Video game spending to jump 7.2% in 2010
PwC's prediction coincides with kickoff of E3 confabThe funk that has stricken U.S. video games is about to end -- and the timing is perfect, considering the industry begins showing off its wares Tuesday at the massive E3 Expo.
Those attending can expect to see previews of Nintendo's handheld 3DS along with 3D games on various platforms and demonstrations of 4D. Also ready for the spotlight are new peripherals -- such as Microsoft's Kinect (formerly known as Natal, a full-body motion controller), Sony's Move (a motion-capturing controller) and Nintendo's Vitality Sensor (which measures pulse) -- that increase realism, activity levels, feedback and whatever else.
Among active gamers, 21% are aware of Natal/Kinect, and 35% of those "have definite purchase interest," according to Nielsen Games. As for Move, 23% are aware of it, and 28% of those have definite purchase interest.
"All eyes are on Natal and Move, but I think the 3DS will steal the show," Wedbush Securities analyst Michael Pachter predicted.
"We saw Natal a year ago, and people will be excited to get their hands on it this time. The Move, we've already had our hands on. But the 3DS is totally new, and people like to see things they've never seen before."
Also at E3, look for strong representation from traditional media conglomerates, especially Time Warner, Disney and Viacom, which is expected to introduce "Rock Band 3," which includes keyboards.
Speculation also is rampant that Hulu is coming to Microsoft's Xbox 360 and that the parties will make the announcement at E3. Also, Nintendo's Wii no doubt will show off its new ability to play Netflix movies.
The industry's three-day confab at the Los Angeles Convention Center coincides with positive analysis from PricewaterhouseCoopers. The firm will release Tuesday its prediction that consumers in North America will spend 7.2% more this year on video game software, hardware and accessories than it did last year. That's good news, considering the industry sank by that percentage in 2009. Video games will significantly outpace the 1.2% growth in North America that all entertainment and media combined -- including film, television, radio and print -- is expected to notch.
From 2011-14, video game industry growth will continue at a clip of 5.1%-6.5% annually, PwC will report.
The prediction of a recovery comes in the face of withering data so far this year from NPD, which reported that video game software sales tumbled 22% in April compared with the same month a year ago. For the year so far, software sales are off a more moderate but still troubling 8%.
Eventually, easy comparatives will fuel a recovery, but new technology and a robust lineup of titles also will do the trick, Janney Capital Markets analyst Tony Wible said.
The list of potential big sellers is long. Sticking to the conglomerates, Warner Bros. has "F.E.A.R. 3," "Batman: The Brave and the Bold -- The Videogame," "Super Scribblenauts," "Lego Harry Potter: Years 1-4" and two games based on "The Lord of the Rings."
"Time Warner continues to have the more established video game business of the conglomerates," Wible said.
Maybe so, but Disney Interactive Studios GM Graham Hopper boasts of his company's "best lineup ever." Among the games he'll show off at E3 is "Disney Epic Mickey," which he's hoping will make Mickey Mouse "the video game star he was meant to be."
The game is exclusive to Wii and puts players into an artistic wasteland that they are tasked with fixing, using paint and paint thinner. Three years in the making, "Epic Mickey" is the first game from Warren Spector's Junction Point Studios, which Disney acquired in 2007.
Disney, in fact, is full of "firsts" at this year's E3:
-- "Pirates of the Caribbean: Armada of the Damned" is the first role-playing game from the franchise not associated with a movie. Although it won't be out until next year, it will be shown "behind closed doors" at E3, Hopper said.
-- "Toy Story 3: The Video Game" is the first game that Disney, through its Avalanche Software unit, is publishing with Pixar; previous Pixar titles have been handled by THQ. The game hits stores today, three days ahead of the movie.
-- "Tron: Evolution" marks the first time Disney will use a video game to tell an original story designed to bridge two films, 1982's "Tron" and "Tron: Legacy." The new film is set for release in December, four weeks after the video game.
Plus, Hopper and company will show "Disney Guilty Party," a mystery-solving game with variable degrees of difficulty in which players "use the Wii remote as a detective tool kit," he said.
The turnaround thesis for the overall game industry earned credibility a few weeks ago when Take-Two Interactive reported $17 million in quarterly net income. That's newsworthy because, beyond being the studio behind the "Grand Theft Auto" franchise, Take-Two lately has been known for its inability to turn a profit. "BioShock 2" helped drive a 54% revenue surge, and the company raised guidance based on sales of more than 5 million units -- and counting -- of "Red Dead Redemption."
Spending on video games will reach $15.3 billion in North America this year, and every category PwC measures except for PC games will grow. Online games will experience the biggest bump (8.7%), and the biggest category -- software for console and handheld games -- will increase 7.7% to $11.5 billion.
The recovery is owed in large part to the decision by some developers to hold back on releasing some big sequels and hotly anticipated new titles until this year.
"This double-up is one of the contributing factors as to why the video game category will be among the growth leaders in 2010," said Stefanie Kane, a partner in the PwC Entertainment, Media & Communications practice.