UK Game Group Reports Weak Retail Demand

The UK-based major video game retailer The Game Group, the largest single game retailer in Europe, has released a trading update indicating a weak performance in the video game market leading up to this holiday season. The group's update pointed to 2005 as "a transitional period for the games market", citing significant price deflation on hardware and software as the current generation of consoles reach maturity, coupled with a tough retail environment, and mentions that "the anticipated pick-up in... sales of mature format hardware and software [for current-gen consoles such as PlayStation 2 and Xbox] has not materialised in recent weeks." The Game Group also indicated that the consumer demand for the Sony PSP has been exceptional, but, at least in Europe, supplies have "been behind plan and intermittent." It shares similar worries about the Xbox 360, which launches on December 2 in Europe, and for which supply will be extremely limited, as they have been in North America. Therefore, the Game Group indicated it will be showing a reduced profit before taxation and exceptional items for the year ending 31 January 2006, currently believed to be in the range of £3 million ($5.15 million) to £13 million ($22.33 million). However, looking ahead to 2006, the Group sees a rapid growth in ownership of both PSP and Xbox 360 is anticipated, together with the expected launch in the second half of Sony PlayStation 3 and Nintendo Revolution. These new hardware formats, together with premium price software and peripherals, are anticipated to bring the Group back in line with previous growth over the longer-term, according to its statement.