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Video Game Sales Strong -- and Getting Stronger

20 Nov, 2001 By: John Gaudiosi

Despite the economic woes that are impacting most industries, a trio of new reports paints a rosy outlook for the burgeoning video gameindustry.

While 2001 is considered a transition year as consumers buy new PlayStation 2s, Xboxes and GameCubes to replace the old PlayStationsand Nintendo 64s, retail dollar sales of U.S. video game hardware, software and accessories is already up 33% year-to-date (Januarythrough September), compared to the same time last year, according to NPD Funworld. Unit sales of video game hardware, software andaccessories also rose 12%, compared to the same time last year.

Riding the successful wave of PlayStation 2 and Game Boy Advance hardware and software sales, the total U.S. video game industry generated more than $4.3 billion in revenue during the first nine monthsof this year, while sales during the same time period last year were more than $3.2 billion, according to NPD Funworld.

With the months of November and December accounting for as much as 50% of the gaming industry’s yearly sales revenue, this is a very good sign. The duel launches of Microsoft’s Xbox and Nintendo’s GameCube are already giving a boost to toy and electronics stores, as theconsoles are selling out as fast as they hit retail shelves.

"While most of retail struggled in September, the video game industry not only survived, but thrived," says Richard Ow, NPDFunworld senioraccount executive. "Due to recent national events, Americans may be spending more time at home, which bodes well for video game sales this holiday. Kids and adults undoubtedly will drive video game sales as oneof their top choices of entertainment at home."

Total video game sales for 2001 are expected to reach $23.4 billion worldwide with $8.5 billion slated for the United States, according tothe International Development Group (IDG), a leading video game market research and consulting firm.

IDG’s November Multimedia Industry Update predicts that the strong growth in console sales will come from the unprecedented amount of TVadvertising that will be spent by Microsoft, Nintendo and Sony, the improved product performance of next generation consoles over previous consoles, the movie DVD playback features of Xbox and PS2, and the potential for online gaming on all three new systems.

"The console video game industry is poised for historic growth in revenues and in the penetration of households over the next four years, from the current 35% to as much as 50 to 55%," says Anton Bruehl, president of IDG.

More than 36 million households in the United States currently own avideo game console, up from 34 million a year ago, according to the Yankee Group's recently completed Technologically Advanced Family Survey. The survey results indicate that while a significant portion ofnext-generation video game console sales is coming from households upgrading their video game platform, the market is slowly continuing toexpand. Families with children represent the lion’s share of video game system owners, with more than 80% of households surveyed withchildren ages 13 to 17 already owning at least one video game system. Onaverage, video game households own 1.4 consoles per household.

"The results signal that while the industry is clearly a mature one, there is still room for growth," sayd Steve Vonder Haar, director of theYankee Group's Media & Entertainment Strategies practice. "Consolemanufacturers are hoping that by transforming the console from a stand-alone video game system into a home entertainment system, theywill be able to jump-start console growth beyond its current 1% to 2% per year."

U.S. Video Game Industry Unit Percent Changes, January-September 2001 vs. January- September 2000

Categories/Unit Percent Change

Total +12%
Consoles +62%
Console accessories +19%
Portable video hardware +17%
Portable video software +23%
Portable video accessories +35%

(Source: NPDFunworld(SM)

Top 10 Video Game Titles Ranked by Units Sold, January-September 2001

Rank/Platform/Title/Publisher/Intro. Date

1 GBC: Pokemon Crystal (Nintendo) July '01
2 PS2: Gran Turismo 3: A-Spec (Sony) July '01
3 GBC: Pokemon Silver (Nintendo) October '00
4 GBA: Super Mario (Nintendo) June '01
5 N64: Pokemon Stadium 2 (Nintendo) March '01
6 GBC: Pokemon Gold (Nintendo) October '00
7 PS2: Madden NFL 2002 (Electronic Arts) August '01
8 PSX: Gran Turismo 2 (Sony) December '99
9 PSX: Tony Hawks Pro Skater 2 (Activision) September '00
10 PSX: Madden NFL 2001 (Electronic Arts) October '00

(Source: NPDFunworld(SM)

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