Video game sales declined sharply in December, falling 21% in the heaviest consumer buying month of the year. According to a PC Magazine article by Angela Moscaritolo, video game sales were off 21 percent in December to $3.99 billion from $5.07 billion the previous year."
The toy industry tends to rise and fall in single digit increments (for example, Toys R Us reported being up 1.2% in comparable store sales over last December) so a double digit decline in video gaming tells us a number things:
- The toy industry forgets how relatively stable it is compared to other industries. Video game sales depend heavily on new hardware releases and are highly susceptible to changes in technology. This December’s drop could portend a continuing decline as players move to portable and free game platforms for their enjoyment.
- Toys R Us’s 1.2% increase included video game sales. It would be interesting to know how they did on traditional toy sales.
- As the video game business declines the toy industry needs to take a hard look at the cell phone and other portable play platforms. These may well now be the industry's biggest competitors for consumer dollars.
- Finally, and most importantly, does the sharp decline in video game sales create an opportunity for traditional toy companies to sell products to consumer electronics retailers like Best Buy (4000 stores) and GameStop (6700 stores)? These retailers need to make those video game sales up somewhere and it might as well be with traditional toys. My advice to traditional toy companies: Knock on those doors.
What impact do you think the decline in video game sales will have on the toy industry?