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Video Gaming Industry Shows Strong Growth in 2007

Frederick Lane, newsfactor.com Sat Jan 19, 11:35 AM ET

According to figures just released by market research firm NPD Group, escapism was a big winner in 2007. Despite an overall slowdown in consumer spending, the video-game industry posted a strong increase in earnings, up 43 percent from the year before. It was the second year of double-digit growth for video games, which grew by 19 percent in 2006. ADVERTISEMENT

In total, NPD said, the video-game industry generated $17.94 billion in sales, compared with $12.53 billion the year before.

"While I wouldn't count on similar growth in 2008," NPD analyst Anita Frazier said in an e-mail, "I would expect to see 2008 increase over 2007, with more growth [proportionately] coming from software sales. While we will continue to see strong hardware sales, particularly if prices come down again, the spotlight now turns from hardware to software."

Good Hardware Drives Software

In 2006, the growth in video-game revenues was driven almost exclusively by new hardware: between November 2005 and November 2006, all three major gaming platforms released new versions of their consoles. But in 2007, NPD Group said, the strong performance of the video-game industry was spread across all sectors.

Hardware continued to be a strong performer, with sales rising 54 percent; close behind were sales of video-game accessories, which climbed 52 percent. The real surprise in the NPD Group's findings, however, was the strength of software sales, which increased by 36 percent to a total of $8.64 billion, nearly half the industry's overall sales.

Much of the credit for the strong software sales can be attributed to Nintendo, which clobbered its competitors in game-console sales. Consumers scarfed up a remarkable 6.29 million Wii units in 2007 (1.35 million in December alone) and, not surprisingly, those figures helped make Wii games some of the most popular of the year.

The Wii's main diversion, Wii Play, sold 4.12 million copies, making it just one of two games in 2007 to break the 4 million mark. The other, not surprisingly, was Microsoft's long-anticipated Halo 3, which sold 4.82 million copies.

The other two Wii titles in the top 10 for the year were Super Mario Galaxy (2.52 million) and Mario Party 8 (1.82 million).

Good Software Drives Hardware

For much of 2007, Nintendo competitors Microsoft and Sony seemed somewhat dazed by the success of the Wii. But both had powerful software releases that helped generate demand for their more traditional (and more expensive) consoles. In addition to the immensely popular Halo 3, Microsoft had another game in the top three: Call of Duty 4, which sold 3.04 million copies.

The combined software sales of more than 7 million copies for those two games helped lift sales of the Xbox 360 to more than 4 million for 2007, with more than a quarter of those sales coming in December alone.

On the basis of console sales alone, Sony had a disappointing year. Its newest unit, the PlayStation 3, trailed all other consoles, with sales of just 2.56 million units. Ever more disconcerting, no doubt, was the fact that the older PlayStation 2 outsold the newer model by more than 50 percent.

But those figures help underscore the biggest success for Sony: the overwhelming popularity of Guitar Hero III: Legends of Rock. The PlayStation 2 version was the fourth most popular game, selling 2.72 million units, and overall, the Guitar Hero franchise racked up $820 million in sales -- an all-time record for a video-game franchise.