General Investing
A Stronger-Than-You-Thought Video Game Industry
December 23, 2009Rapid growth in the emerging video game areas of social networking and iPhone games, as well as easy year-over-year growth comparisons thanks to 2009′s negative sales outcome paint a picture of a video game industry that is actually healthier than much of today’s data would suggest.
“At this early point, we are forecasting mid-single-digit growth for the industry, although we could paint a more upbeat scenario as consumers demonstrate whether they are willing to spend their hard-earned money on the robust lineup scheduled for the year,” said Colin A. Sebastian, senior vice president of equity research at Lazard Capital Markets. “We expect ongoing headwinds for the Nintendo Wii, but 2010 could really turn out to the breakout year for Sony and the PS3. We also expect another good year for the Xbox 360. That’s the console business.”
With a full year a lower price point, Sony’s PS3 also has a large number of games in the pipeline, a burgeoning online and media distribution service, as well as the Blue-Ray platform, setting the console up for success in 2010.
“Also on the hardware side, we would not be surprised to hear about new portable gaming devices from Sony and Nintendo, partly due to the increasing popularity of the iPhone to access and consume content, including games,” said Sebastian, adding that more and more consumer will look for portable video games as demand for on-the-go content continues to increase.
“I would highlight to investors that one part of the market where we’re seeing tremendous growth is social networking games. In fact, I have never seen growth as fast as what we’ve witnessed over the past two years in the market for Facebook games,” he said. “For the year ahead, investors should expect more clarity on how these companies fit within the industry, how important social gaming is for the entire ecosystem of interactive entertainment. And we think they will become a bigger force, particularly as the Internet continues to emerge as the next big platform for games.”
