U.S. video game industry growth seen slowing
Sat Jan 5, 2008 8:31 PM ET



LAS VEGAS (Reuters) - U.S. video game industry sales growth is expected to slow in 2008 as accelerated demand for software is tempered by a decline in hardware revenue, the Consumer Electronics Association said on Saturday.

Overall U.S. industry sales are seen rising to $17.9 billion in 2008, up 13 percent from an estimated $15.8 billion in 2007, the CEA said. That compares with a 22 percent increase from 2006 to 2007.

The expected decline in growth comes as the industry moves beyond the initial phase of the introduction of new gaming consoles made by rivals Microsoft Corp , Sony Corp <6758.T> and Nintendo Co Ltd <7974.OS>.

Microsoft's Xbox 360, launched two years ago, competes against Nintendo's Wii and the Sony PlayStation 3 consoles, both on the market for just over one year -- for dominance in a global video game industry thought to have approached $40 billion in revenue in 2007.

Video game industry hardware sales jumped 50 percent to $6.6 billion in 2007, but are anticipated to shrink to $6.4 billion in 2008.

Now that all of the major consoles are established, hardware sales are expected to moderate, while demand for related software is expected to jump, as game owners beef up their libraries of new titles.

"Software (in 2007 had) phenomenal growth, riding the wave of hugely successful title launches such as (Microsoft's) Halo 3, (Activision Inc's ) Guitar Hero III and (Electronic Arts Inc's) Rock Band. In fact, the focus for 2008 will be in the software category, where CEA estimates a 26 percent increase in sales over 2007," said CEA spokeswoman Jennifer Bemisderfer.

Software sales are expected to rise to $11.5 billion in 2008, up from $9.1 billion in 2007. That was a 7.6 percent increase from 2006, the CEA said.

The CEA released the data ahead of the annual Consumer Electronics Show in Las Vegas this weekend, when Microsoft Chairman Bill Gates, Sony Chief Executive Howard Stringer and others are expected to give glimpses into the future of their gaming products.

Expected, but I doubt it'll be as strong as they think thanks to the Wii

are the insane? with all the AAA software coming out the only thing stopping people from being, especially in the USA, is the economy. Which is poor in the USA right now.

Even the economy shouldn't hurt it much, entertainment is usually unaffected by the economy

I agree Avinash, entirely expected but shouldn't be as bad as they make it sound.

As for the economy, A) it's not that bad but I'll spare Avinash and myself the time and won't insist on that point , and B) it has very little to do with video game spending. For example, the Japanese economy was in worse shape from 1995-2000 than 2000-2005 yet the video game industry in Japan was better in the late 90's than the early 00's. I don't have hard numbers but I don't believe the US video game industry was too badly affected by either the 1992 or 2001 recessions either.

Maybe all Americans should sell their house to buy games! No, I don't think gaming is affected by this at all, look how well the 360 is doing in NA.

All they said was that growth was slowing, not that the VG industry is shrinking. No surprise because the growth in 2007 was through the roof.

A decline in hardware revenue? That's their basis for this claim? I don't see hardware declining at all. If one console fails to exceed last year's total then obviously that sale will go to another console. We are at the infancy of this generation and as prices get closer to the magic $199 price point hardware sales will only increase. The fence-sitters from last generation will certainly be taking sides and they totally dismiss Nintendo's blue ocean strategy.

How much do these analysts make again? Maybe we can take shots at analyzing their falling salaries in the coming year.

I would add that entertainment rises in tough economic times.

It's escape from depressing realities.

Videogames being what they are will see an increase next year.

A relatively cheap (though not universally applicable this gen) pastime with hosts of different imaginative and keyword: interactive adventures that can be played alone or with others (in house or out of house)...

Think about the impact of rising gas prices and increasing jobs sent overseas or pretend to be a Space Marine or football player or magicland plumber or mystical martial artist or a pirate with magic monkey.

You tell me.

John Lucas

It will definitely be interesting to see how this year plays out, I know myself and several others have predicted increased hardware sales across the board and while this certainly gives me pause to reconsider I still feel secure in that prediction. 

As an aside this reminds me of a chapelle show skit (skip to 1:30):

lol sqrl...thanks.