There has been a major shift in consumer attitudes towards the entertainment market, with sales of video games surpassing music sales predicted this year.
According to a study by Verdict Research the more severe the economic downturn has become in the last year, the better the gaming market has performed.
In the last 12 months to the end of 2008 Verdict predicts the buoyant video games market will have grown by £1.37bn - at a time when the combined music and video sectors have stagnated, with growth of £0.03bn between them.
Verdict says music is suffering from piracy, a continual onslaught of price deflation, intensifying competition and the ongoing decline of physical formats.
While the DVD market has shown robust volume growth, falling prices and heavy discounting have impaired value growth. With the high street consolidating and online becoming increasingly fragmented, competition is intensifying at a time when overall growth in the market is grinding to a halt, at just 0.8% over the last five years.
"The music & video market is not just suffering from a slowing of growth but a massive transfer of spend to online," says Malcolm Pinkerton, senior retail analyst at Verdict Research and author of the Music & Video report.
“So in actual fact the sales via high street shops are being hit a lot harder than the overall growth figures would suggest.
Indeed Verdict figures predict that by the end of 2008 in-store music and video sales will account for less than two-thirds of the market - and that this proportion is falling fast.”
Pinkerton says initiatives by Zavvi and HMV, including reinvigorating their online offers, making store environments more appealing and widening their product range to include MP3 players and books are having a measure of success at improving sales.
Verdict says that although piracy is decreasing and legitimate downloading is becoming more popular, the digital market is becoming increasingly fragmented, because of the growth in music and video download websites intensifying competition.
However the video games market is proving itself the standout performer in a sluggish retail environment.
"Whereas music & video has become somewhat stale, video games has enjoyed an array of technological innovation, which has widened the market demographic enormously and driven phenomenal growth," said Matthew Piner, author of the Video Games & Consoles Retailing report.
According to Verdict supermarkets are increasingly frequently promoting lucrative video games offers, which has moved into the space previously occupied by music and video, with video games sales now worth more than £500m, growing from just under £100m in 2003.
“As more people save money by staying in, a video game, although it may cost three or four times as much as a DVD or CD, offers much more longevity and hence better value for money,” explains Piner.
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