At a time when many categories are sputtering in the downturn, video game sales are surging and appear set for a robust 2009. While undeniably popular with young males for years, video games are also believed to be getting a benefit from the "nesting" effect, in which families look for cheap ways to entertain at home.
"Clearly, interactive entertainment is a great value in a down economy," Dan DeMatteo, chief executive at GameStop, the largest standalone chain, told The Dallas Morning News.
A number of statistics underscore the strength of the videogame category:
- In October, videogame sales jumped 18 percent, according to NPD Group;
- Blizzard Entertainment's Wrath of the Lich King sold more than 2.8 million copies in the first 24 hours after it was released on Nov. 13, making it the fastest-selling PC game of all time;
- Microsoft Corp.'s Gears of War 2 for Microsoft's Xbox 360 console sold more than 2 million copies on its Nov. 7 opening weekend;
- Nintendo Co.'s new Wii Fit exercise game for the Wii console is seeing instant sellouts as it is refilled on retail shelves.
But some analysts believe the difficult times are having some impact.
GameStop's sales during the third quarter fell short of analysts' expectations and the retailer slightly lowered its projected earnings for the fourth quarter. Although GameStop's same-store sales in the first two weeks of November had increased 20 percent due to the new launches, Mr. DeMatteo noted that recent sales were driven by serious game players who may not be as price conscious as the average consumers expected to drive sales for the rest of the holiday period.
Mr. DeMatteo also said the company will be "more cautious" with its plans for new store openings in 2009 because of the downturn, after opening more than 600 in 2008. At the end of the third quarter, it operated 6,066 retail stores in 17 countries worldwide.
But Mr. DeMatteo still believes industry sales will grow 10 percent to 15 percent next year, and he remains bullish about GameStop's prospects.
"I think we're being prudently cautious given the environment we're in," he told The Dallas Morning News. "But strategically, long range, do we believe videogames are a robust, growing industry? Absolutely. How could you come to any different conclusion?"
Discussion Questions: Do you think video game sales are somewhat recession resistant? What factors will define continued success for GameStop?