GameStop 2010 Annual Report Download - page 20

Table of Contents
Based on internal estimates compiled from a variety of third-party sources, which estimate portions of the digital video game market, the
North American market for digital mobile, social, console and PC games was approximately $6 billion in 2010 and the market is expected to grow to
approximately $12 billion by 2015.
New Video Game Products. The Entertainment Software Association ("ESA") estimates that 65% of all American households play video or
computer games. 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 with each generation of hardware to high speed processors in today's gaming
systems, such as the Sony PlayStation 3, the Nintendo Wii and Microsoft Xbox 360, which all launched between 2005 and 2007. In
addition, portable handheld video game devices have evolved from the 8-bit Nintendo Game Boy to the 128-bit Nintendo DSi XL, which
was introduced in 2010 and the Sony PlayStation Portable (the "PSP"), which was introduced in 2005. Technological developments in chip
processing speed, data storage and viewing capabilities have provided significant improvements in advanced graphics, including 3-D
viewing, 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.
• Today's Gaming Systems Provide Multiple Capabilities Beyond Gaming. Most current hardware platforms, including the Sony PlayStation
3 and Microsoft Xbox 360, have the potential to serve as multi-purpose entertainment centers by providing DVD and music playback,
movie streaming and interaction with other home entertainment products. The Nintendo Wii also allows for movie streaming. In addition,
the Sony PlayStation 3 and PSP, the Nintendo DSi, DSi XL and Wii and Microsoft Xbox 360 all provide internet connectivity and the Sony
PlayStation 3 plays Blu-ray discs.
• Backward Compatibility. The Sony PlayStation 3, the Nintendo DS and Wii and Microsoft Xbox 360 are, to some extent, 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 during the initial launch phase of next-generation platforms, backward compatibility results 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 is 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.
• Broadening Demographic Appeal. While the typical electronic game enthusiast is male between the ages of 14 and 49, 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 40% of all electronic game players are female. ESA also states the average game
player is 34 years old and the average age of the most frequent game purchaser is 40; however, the video game market also includes
approximately 26% of Americans over the age of 50. 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 Products. As the installed base of video game hardware platforms has increased and new hardware platforms are
introduced, a considerable market for used video game hardware and software has developed. Based on reports published by the NPD Group, we
believe that, as of December 2010, the installed base of video game hardware systems in the United States, based on original sales, totaled over
249 million units of handheld and console video game systems. Of the total installed base, 141 million were comprised of the current generation of
video game platforms as follows: 15.4 million Sony PlayStation 3 units, 34.2 million Nintendo Wii units, 25.4 million Microsoft Xbox 360 units,
19 million Sony PSP units and 47.3 million Nintendo DS units. The 4