The video game industry has seen an overall leveling off in sales following the banner year of 2001, when new systems were released and backed with heavy promotion in both advertising and retailer support. With the current generation of consoles aging, hardware prices have fallen sharply. Yet, the fact that total industry sales held steady in 2003 shows great interest by consumers. In 2004, consumers are biding their time until the next generation of consoles is released, starting with Nintendo’s planned launch of Nintendo DS (a dual screen hand-held), Sony’s PlayStation Portable (PSP) for the 2004 holiday season, and Microsoft’s Xbox Next slated for 2005.

The video game market saw sales of $10 billion in 2003, unchanged from 2002. Video game software sales have buoyed the market while consumers wait for the new console releases. Sony Computer Entertainment of America continues to be the market hardware leader, with the installed number of PS2s vastly outnumbering those for GameCube and Xbox. However, new sales for the 2003 to 2004 period show Xbox as the leader, followed closely by both PS2 and then GameCube.

In the portable game category, combined hardware and software sales of $1.6 billion in 2003 are far smaller than the console business, at 7.5 billion, but growing much faster throughout 1998-2003. Portable games make the most of their anywhere/anytime advantage, and have enjoyed continued play from young adults who started playing as pre-teens. This part of the market will undoubtedly continue growing as more handhelds join Nintendo’s Game Boy franchise, particularly with Sony’s PSP in 2005.

The added features that came new with the current generation of game consoles have proven to be popular with many users, as they utilize DVD, CD, and online capabilities. These have redefined game playing for many gamers, and have also aided in increasing the average age of the video game player. With broadband connectivity increasing at an annual rate of 29.4%, access to online gaming via the console is also increasing. In 2002, 7 million wireless subscribers worldwide had game-capable handsets. That number is expected to reach 40 million by 2007.

Mintel anticipates that the market will continue strong growth in 2004-2009—also continuing to grow very cyclically, with the next upsurge in 2005-2006. The strongest factor for the industry is increasing market penetration as the average age of gamers rises, while the biggest negative factor is the many competing forms of entertainment, including PC gaming, DVDs, DVRs, and MP3s.

For the purposes of this report, the video game market includes hardware, software, and accessories. This report excludes sales of computer games such as Minesweeper and Solitaire, as well as computer-associated gaming hardware.