With the arrival in stores this week of long-awaited titles Grand Theft Auto IV and Mario Kart Wii, the already hot video game industry is headed for the stratosphere.
For 24 months in a row, sales of video-game systems and software have grown over the previous year. That performance led to record sales of $18 billion last year, up from $12.5 billion in 2006, according to market tracking firm The NPD Group.
Industry observers were prepared for a breather after the strong 2007 holiday season, but sales continue to rocket. "With continued demand for games like Guitar Hero and Rock Band, big-ticket items, and the (Nintendo) Wii not in stock … we saw some big numbers in February and March," says Edward Williams, an analyst with BMO Capital Markets.
Sales rose 34% in February ($1.3 billion) and 57% in March ($1.7 billion) over the previous year and April is likely to keep growing with potential blockbusters such as GTA IV, out Tuesday, and Mario Kart, released Sunday.
The controversial GTA IV, even as it draws complaints from parent activist groups for its violent themes, also draws dollar comparisons with box-office smashes such as Spider-Man 3 ($337 million in the USA) and Pirates of the Caribbean: At World's End ($309 million). Williams estimates GTA IV should surpass $200 million in U.S. sales in its first week.
And Nintendo's Mario Kart "is definitely going to give us a good start to the week," says Bob McKenzie of the GameStop chain.
While it's uncommon for two such popular games to hit stores within days of each other, the Mature-rated GTA IV and the family-friendly Mario represent a "classic example of counterprogramming," NPD's Anita Frazier says. "I expect April to be a record sales month."
With Nintendo's healthful Wii Fit due May 19 and Metal Gear Solid in June for the Sony PS3, Williams says, "you are going to have some pretty strong numbers through the first half of the year."
Reasons behind the hot streak:
•More people playing games. An NPD survey earlier this year found the highest percentage yet (72%) of consumers playing video games, including more women and people older than the typical player. "The intimidation factor has been taken away with the Nintendo Wii and Guitar Hero," says Best Buy's Jill Hamburger. "We're seeing multiple generations come together to experience video games."
•A wider variety of games. Two years ago, analysts wondered whether the market was big enough for Microsoft, Nintendo and Sony. So far, it has been, as game designers try to play to different demographics on the three systems.
Last month's top-selling game, Super Smash Bros. Brawl for the Wii, targeted families and Nintendo devotees, while Devil May Cry 4 and Tom Clancy's Rainbow Six: Vegas 2 aimed at hard-core gamers. In development are more cooking games, such as Iron Chef America: Supreme Cuisine, and new music games, including Guitar Hero: Aerosmith. The handheld Nintendo DS and Sony PSP continue to sell well, too.
•More people staying home. With fuel and food prices rising, families may opt for video games rather than other leisure pursuits. "In this economy, you might not take that elaborate spring vacation," Hamburger says. "Gaming becomes a nice alternative in terms of creating a family entertainment experience right at home."
Says Williams: "When that happens, the video game industry benefits. It's cheap entertainment."
With other games due this summer. such as SOCOM U.S. Navy Seals Confrontation and movie tie-ins Iron Man and The Incredible Hulk (plus Too Human, Fable 2 and Fallout 3 soon after), Jeremy Dunham of game and entertainment site IGN.com says that he doesn't see "video games slowing down at all."
A video-game player since he was 3, Dunham, now 31, says that to see video games evolve from "an underground movement to complete mainstream acceptance … is very, very impressive. The fact that video games are broadening their reach just in the way they get into your home has a lot to do with it."