We, as consumers, appear to be in a bit of a bind. Credit is no longer available on tap, prices of everyday consumables are on the rise, and households are starting to feel the financial pinch. Every month our disposable income is being squeezed by the increase in costs of food, petrol and utilities, which means less money to spend on luxuries such as meals out or – importantly – entertainment media. Surely this spells trouble for the games industry as a whole?

 

Well, actually, although we probably have less disposable income than we did 12 months ago, this doesn’t appear to dampen our enthusiasm for games. During times of economic strife, while we might be prompted to curb our meals out or trips to the football and cinema, we seem to be happy to keep splashing out on entertainment for when we’re stuck at home. Generally, games are perceived as good value on the cost/hours of entertainment ratio and this has meant that, historically, console cycles have been pretty much uninterrupted by economic turmoil.

 

This most recent console cycle is little different This most recent console cycle is little different, with some very strong sales results in what the specialist press is calling a ‘golden era’ for games retail. First-quarter sales performance for hardware saw volume up by almost 20 percent compared to last year. Software sales have also been very strong in the US and Europe, and current year-on-year performance suggests that the industry will see another record-breaking year in 2008.

 

This market performance is being partly driven by the expansion of the console market through new types of consumers buying the Wii and (to a lesser extent) PS3. According to NPD, Nintendo sold over 700,000 Wii consoles in the US during April, far more than Xbox 360 and PS3 – both at fewer than 200,000. With the Wii having the widest age range of users of all three platforms, it is likely that a good share of those purchasers were fresh to the console market. While the Wii has prompted interest from traditional non-console gamers through its technology and lifestyle software, the PS3 has prompted interest from the high-definition video consumer looking for a good value Blu-ray player.

 

 

So which publishers are currently most actively engaged in pursuing a slice of this growing market? All the major publishers have ramped up game output in recent months, as the current generation of consoles enters the mass adoption phase. In the first quarter of 2008 we commented on how Sega had upped its commitment with an output volume bigger than its competitors. The second quarter is much the same again – Sega continues its headlong charge into the current generation, with nine releases including four based on new IP. Sega’s roster includes multiplatform releases of Iron Man and The Incredible Hulk, both based on what are likely to be two of this summer’s most heavily marketed Hollywood cinematic releases. Take-Two and EA also share the top spot for game SKUs released in the current quarter.

 

The most prolific publishers in relation to releasing original IP are Sega, THQ and Ubisoft. All three publishers recognize the importance of establishing new IP at this stage of the console cycle, where successful new IP can spawn at least two sequels before new consoles are released. In an industry where development costs have risen strongly since the last cycle, being able to re-use technology and assets across a number of titles is a good way to reduce costs. Some notable new game IPs hitting the market in this quarter include a further twist on the Lego franchise with Lego Indiana Jones, Free Radical’s Haze, and EA’s Boom Blox, in which Steven Spielberg has also had some creative input.

 

As most publishers are now firing on all cylinders, it’s also interesting to see which countries are actually producing all this new content. Unsurprisingly, the US maintains its leadership position at the cutting edge of console games production during the second quarter. Commendably, the UK maintains its position as number two producer of content, and shows that for all the doom and gloom surrounding R&D tax incentives in other markets, the UK industry is performing very strongly. Compare this to the miserly output of Canada this quarter, a territory renowned for sucking talent out of other countries, and things look pretty good for the UK.

 

 

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