Analysts: Games Industry Might Not Grow in 2011

A number of analysts are saying that 2011 will be a worse year for the video game industry than 2010, with the industry continuing to see a shift away from the packaged retail mode and towards a system where digital sales and social games are more important than ever.

Speaking to Gamasustra as part of a bigger analysis article, Colin Sebastian, who is watching the video game industry for Lazard Capital Markets, has stated, “I’d say it looks like the industry could be down again from a software perspective – maybe low single digits."

He added, "But the overall industry would be up - due to mobile games and DLC. And maybe the Facebook-like games will accelerate a bit. … That’s a story that investors may not understand. The packaged goods business is challenged – and publishers are publishing fewer games each year.”

Edward Williams from BMO Capital Markets believes that the evolution in 2011 is intimately linked to the way the market reacts to the Nintendo 3DS handheld, which will arrive on February 26, 2011 in Japan and before the end of March in the rest of the world.

Much will also depend on the actions taken by console manufacturers, who are widely expected to again cut the price of their devices, which could lead to an increase when it comes to video games sales.

The biggest increase will be seen in the downloadable content sector, which could reach on overall value of 500 million dollars, close to 25 percent more than during 2010.

Another source of growth for the gaming industry can be the Kinect and the PlayStation Move motion tracking systems, but only if they reach the critical mass needed to get developers creating more and more titles for them.

The predicted weak performance in 2011 is in stark contrast to the predictions coming in 2008 and 2009, which suggested that the video games industry was immune to the worldwide economic downturn and could grow right through it.