GameStop 2014 Annual Report Download - page 23

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Video Game Industry
Based upon estimates compiled by various market research firms, including NPD Group, Inc. ("NPD") and International
Development Group ("IDG"), we estimate that the combined market for new physical video game products and PC entertainment
software was approximately $21.5 billion in 2014 in the countries in which we operate.
Market Market Size (in billions) Data Source
United States................ $13.1 NPD
Canada ......................... 1.0NPD
Australia ...................... 1.1NPD
Europe.......................... 6.3IDG
Total............................. $21.5
The electronic game industry referred to above consists of new physical video game products, such as hardware, video game
and PC software and accessories, but excludes sales of pre-owned video game products, which are not currently measured by any
third party research firms. Additionally,based on estimates compiled by various market research firms, we estimate that the market
in North America for content in digital format (full game and add-on content downloads for console and PC, subscriptions, mobile
games and social network games) was between $8 billion and $10 billion in 2014.
New Video Game Products.Video game products appeal to awide array of consumers, from avid gamers spending many
hours per week playing console gaming systems to casual game players enjoying social and mobile games on smart phones, tablets
and other devices. The average game player is 31 years old, 71% of gamers are age 18 or older and 48% are female. We expect
the following trends in sales of video game products:
•Video Game Hardware. Gaming consoles are typically launched in cycles as technological developments provide significant
improvements in graphics, audio quality,gameplay,internet connectivity,socialfeatures and other entertainment
capabilities beyond video gaming. The most recent cycle of consoles (referred to as “next generation”) includes the Sony
PlayStation 4and Microsoft Xbox One, which both launched in most of the countries in which we operate in November
2013, and the Nintendo WiiU,which launched in November 2012. The demand for the previous generation hardware has
been in decline since 2011and we expect that demand will continue to decline as consumers continue to move to the next
generation consoles.
In addition, portable handheld video game devices have evolved to the Nintendo 3DS and 2DS, which were introduced
in 2011and 2013,respectively,and the Sony PlayStation Vita, which was introduced in February 2012. The market for
handheld devices has declined in recent years as the proliferation of smart-phones, tablets and other mobile devices offer
video game players alternative ways to play games.
•Video Game Software. Sales of video game software generally increase as gaming platforms mature and gain wider
acceptance. Sales of video game software are dependent upon manufacturers and third-party publishers developing and
releasing game titles for existing game platforms. In recent years the number of new games introduced each year has
generally declined and as aresult, the market for video game sales has also declined. With the introduction of the next
generation consoles, we expect the number of new games introduced to increase and we expect demand for software for
those devices to grow and demand for software for the previous generation of consoles to continue to decline.
•Video Game Accessories. Sales of video game hardware also drive sales of video game accessories for use with the hardware
and software. The most common video game accessories are controllers and gaming headsets. We expect demand for video
game accessories for use on the next generation of consoles to increase as the installed base of these consoles increases.
We expect the demand for accessories for use with the previous generation of consoles to decline as the sales of those
consoles decline.
Pre-owned and Va lue VideoGameProducts. The installed base of video game hardware platforms continues to increase each
year and continues to fuel the market for pre-owned video game hardware and software. Based on reports published by NPD, we
believe that, as of December 2014, the installed base of next generation and the most recent previous generation video game
hardware systems in the United States, based on original sales, totaled approximately 217 million units of handheld and console
video game systems and grew by 16 million units in 2014. According to IDG, the installed base of active hardware systems of the
same generations as of December 2014 in Europe was approximately 172 million units and grew by 14 million units in 2014.
Hardware manufacturers and third-party software publishers have produced awide variety of software titles for each of these
hardware platforms. Based on internal estimates, we believe that 2.1 billion console video game and portable game units have
been sold over the last 10 years. This fact, combined with the growth of the next-generation video game hardware and software,
drives ongoing demand for pre-owned video game products. We believe that we are the leader in sales of pre-owned and value
video game products.
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