Video games to outsell music, DVDs – research

Just what’s so important about the growing links between music and video games is underlined by London-based Verdict Research, which predicts video games will outsell music and other video products this year for the first time.

In the 12 months to the end of 2008 Verdict predicts that the buoyant video games market will have grown by a massive £1.37bn – at a time when the combined music & video sectors have stagnated, with growth of just £0.03bn between them.

The researchers note that while the music and video sector has enjoyed a boost from the rapidly growing digital download market, general trading conditions remain challenging.

Music is suffering from piracy, a continual onslaught of price deflation, intensifying competition and the ongoing decline of physical format CD’s, the researchers note, while the DVD market has grown in volume but at the expense of discounted prices. 

“With the high street consolidating and online becoming increasingly fragmented, competition is intensifying at a time when overall growth in the market is grinding to a halt, at just 0.8% over the last 5 years,” the analysts said.

“The music & video market is not just suffering from a slowing of growth but a massive transfer of spend to online,” Malcolm Pinkerton, Senior Retail Analyst at Verdict Research explains. “So in actual fact the sales via high street shops are being hit a lot harder than the overall growth figures would suggest.”

The research also suggests that by the end of 2008 in-store music and video sales will account for less than two-thirds of the market – and that this proportion is falling fast.

Looking forward to future music retail the researcher’s declared price, innovative features “such as iTunes’ ‘Complete your Album’ , superior sound quality downloads and premium albums with bonus material as key to sales.

The researchers stressed the digital channel stil represents a source of potentially lucrative growth, particularly in light of the move to DRM-free music downloads, “The embracing of open MP3 format will reignite download sales, as it will remove the issues of interoperability and encourage album sales,” said Pinkerton. “With more record labels and retailers signing up to the MP3 format, the download market is more likely to reach its true potential, as there will be a universally-compatible open format. ”

Meanwhile, the video games market is proving itself the stand-out performer in a sluggish retail environment, enjoying explosive growth, Matthew Piner, author of the Video Games & Consoles Retailing report notes. “2008 has seen video games catapulted into the mainstream entertainment market, popular with men, women, children and families alike”.

Although leading specialist Game and a number of well-run independents are well-placed to profit on the conspicuously buoyant market, other retailers are also keen to benefit, with grocers, online retailers and selected non-specialists all ramping up their participation in the sector – often at the expense of their music & video offers.

One surprising aspect of the games market over the past year is that the more severe the economic downturn has become, the better the gaming market has performed.

“Games represent a relatively cheap, but also exciting and innovative, pastime,” adds Piner. “As more people save money by staying in, a video game, although it may cost three or four times as much as a DVD or CD, offers much more longevity and hence better value for money. Moreover, it offers a more involved and interactive form of escapist entertainment when compared to a CD or DVD.”

The video games accessories market is also set to continue enjoying massive growth – with sales more than doubling in 2008 and now representing more than 10% of the video games sector value. Over the past few years gaming has increasingly moved away from the traditional formates, “The Nintendo Wii’s movement based controller, or aEUR~Wii remote’ has had a particular impact on the market, as has the arrival of stylus pens (for the Nintendo DS), dance mats, drum machines and microphones to play games,” concludes Piner.

“Sales of these peripheral gadgets have widened interest in the sector and generated a new revenue stream for retailers.”

We’d note – perhaps this is also why Apple is focusing its wireless iPod/iPhone platforms as being more than simply media players, but also as increasingly popular games platforms.

(Given the combative lawyer-infested relationships seen as standard in the music and movie industries, it’s no surprise Apple and other players are focusing on more transparent alliances, such as with video games developers).

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