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United States video games market to reach value of $22.1 billion by 2016
Video Games in the US - a new market research report on 2014-03-31 02:49:02
The US video games category is top heavy, with three companies – Nintendo of America, Microsoft Corp and Sony Corp of America – accounting for 45% of total sales in 2011. This dominance is especially prevalent in video games hardware, as they accounted for 93% of sales value, making it difficult for new entrants to penetrate this category. Market penetration for the current generation of hardware devices is very high, with many Americans owning two or three different systems. As a result software manufacturers have a slightly more level playing field, with their products possibly being available on more than one system.

The US leader for video games is Nintendo of America with sales worth US$3.7 billion and a value share of 19% in 2011. Nintendo has maintained this position because it is involved in many aspects of the video games industry, including both static and hand-held consoles, accessories and software. It is also considered a pioneer of the past – with its original Nintendo Entertainment System and hand-held Gameboy – and of the future – with its Nintendo Wii motion-sensing controller system. In 2011, Nintendo sales declined sharply due to the lack of Wii sales, dropping by 29%, as Americans waited to buy Wii U, which was announced for the 2012 holiday season.

The launch of the hand-held Nintendo 3DS console in March 2011 did not meet sales expectations as there was a lack of quality software available for the system. Curiously enough, a new Pokémon game – the top selling hand-held game in the US – was released in the same month but for the older DS console. These issues caused Nintendo to drastically reduce its prices on the 3DS system, leading to a flat performance for overall Nintendo DS value sales and an overall 5% decline in hand-held consoles in 2011.

In 2011, digital gaming sales in the US grew by 16% to reach sales of US$3.3 billion. Each individual category that makes up digital gaming – mobile games, PC and online game downloads and online games – was positive in sales, contrary to the video games hardware and software sales. Mobile games sales rose 50% in 2011, benefitting from an increase in both tablets and smartphones penetration. We estimate that there were 21.5 million iPhones and over 20 million iPads sold in the US during 2011. PC and online game downloads grew by 9% to reach sales of US$1.2 billion as faster internet speeds made downloading quicker. Additionally, profit margins for downloaded software are greater – due to the lack of a physical product – so publishers have been much more willing to reduce prices. Online games grew by 10% in value as World of Warcraft 3: Cataclysm released in December of 2010 reinvigorated online subscriptions sales.

Sales of US video games are projected to see a 2% constant value CAGR over the forecast period, to reach US$22.1 billion in 2016. The 2012 holiday launch of Nintendo Wii U marks the first new static console launch since 2007 and will help drive sales in both hardware and software for the first few years of the forecast period. Hand-held hardware and software should receive a bit of a boost with the Sony Vita launch in February 2012 and additional software support for the Nintendo 3DS. Sales are expected to fade out following the initial purchasing period of new systems; however, the release of a new Sony or Microsoft system may delay the cyclical decline for a year.

Static consoles are still expected to be drivers of US video game sales over the forecast period. Static console sales are projected to grow 34% over the forecast period to reach US$5.5 billion. Static consoles have much higher market penetration than hand-held consoles, as many Americans will likely purchase multiple systems over time. Static consoles have also been known to double as Blu-ray players (Sony PlayStation 3) or have streaming video capabilities (Nintendo Wii with Netflix), thereby adding value and justifying higher purchase costs. The upcoming Nintendo Wii U static console is promised to have high-definition viewing quality. A potential threat to the forecast growth of static consoles and games would be delays in launches and inability to fulfil initial high demand and consumer expectations.

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