The generation game: Consoles and software sales are up

The computer games industry is bucking the gloomy retail trend with rising sales, as mums and dads join their kids to battle it out on the Wii and other consoles. Nick Clark reports

Up and down the country, Britons are acting out their fantasies in record numbers, from strumming power chords as Slash from Guns N' Roses or stepping into John Terry's boots to lead England to World Cup victory. Computer games have reached record sales despite the credit crunch, and are outgunning other forms of entertainment.

Take the specialist retailer Game Group, which yesterday reported impressive sales compared with most of its high street rivals, with sales up 9.5 per cent over the previous year. Lisa Morgan, the chief executive of Game, said: "The sector performed well last year and was particularly strong over Christmas."

In a tough consumer market, this is an industry that is one of very few winners. Computer games are enjoying record sales of consoles and software across the globe. Mike Griffith, who heads the video game group Activision, said: "Movies, recorded music and television – these are all stagnating or contracting entertainment sectors. Video games are poised to eclipse all other forms of entertainment in the year ahead."

Mr Griffith told the Consumer Electronics Show in Las Vegas that video game sales were up 40 per cent in the four years to 2007. At the same time, cinema tickets, music sales and average time watching television in the US had all fallen.

The sales explosion is not limited to the US. The ownership of consoles including the PlayStation 3, Microsoft Xbox 360 and the Nintendo Wii is running at record levels in the UK at 22 million units.

Michael French, the editor-in-chief of gaming industry magazine MCV, said: "There has been a social and cultural shift. Computer games have become much more accepted by older people. There are still products for core gamers, especially with the 15- and 18-rated games, but more and more there are those that a 50-year-old or a 12-year-old could play."

Last year, consumers spent £4bn on hardware, software and accessories for games, according to the Entertainment and Leisure Software Publishers Association. This was almost a quarter higher than the previous year.

David Cole, an analyst at video game research house DFC Intelligence, said last year that the industry would be in pole position to benefit from a downturn. "Consumer spending on software is at record levels and the game business seems to actually benefit from a recession because games are a relatively cheap form of home entertainment."

DFC predicted that the video game market – including consoles, portable machines, their software and PC games – would hit $57bn this year. Last year, 11 countries had annual video game revenue of more than $1bn.

The Wii, which DFC predicts will be the top-selling console of this generation, now costs as little as £179.99. A PlayStation 3, which fared badly when it was initially priced at more than £400, before a quarter was slashed off the price, has now shifted 1.8 million units in the UK. This has had a huge knock-on effect for retailers. At its annual results presentation in July, HMV said a "terrific year for games" had saved its numbers, picking out Grand Theft Auto IV and Wii Fit as the runaway successes. The store now makes about a quarter of its sales from games, consoles and accessories.

The retail market for games is hugely competitive, Ms Morgan added. Retailers such as Game jostle for position with the major supermarkets and stores such as HMV and Argos. There is an increasingly stronger challenge from the online sellers including Amazon and Play.com. Ms Morgan believes that games are so successful because there are five competing consoles and now adults are more willing to play. "Each console offers something slightly different and there are a wider range of products," she said. Her point is borne out by the top-selling games of last year. Across all formats, the top seller was EA's FIFA '09, and Grand Theft Auto IV for the established gamers. The fifth bestseller was Wii Fit, a game promoting exercise, and three places lower was Dr Kawashima's Brain Training.

The Nintendo DS offers Brain Train-ing for older consumers, whereas the Wii has brought in "loads of women", says Ms Morgan. She added that the products are now affordable enough for households to have multiple machines.

The success has also been driven by a quantum leap in console capability, with better graphics, story lines and interactivity with gamers over the internet than ever before.

MCV's Michael Frenchsaid that the first generation of adults who grew up with consoles including the Super Nintendo and the Sega Megadrive are beginning to have children. They are comfortable with gaming and will introduce their children to it as well.

The future looks bright for the industry. Big selling games released this year are expected to include Mario Tennis on the Wii, the popular strategy games The Sims and the latest in Microsoft's Halo series.

Last year, more software units per console were sold than ever before. And Game Group's Ms Morgan is expecting the industry to keep growing as "the new release schedule offers something for all formats".

Concluding his Las Vegas speech, Mr Griffith said: "The one thing that is for sure is entertainment is changed forever with gaming."

The road ahead: Guitar hero is music's saviour

Bruce Springsteen makes his video game debut this month at the age of 59, with the release of two songs available exclusively to players of Guitar Hero World Tour.

The Boss is the latest big-name artist to consider games like Guitar Hero and Rock Band as an ever more lucrative sideline to traditional forms of selling their music. Some believe the games could even reinvigorate the music industry.

Guitar Hero's third instalment, Legends of Rock, has just become the first game to generate $1bn in sales. Gamers act out fantasies of rock stardom using controllers shaped like guitars, drums or microphones to play along to songs.

Mike Griffith, head of the games' producer, Activision, said: "It's both a whole new way to play a game, and a whole new way to experience music. The convergence of the action game with the passion of music is changing video games. Music has a history of evolving through technology and we are at the beginning of the latest chapter in that story."

On an Xbox or PS3, players can download a given song to the console, paying by credit card, and can then play along to it.