Analysts from securities firm Piper Jaffray have predicted that video game shelf space could grow by as much as 55 percent by 2007 in U.S., as retailers increase their commitment to the industry.
"Discussions with leading video game retailers reveal shelf space expansion plans between 2005 and 2007. We estimate videogame category square footage will increase between 50% to 55% by 2007 driven by the launch of new hardware platforms and complementary software products," commented an unnamed analyst.
The firm suggests that 55 percent of the increase will be comprised of new store rollouts at leading retailers, and the remaining 45 percent via an increase in existing floor space allocations.
"Retailers view video games as a leading traffic driver. Next-generation systems promise a leap in technology and gameplay that retailers believe translates into increased adoption of higher-margin HDTVs, audio equipment, and ancillary home media devices," the research firm said.
Best Buy and Target are seen as the leaders for in-store expansion, increasing video games coverage by around 50% between 2005 and 2007, with Wal-Mart and Circuit City to follow.
"Comments from mass and electronics retailers suggest a slimming of the CD-based music and portable DVD categories in favor of increased space devoted to video games." Piper concluded, "A 50 percent increase in shelf space would demonstrate retailers' willingness to bet on meaningful category growth during the next five years. Competition is heating up for consumer dollars and mindshare, and we expect GameStop, EB Games and Best Buy to be early next generation winners as hardcore gamers are drawn to these destinations in late 2005 and 2006."