing video games than with traditional toy categories. Girls in that age group spend less time with video games, the study showed. Older boys, ages 9 to 12, gravitate from specific toy categories, such as action figures, building sets, games and puzzles, and vehicles. Girls 9 to 12 continue to show no difference in the time they spend with video games and traditional toys, and as they get older, tend to find other interests sooner than boys.

NPD Group also reported that total U.S. retail sales for console and portable games remained flat in 2003, although there was a 10% growth in first-quarter 2004.

Another research company, DFC Intelligence, San Diego, predicted that overall sales of game hardware and software will drop 9% in 2004. There was better news from DFC for portable games as the company predicted that category would grow from $3.9 billion worldwide sales in 2003 to over $7 billion in 2007. David Cole, analyst with DFC, said he may have to revise those numbers upward because of the introduction of new portable game machines from Sony and Nintendo during E3.

JupiterResearch, New York, predicted the U.S. audience for portable games would grow from 23 million in 2003 to 43 million in 2009, with revenue increasing from $1.6 billion in 2003 to $2.7 billion in 2009. "Competition is the major driver of growth over the next five years," said Michael Gartenberg, vice president and research director.

"As device manufacturers and content developers cater to broader audiences, we will see some amazing things happen. There's a gap in ownership between console and handheld devices, allowing for an untapped market, as well as substantial opportunities in age brackets from the upper teens to 34 years of age, both male and female," Gartenberg said.

Because of theft, damage and the continuing space challenge brought on by the burgeoning DVD category, video games have become less of a factor in many supermarkets, whether for rental or sales. "We don't involve ourselves anymore with games.

We didn't find it to be profitable or workable," said Ray Wolsieffer, video specialist, Bashas', Chandler, Ariz. Games are an afterthought for many supermarket video programs, said Andrew Miller, director, supermarket division, Rentrak Corp., Portland, Ore.

"Gamers are a breed that's pretty serious. They want to go to a game store or one of those [video specialty store] departments that are so nice. They want to go to a resource and supermarkets are never going to be that," he said.

Although theft is an issue, some stores served by Video Management Co., Tacoma, Wash., continue to do business in games, said Greg Rediske, president. "The stores that are doing it do a pretty good job with games, and it certainly is a viable category. It has a lot of opportunities for rental, it also has higher shrink and it is more difficult to manage. For a lot of our stores, it's not something they want to deal with," he said.