Is the Video Game Industry Ready to Break Out of 2010’s Limbo?

The preliminary estimate for dollars spent on video games in 2010 is between US$15.4 billion and $15.6 billion, down by about 1 percent from 2009, according to a report from the NPD Group. The figure includes total sales of new physical video and PC games, used games, game rentals, subscriptions, digital full-game downloads, social network games, downloadable content and mobile game apps.

Microsoft’s Xbox 360 saw significant growth 2010, with December its best month ever. The spurt was due to the November release of the Kinect accessory, which sold 8 million units in its first 60 days.

The Kinect came bundled with Xbox 360 consoles and also sold individually. Kinect benefited from media and consumer interest in its ability to track player movements by camera, forgoing traditional controllers.

PC game sales were up 3 percent. There was also a rise in mobile game apps, downloads and social network games, NPD noted. Sales were bumped up by high-profile PC exclusives from “Blizzard: Starcraft 2” and “World of Warcraft: Cataclysm.”

The NPD Group did not respond to the E-Commerce Times’ request for comments by press time.

Slow Year Sees Spike Near the End

The economy dampened video game sales, but higher retail numbers during the holiday helped.

“The depth of the recession was in 2009, but we saw some overlap into the first six months of 2010,” Charles King, principal analyst at Pund-IT, told the E-Commerce Times.

“Microsoft’s Kinect was cited as being a driver for the Xbox 360 surge,” he pointed out, “but that technology wasn’t available until the end of the year in the lead-up to Christmas. PC games were up 60 percent for December. It looks like there was a surge around the holidays, even though the year was down overall.”

Innovation propels the game industry, and it will be a major factor in its future success.

“I think the big drivers now are around online gaming,” King said. “I think that Kinect will grow like Nintendo’s Wii, which was successful at the beginning and continued its success for several years. When vendors come up with a new technology for consoles that lets users play games in a new and different way, that’s the key.”

Online gaming also took some fire out of the traditional game market.

“Online is a big part of the industry. Certain types of games need a well-developed online aspect to be really successful,” said King. “I expect to see growth continuing for online games and games related to social networking.”

Improvements in computer technology also means improvements in video gaming.

“On the console side. I expect 2011 to be a good years for Microsoft and Xbox 360,” said King. “I think the next generation of Intel and AMD processors will do very well for extreme gaming. People have access to PCs and laptops, and given the interest in 3D, it will bode well for PC gaming — especially for high-end gaming.”

Other Reasons for Shrinking Sales

The drop in sales could be due to a lack of quality new games and a focus on remakes and sequels.

“There really has been a dearth of great titles,” Rob Enderle, principal analyst at the Enderle Group, told the E-Commerce Times. “Everybody is locked into sequels, which are not that exciting right now. For PC gaming, the big focus is tablets and smartphones, with not as much gaming. The shift in consumer interest has been away from game consoles to tablets.”

The current generation of consoles has been around for about five years now.

“None of the platforms are trending at the moment except for Microsoft Kinect,” said Enderle. “And it doesn’t have a lot of games. There are a few titles that people really like. The Wii is also that way. So Kinect is strong, but it can’t hold up the industry.”

How Will the Industry Jump Back?

The video game industry usually gets a big rise when a new generation of consoles is released.

“Gaming goes in cycles. It was hot in the 80s, slow in the 90s, up in the past decade,” said Enderle. “It will come back again. It’s getting bigger on the iPhone. The future will be on tablets and smartphones. I think it will come back again, but it will come back different, just like the last cycle. Atari wasn’t the leader when it came back, and who knew that Sony would be the big guy?”

The video game industry seems to be in a pause before the next spurt of innovation. “The market is looking for something else now,” said Enderle. “Augmented reality games are big, and social networking games are big, but a lot of that activity doesn’t show up in the numbers.”