James Steinman tries out Nokia Oyj's N-Gage combination gaming device/mobile telephone at a GameStop store in New York. The video game industry has seen upbeat retail sales despite a lack of hardware inventory. Analysts expect industry sales this year to get a boost from new hand-held game units.
Although retail sales and demand are there, some inventory is not
The video game industry is booming, but a hardware shortage is keeping game retailers from reaching their full sales potential.
GameStop, the country’s largest video game and entertainment software retailer, reports total sales for the 48 weeks ended Jan. 1 totaled $1.7 million, a 17 percent increase from the prior year, but the increase was stunted by a lack of inventory.
“Severe hardware shortages of Sony’s PlayStation 2, Microsoft’s Xbox and Nintendo’s Dual Screen, have taken a toll. Not only did we lose the tie-in software sales that generally accompany hardware gifts, but due to the shortage affecting the total market, we lost the downstream sales that historically have come our way regardless of where hardware is sold,” said R. Richard Fontaine, GameStop’s chairman and chief executive officer.
“In all my years in the video game business, I have never seen shortages of this duration or magnitude. There is no question that there was demand for the product, but no hardware product to satisfy demand.”
The Texas-based company’s month-end inventory in December was $33 million lower than the previous year even though GameStop added 300 stores, reports Fontaine.
Fontaine said in a press release that the inventory shortage is a “temporary problem” that hardware manufacturers are working on.
Experts expected the entire industry to decline in 2004 as consumers anticipated new consoles – given that the current video consoles are about five years old, reports Doug Lowenstein, president of the Entertainment Software Association.
Despite aging video game consoles and a holiday shortage of PlayStation 2, price cuts and strong sales of Microsoft’s Xbox, the U.S. video game industry was healthy in 2004, marketing information company NPD Funworld reports.
Sales for hardware, software and accessories totaled $9.9 billion, down 1 percent from $10 billion a year earlier, mainly because of a 17 percent decline in hardware sales to $2.4 billion as a result of price cuts, research from NPD Funworld shows.
Video game software sales grew 8 percent to $6.2 billion in 2004. Analysts expect 2005 sales to get a boost from new hand-held game units from Nintendo and Sony. Microsoft also may launch its successor to the Xbox in the fall. Microsoft and Sony consoles are priced at $149 and Nintendo’s sells for $99, NPD reports.
Microsoft’s Xbox console sold 4 million units in the United States, up 27 percent from 3.2 million a year earlier, NPD data shows.
Microsoft started gaining early last year when it cut hardware prices ahead of Sony. That trend continued during the year with the Xbox beating the PlayStation in hardware sales for the fourth quarter, a first since Microsoft launched its console in 2001.
While Nintendo lost on the console front, it continued to dominate hand-held sales.
Overall, portable hardware units accounted for 43 percent of the market. Portable hardware revenue was $828 million, up 10 percent from a year earlier. Nintendo had the majority of the market, and in November it launched its next-generation hand-held, the DS. The DS sold more than 1.4 million units.
The year also was a good one for computer games, with “Half-Life 2” and “Doom 3” spurring growth in PC game sales, NPD reports.
Online gaming continued to grow with online-playable titles accounting for 26 percent of units sold, compared with 12 percent a year earlier.
