Last year, we witnessed Grand Theft Auto 5 break five Guinness records, grossing $1 billion within three days! 2013 was clearly an awesome year to be in the video games business.
However, things were not so rosy here in Australia.
The video games retail industry in Australia has faced some seriously tough times these past five years thanks to more consumers accessing and playing games online, fierce discounting, poor consumer sentiment and a reduction in household expenditure.
Salvation in the nick of time
However, the recent release of next-generation video gaming consoles Xbox One and PlayStation 4 just might be the lifeline our video game retailers need. New popular games will also be a significant factor in the retailers’ success.
The popularity of Grand Theft Auto 5 – launched in September last year and designed for the older Xbox 360 and PlayStation 3 – shows that if consumers love the video games being released, it translates into better industry revenue overall.
In fact, the analysts over at IBISWorld anticipated that spending on toys, games and video games in Australia would increase to a whopping $1.5 billion in December 2013.
Wow! Santa sure had a whole lot of Xboxes and PlayStations to deliver…
How are the top Australian video game retailers performing?
JB Hi-Fi, one of the largest players in the industry, has performed strongly despite poor conditions due to its economies of scale and competitive pricing.
Their video game and music segment revenue is estimated to reach $515.0 million in 2013 and with the release of the Xbox One and PlayStation 4, things can only get better.
The company has also created more physical stores, located in highly visible areas with substantial foot traffic such as shopping centres which should translate into more sales.
EB Games, a specialty game and collectibles retailer owned by American giant GameStop Corporation, will also benefit from new consoles and the popularity of gaming titles.
This is particularly important for EB Games, which currently operates more than 350 stores in Australia, as it is unable to earn revenue from a diverse range of product segments.
However, they have managed to keep their revenue relatively steady by opening up more physical outlets and using a client loyalty program to attract and retain customers.
When the internet is bad for business
One of the key challenges facing games retailers is the rise of digital distribution of video games online. Downloadable games on digital platforms and app stores are getting cheaper. This indicates a major shift in how consumers access gaming software.
Increased internet subscriptions and higher connection speeds in Australia have also made these online outlets more accessible, hence hurting the bricks-and-mortar stores.