Software game sales hit holiday skid

Industry turmoil, PC encroachment and no 'must-have' games led to sad holiday computer-game sales. 'It was just a mess,' said one analyst
Written by Margaret Kane, Contributor

While toy makers get ready to show off their latest and greatest products at this year's Toy Fair opening Sunday in New York, computer game makers may be licking their wounds as they try to recover from a somewhat disappointing Christmas.

During the fourth quarter, retail revenue for the top 10 game publishers rose only 2.1 percent, according to PC Data In fact, the research firm said sales growth actually slowed down as the holidays approached.

Analysts traced the poor sales to a few factors: troubles at some of the major game publishers, the increased overlap between PC-buying households and game console households, and the lack of any popular "break-out" products.

Even for some of the big software game publishers, things were tough.

Havas International, which controlled more than 15 percent of the software game market in 1999, failed to get two anticipated games, WarCraft 3 and Diablo 2, out in time for Christmas. Mattel Interactive suffered major problems digesting its acquisition of The Learning Company. And sales of Lucas Arts' Star Wars products were less than expected.

PC, gaming machine competition "For computer games it was just a mess in (the fourth quarter) and Christmas," said Roger Lanctot, director of research for PC Data. "So established publishers who weren't going through turmoil, like Hasbro or Microsoft, had good Decembers. Everyone else was groping."

What surprised some analysts was that the growth in sales of low-end PCs -- traditionally bought by first-time computer buyers -- didn't boost sales of game software. First-time PC buyers are traditionally big software purchasers.

But some speculated that the drop in computer prices may have actually hurt game companies, by putting PCs in the same league as high-end gaming machines, which sold for about $200 (£124) during the holidays.

"Hard-core PC gamers don't ever even want to look at a console -- it's just not the same thing and they won't go play it," said Matt Gravett, game analyst at PC Data. "But as you have PCs becoming more of a mass-market (device) you'll have households with both systems in use.

"The consoles are easier to adapt to," Gravett said, "and they have a broader audience (between young and old)."

More emphasis on video market Lanctot pointed out that game makers are also forced to split their development time and marketing money between PC games and video games, and many choose to focus on the video market first.

For instance, Pokemon, which dominated the video game market -- earning five of the top 10 sales spots for the year -- didn't even register in the top 10 in computer software sales.

There were some standouts in the software world, however. "Who Wants to Be a Millionaire" sold more than a half million units in just over a month's time.

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