GameStop 2004 Annual Report Download - page 15

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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, both Sony PlayStation 2 and Microsoft Xbox manufac-
ture accessories which provide internet connectivity.
‚Backward Compatibility. Sony PlayStation 2 and Nintendo DS 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. Histori-
cally, 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 850 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 35, 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 ESA, approximately 39% 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 aÅord 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 2004, the installed base of video game
hardware systems in the United States, based on original sales, totaled over 185 million units, including
approximately 27 million Sony PlayStation 2 units, 12 million Microsoft Xbox units, 9 million Nintendo
GameCube units, 27 million Nintendo Game Boy Advance and Game Boy Advance SP units, 29 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
manufacturers and third-party software publishers have produced a wide variety of software titles for each of
these hardware platforms. Based on internal company estimates, we believe that the installed base of video
game software units in the United States exceeds 700 million units.
PC Entertainment Software. PC entertainment software is generally sold in the form of CD-ROMs and
played on multimedia PCs featuring fast processors, expanded memories, and enhanced graphics and audio
capabilities.
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