Game console sales in slo-mo

[wraggster]

More than 25 million of the video-game industry's most sophisticated and family-friendly consoles have been sold in the United States in the past 2 1/2 years.

But there are only marginal signs that the machines - designed to foster games as a mainstream pastime in a majority of homes - are making any inroads with households that traditionally have been without consoles.

The game industry's signature event, the Electronic Entertainment Expo (E3), takes place this month in Los Angeles in the midst of booming hardware and software sales, driven heavily by interest in Nintendo's Wii, Microsoft's Xbox 360 and Sony's PlayStation 3. The industry is on pace to top last year's record $18 billion in sales by $3 billion to $5 billion, according to the market research firm NPD.

The robust spending, however, seems mostly to be coming from consumers who owned a previous generation of console, such as the PlayStation 2 or original Xbox. Some industry insiders hoped the new consoles, led by the populist appeal of the Wii, would dramatically expand the pool of game-playing Americans. But that appears to remain down the road at best.

Research companies calculate that 40 to 42 percent of U.S. households are using at least one game console. According to some sets of research, that represents little or no growth in recent years.

"We're looking at very slow growth," said David Klein, executive vice president of Centris, a Los Angeles research firm.
Centris measures the current percentage of homes with consoles at 40, unchanged from this time of year in 2006, and up by just 1 percent over 2005.

Adams Media Research puts the percentage at 40.9, up from a 2005 figure of 36.3.

Michael Arrington, one of the firm's analysts, noted in an e-mail that it's likely "most new consoles are going into homes that are either replacing an existing console or adding a second (or third) unit."

The implications for the game industry, whose challenges include rising development costs, are sweeping. An expansion of the game audience offers continued revenue growth, or at least a hedge against a spending slowdown by existing fans.

The tech-laden nature of the latest consoles - which feature broadband Internet capabilities - gives them broader home entertainment potential. And the wider the cultural acceptance of games, the less vulnerable the industry is to social and political critics concerned about violent or adult content.

Nintendo's hot-selling Wii is based on an easy-to-use, one-hand remote control that's meant to entice consumers without previous game experience. Nintendo declined to comment on any internal research it has, although anecdotes abound about the Wii being a hit with moms, dads and grandparents.

Still, that word-of-mouth enthusiasm may not be translating into much real expansion.

"The problem with any consumer survey of that nature is you can get all kinds of wacky results when you try and extrapolate out to (the) U.S. as a whole," industry analyst David Cole of DFC Intelligence said by e-mail.

"You can look at how much the console systems actually sell, but that doesn't account for duplicate households," Cole said. "If you look at most new console purchases today, they are going into households that already own a game system from a previous generation (yes, even Wii buyers)."

The Consumer Electronics Association puts the percentage of households with consoles at 42, the same as a previous peak in 2005. But the CEA's growth projections are notably upbeat. Its research foresees the percentage hitting 44 by the end of the year, up from 37 in 2007, and it expects 27 percent of the people purchasing a console this year to be first-time buyers.

For whatever market growth there is, noted Arrington of Adams Media Research, it's likely the Wii is "doing the most expanding into existing homes that haven't ever . . . taken the console plunge. PS3 and Xbox 360 are being bought almost entirely by folks that are already comfortable with 'doing the console thing' "

http://www.mercurynews.com/ci_9793586?nclick_check=1

[John Vattic]

casual games make me sleepy. yawn.