Australian retail, digital gaming markets battle for dominance

Retail worth $1.5 billion in 2011 while online gaming sales forecast at $450 million

Despite the rise of digital games distribution platforms such as Steam and Origin and the growth in massively multiplayer online (MMO)gaming and mobile gaming, the Australian retail game market remains relatively healthy, according to the Interactive Games & Entertainment Association (iGEA).

In its latest report on the Australian games market, the iGEA found that while console hardware, games software and gaming peripherals sold through retail outlets contracted 12.8 per cent compared to 2010, sales still accounted for a whopping $1.5 billion.

Total sales in 2010 amounted to $1.7 billion, a 16 per cent decline on 2009.

iGEA chief executive, Ron Curry, told Computerworld Australia that the decrease measured up with retail game sales overseas. For example, the UK and US markets were both down 14 per cent.

Despite the consecutive strong declines since 2009, retail sales were not dying, Curry said pointing to blockbuster retail sales of titles such as Modern Warfare 3 (MW3) and Battlefield 3 (BF3).

“[MW3 and BF3] were strong performers, but like every year we see a base, core group of products that support the industry.

“We did have a look as to whether the top titles were a significant percentage of the overall pie, but it was no different to previous years,” Curry said, referring to MW3's sales reaching the $1b mark in record time.

Curry also said that people who traditionally purchased in store were still doing so, but supplementing some of their spending online.

“Australians still largely enjoy that in-store experience because they want to get advice and have a tactile shopping experience,” he said.

Xmas proved to be the most profitable time for retailers with software sales up 13 per cent in value during December 2011.

Responding to the iGEA data, Microsoft said its Xbox 360 console experienced a five per cent revenue growth during 2011, while its online subscriptions for Xbox LIVE grew 39 per cent.

Telsyte senior research manager, Sam Yip, said the analyst firm had forecast that Australia would spend $400 million on online gaming subscriptions and virtual goods sales during 2012.

“This accounts for 20 per cent of the overall digital goods and online subscriptions market which is worth $2.5 billion,” he said.

Yip said massively multiplayer online role playing game (MMORPG) World of Warcraft (WoW) continued to dominate the online gaming subscriptions market.

“The segment is profitable because while subscriptions can be pirated, the user is limited in what they can do with a pirated subscription,” he said.

“That’s the new model going forward - giving away the game for free and making it a subscription model."

In its forecast up to 2015, Telsyte also found that there will be a compound annual growth rate of 18 per cent year on year in digital sales.

However, despite these predictions, Yip was not ready to call `game over’ for the retail industry just yet.

“There was a lot of activity in 2011 around pre orders of boxed games because gaming companies are still investing in that area of in-store merchandising,” he said.

“You can’t write off that part of the industry that quickly.”

Follow Hamish Barwick on Twitter: @HamishBarwick

Follow Computerworld Australia on Twitter: @ComputerworldAU

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