Harvey Norman, who announced an online sales operation for games and movies last week is already under attack from vendors and Internet providers who want to sell content directly to consumers who are now snapping up new gaming devices such as tablets and smartphone that allow movies and games to be purchased directly from a manufacturers site.
Harvey Norman, who announced an online sales operation for games and movies last week is set to face stiff competition, not from fellow retailers, but from vendors moving to sell online along with a new generation of devices such as smartphones and tablets that allow games to be downloaded directly to the device from either a vendor or manufacturer’s store say observers.
Last week the head of Marketing for JB Hi Fi admitted that it was inevitable that mass retailers would lose customers to vendor sites and online sites. Scott Browning said that in the future “consumer electronics retailers are going to have to live with and compete in an online world, and that’s just reality,” he said.
In the gaming and movie market that is dominated by the likes of JB Hi Fi, Big W and EB Games, Harvey Norman is going to struggle to attract customers due to competition from established retailers in Australia and overseas web sites and vendors selling direct says Games Research.
Also set to take market share away from the likes of Harvey Norman and JB Hi Fi is Telstra who are currently expanding their relationships with both TV vendors and Hollywood movie houses in an effort to make Bigpond Movies a key source for movies via Internet enabled TV’s or the Companies own T Box.
According to several gaming analysts that ChannelNews spoke to at the Consumer Electronics Show 2010 was a “shocking year” for gaming sales.
2011 they say will see a big improvement in the gaming market but mass market retailers will not necessarily reap the benefits of new consoles and price cuts for existing hardware.
This week Nintendo will announce their new hand-held console with a 3D screen that has been made by Sharp.
On Thursday Sony is expected to unveil the PlayStation Portable 2 with all of the available games being sold by Sony directly via a Company portal.
While mass retailers will be given the opportunity to sell the hardware they will not get access to the all-important software which often has significantly higher margins than hardware.
In Australia EB Games refused to sell the Sony PSP device because of Sony’s decision to sell the games direct.
In the second quarter Nintendo is expected to announce a successor to the Wii home console with the device going on sale in Australia in the second quarter.
Revenues for the US video game industry, including hardware, software and accessories, fell 6 per cent to $18.6bn in 2010, according to figures released this week by NPD, the research firm. In 2009, they were down 8 per cent from the previous year.
Console sales fell 13 per cent to $6.3bn in 2010 with neither Microsoft, Nintendo nor Sony reducing prices for their respective Xbox 360, Wii and PlayStation 3 consoles during the year.
Accessory sales increased 13 per cent, helped by the success of Microsoft’s Kinect motion-sensing controller at the end of the year, when 8m were sold globally in its first 60 days on the market.
Michael Pachter, video game analyst at Wedbush Morgan Securities, said new hardware such as the Kinect, the launch of Nintendo’s 3DS, an updated Wii and Sony’s PSP2 could act as catalysts to stimulate falling gaming sales.
“Just as Kinect has had phenomenal success because it was different from what we’d seen in the past, I think the 3DS will be really successful – it has a 3D screen and camera that makes it fun and hip and different.”
Mr Pachter thinks price cuts are inevitable to boost sales, with $50 reductions traditionally adding 5 percentage points to software sales growth as well.
“Sony is going to see it falling behind further and will probably cut prices first; Microsoft won’t want Sony to take share, so they’ll cut, while Nintendo has to cut the Wii in order to launch the Wii 2.”
The console makers are under pressure from other forms of gaming. Apple’s iPod Touch and smartphones now compete with hand-held consoles. Sony Ericsson is expected to release a PlayStation smartphone during the next few weeks.
PC games are also enjoying a revival through social gaming on Facebook and the success of more complex role-playing games such as World of Warcraft.
PC software sales rose 3 per cent last year and NPD estimates consumer spending on content was flat at about $15.5bn, rather than down in 2010, if new growth areas such as social and mobile gaming are taken into account.
Video game sales fell for 2010 but are expected to bounce back this year as people embrace new ways of playing games online and on-the-go, according to retail research firm NPD Group.
Despite a surge in video game accessories — spurred by Microsoft’s Kinect and Sony’s Move motion control systems — total spending on video games and equipment fell 6 percent to $18.6 billion in 2010, as gamers curtailed spending in the early part of the year.
But a recovery is predicted for this year, as more people access games on Internet sites such as Facebook and play them on mobile devices.
NPD analyst Anita Frazier said “The increasing number of ways to acquire content has allowed the industry to maintain total consumer spend on content as compared to 2009. We should expect 2011 to be a growth year in the games industry as the consumer demand for gaming continues to evolve.”