The games market experienced a record year in 2008, although it took a turn for the worse in 2009, as hardware sales slowed down and software tie ratios (the number of titles bought per system in use) fell. However, hardware price cuts in time for a holiday sales season were the welcome stimulus to the market.
“The Nintendo Wii, which has taken the gaming market to a new level, is expected to see hardware sales grow slightly in 2009, reaching over 28 million unit sales globally, but will see a sharp fall next year,” says David Sidebottom, senior consultant, Digital Media at Futuresource. “The installed base of the Wii in the UK and USA will exceed an impressive 20% during 2009. The Wii has also re-invented the peripherals market, as it is the first console that makes the gamer a physically active component of the whole gaming experience. Whilst the novelty effect for many existing owners may be wearing off, compelling new games such as EA Sports: Active will help drive both software and peripheral sales. Peripheral sales have provided a huge boost to retailers, where margins are high.
“Looking to the PlayStation 3 (PS3), the hardware price cut (and new PS3 Slim model) will help boost sales for the holiday season, potentially hitting 13 million unit sales for 2009. Microsoft Xbox 360 (X360) hardware sales are expected to remain pretty steady in 2009 at around 11 million units worldwide.”
As well as the potential return on hardware sales, accessories is a great area for added value sales opportunities. According to GfK, 52% of the total gaming devices sold were accessories rather than input devices, ie controllers. Special accessory packs and chargers account for the majority of accessories, whereas within the input device market, the majority of sales comes from gamepads. A growing area are music-based peripherals such as game guitars. GfK states that over 4.7m gaming input devices and accessories have been sold in the first half of 2009, an increase of 35% on 2008.
“During the first half of 2009 there were 2,167 different accessory items in the gaming device market, sold under 144 different brands. This is an increase of 398 items and 13 different brands from the same time in 2008,” says Sean Fellow, GfK IT account manager.
Suffice to say, this is an industry which continues to grow at an astonishing speed. Most major publishers now have games in development that utilise bespoke accessories. This alone should be an indicator to retail how important this sector is to the industry as a whole.
The next thing retailers need to consider, is what products are best to stock, as the product range varies extensively.
“Gaming accessories is a sector of the market that continues to explode, and with such an extensive choice of products available, it sometimes makes it hard for retail to keep track,” explains Alex Verrey, global PR and communications manager, Mad Catz Europe. “Obviously we have the ‘standard’ bread-and-butter accessories be they controllers, battery packs, carry cases, all of which Mad Catz do very well with. However, many key software titles require their own bespoke peripherals to function, with this Christmas alone bringing us DJ Hero and The Beatles: Rock Band, two huge franchises which require their own unique accessories to play.
“The music genre is a massive business in its own right. Mad Catz have an official Rock Band license which allows us to produce the official Fender Bass Guitar and official Cymbal Packs, both of which perform very well for us as a company. Our own new ranges of Wii compatible remotes are also performing strongly, largely down to the huge console install base and the relative high cost of the official accessory.”
These kinds of gaming peripherals are allowing gaming to become a social activity, increasing the size of the gaming audience. “Gamers are no longer content with just sitting there playing the game, they wish to get more involved and interact. Playing games has evolved away from being something done alone in the bedroom to something that the family can do together. Thus in turn creating a social aspect to gaming,” says Fellows.
“The new peripherals, such as the numerous musical accessories, have proved popular with gamers adding a touch of realism to the game merging the reality with the virtual. Whilst other peripherals have been successful because of their promotion of being healthy and active, stereotypically not associated with gaming. As a result this has helped appeal to a wider audience of casual gamers.”
And, as Futuresource’s Sidebottom points out, such peripherals help fight piracy. “Following the success of Guitar Hero and Wii fit, more and more developers are looking towards the advantages of peripheral-driven software. Games like Guitar Hero not only offer a unique interactive experience, but also circumvent piracy, because the controllers and physical objects bundled with the software are impossible to pirate,” he explains.
A learning curve
Accessories can often give retailers the best margins in comparison with hardware sales, so how can you make the most of the market? “The key is education,” says Verrey. “Education for the retailer who in turn educates the customer. It really is that simple. Retail constantly needs reminding that when selling third party accessories, they usually make far greater margins than the sale of both first party hardware AND the software. It’s true, however, that accessories require more focus because they are often a harder sale than software but if we educate the retailer as to the huge potential benefits, it makes it easier when it comes to the point of sale,” he explains.
The key for any retailer is to maintain a balance between serving the more dedicated gamer and the growing legions of casual gamers: a sector that has been hugely significant in the growth of the industry in recent years. Pricing is therefore key; if consumers will find added value in the product, like Wii Fit or Call of Duty, then they will pay a premium. But low price software titles are increasingly important for the casual market, particularly when gifting remains such an important driver.
However, the size of the retail premises and customer demographics usually dictate which products are best to stock.
“I think that every retailer should at the very least be stocking the perennial favourites such as controllers and cables as these are constantly in demand,” highlights Verrey. “I honestly believe that every time a console is sold, the retailer should be able to up-sell an extra controller or cable. It’s a key opportunity that will be lost once the customer walks out the door and an easy way for the retailer to drastically increase their margin,” he notes.
Another product range always worth highlighting to consumers purchasing games consoles and accessories are of course, cables.
Customers are better educated than ever before about the benefits of HD and the advantages an HD display can deliver. Neither the PS3 nor the Wii (although sadly not HD capable) come packaged with cables which make the most of an HD display so again, this should prove an easy way for retailers to sell. Even the X360’s Elite model no longer comes with HD cables.
“For the PS3 (and X360), retailers should be pushing HDMI and Digital Optical (TOSLINK) cables and for the Wii, retail should be pushing the Component Video cable,” Verrey recommends. “But there’s always the customer who loses their original cable so the message for retail should be to remember to ask the customer about it whenever they sell a piece of software or first party hardware,” he concludes.
The power to game
Of course, the majority of these peripherals run on batteries, so there’s another great sales opportunity for retailers. “The growth
in recent years of digital cameras, games consoles and portable music players has altered the way batteries are consumed. With more and more portable consumer electronic goods making use of internal rechargeable cells, the emphasis has now shifted to peripheral devices and the power to drive them,” highlights Duracell business leader Annaliese Reekie.
“The gaming area is currently showing extremely robust growth, as wireless games console controllers become the standard input device using mostly AA or AAA cells (58% of these devices use AA, and 23% use AAA),” she adds.
Battery manufacturers recommend retailers to stock and endorse rechargeable batteries and chargers to their gaming consumers, as they offer greater convenience, significant cost savings and are kinder to the environment. “For serious gamers, rechargeable batteries are the ideal choice for controllers and other accessories. Rechargeables have come on leaps and bounds over the past year and they offer greater value for money but also greater convenience. Gamers need not nip to the local shop mid-game to replace their controller’s battery as many chargers now have a charging time of just 15 minutes and the batteries can be used straight from the pack as they are pre-charged. There are also a number of innovative chargers that have recently come onto the market such as solar powered and USB chargers that offer greater flexibility,” says Vince Armitage, divisional vice president, Varta Consumer Batteries.
Finally, there’s another kind of product which fits the bill – console chargers – often produced by third party manufacturers. “Rechargeable battery packs and console chargers save the consumer money in the long term and add more margin for retail,” notes Verrey. “Fortunately, Mad Catz has a whole range of great chargers available for all the leading consoles. For example, for the Wii, we even have a brand new ‘Raving Rabbids’ charger, shaped like the in-game character, which holds your two Wii Remotes in place whilst he charges away in the background. A great gift idea and an easy sell for retail.”