GameStop 2003 Annual Report Download - page 18

Download and view the complete annual report

Please find page 18 of the 2003 GameStop annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 80

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80

Table of Contents
New Video Game Products.The Interactive Digital Software Association, or IDSA, estimates that 50% of all Americans, or approximately 145 million people, play
video or computer games on a regular basis. We expect the following trends to result in increased sales of video game products:
• Hardware Platform Technology Evolution.Video game hardware has evolved significantly from the early products launched in the 1980s. The processing speed
of video game hardware has increased from 8-bit speeds in the 1980s to 128-bit speeds in next-generation systems such as Sony PlayStation 2, launched in 2000,
and Nintendo GameCube and Microsoft Xbox, which both launched in November 2001. In addition, portable handheld video game devices have evolved from
the 8-bit Nintendo Game Boy to the 32-bit Game Boy Advance SP, which was introduced in March 2003. Technological developments in both chip processing
speed and data storage have provided significant improvements in advanced graphics and audio quality, which allow software developers to create more
advanced games, encourage existing players to upgrade their hardware platforms and attract new video game players to purchase an initial system. As general
computer technology advances, we expect video game technology to make similar advances.
• Next-Generation Systems Provide Multiple Capabilities Beyond Gaming. Many next-generation hardware platforms, including Sony PlayStation 2 and Microsoft
Xbox, utilize a DVD software format and have the potential to serve as multi-purpose entertainment centers by doubling as a player for DVD movies and
compact discs. In addition, in 2002, both Sony PlayStation 2 and Microsoft Xbox introduced accessories which provide internet connectivity.
• Backward Compatibility.Sony PlayStation 2 and Nintendo Game Boy Advance SP are both backward compatible, meaning that titles produced for the earlier
version of the hardware platform may be used on the new hardware platform. We believe that backward compatibility may result in more stable industry growth
because the decrease in consumer demand for products associated with existing hardware platforms that typically precedes the release of next-generation
hardware platforms may be diminished.
• Introduction of Next-Generation Hardware Platforms Drives Software Demand.Sales of video game software generally increase as next-generation platforms
mature and gain wider acceptance. Historically, when a new platform is released, a limited number of compatible game titles are immediately available, but the
selection grows rapidly as manufacturers and third-party publishers develop and release game titles for that new platform. For example, when Sony PlayStation 2
was released in October 2000, approximately 30 game titles were available for sale. By January 2003, over 450 game titles for the Sony PlayStation 2 platform
were available for sale. Currently, there are over 700 game titles for the Sony PlayStation 2 platform available for sale.
• Broadening Demographic Appeal.While the typical electronic game enthusiast is male between the ages of 14 and 34, the electronic game industry is broadening
its appeal. More females are playing electronic video games, in part due to the development of video game products that appeal to them. According to IDSA,
approximately 43% of all electronic game players are female. More adults are also playing video games as a portion of the population that played video games in
their childhood continues to play and advance to the next-generation video game products. In addition, the availability of used video game products for sale has
enabled a lower-economic demographic, that may not have been able to afford the considerably more expensive new video game products, to participate in the
video game industry.
Used Video Game Market.As the installed base of video game hardware platforms has increased and new hardware platforms are introduced, a growing used video
game market has evolved in the United States. Based on reports published by NPD, we believe that, as of December 2003, the installed base of video game hardware
systems in the United States, based on original sales, totaled over 165 million units, including approximately 22 million Sony PlayStation 2 units, 8 million Microsoft
Xbox units, 7 million Nintendo GameCube units, 20 million Nintendo Game Boy Advance and Game Boy Advance SP units, 28 million Sony PlayStation units and
over 80 million units of older hardware platforms such as Sega Dreamcast, Nintendo 64, Nintendo Game Boy and Game Boy Color, Sega Genesis and Super Nintendo
systems. Hardware
9