Toy recalls drive sales of video games
Kathleen Buczko, a mother of three, is the toy industry’s Grinch this year. She plans to cut her spending on toys by 25%.
To the video game industry, she’s more like Santa -- because she’s boosting her game budget by 600%.
One big reason, the San Pedro resident said, is that she wants to protect her 5-year-old son from another toy crisis. Two of his favorite playthings -- a Mattel Inc. die-cast car and a Thomas the Tank Engine train by RC2 Corp. -- were recalled this year because of lead contamination.
“It was emotionally difficult to have to take those toys away,” Buczko said. “I know there must be thousands of kids who had to go through the same thing.”
There were, and that’s part of the reason industry analysts expect this to be a very good year for video game sales and a flat one, at best, for toy sales.
Game makers’ sales are forecast to climb 19% or more, according to Wedbush Morgan Securities, fueled by lower prices for consoles, a plethora of must-have games such as “Super Mario Galaxy” and the popularity of Nintendo Co.’s Wii and hand-held DS consoles, which appeal to a broad age range. At the same time, retail toy sales are expected to decline by 2%, to $23 billion, said Gerrick Johnson, an analyst with BMO Capital Markets.
“There’s definitely money leaving that sector,” he said. “It’s logical to assume that video games might be viewed by some parents as an alternative.”
The recalls are contributing to the growth in games, but only modestly, said Anita Frazier, an analyst at market research firm NPD Group.
“Video games really kick in for the 8- or 9-year-old,” Frazier said. “The bulk of toy sales is for kids younger than that, so while they do overlap somewhat, they mainly serve different audiences.”
More powerful drivers are lower console prices and this season’s abundance of blockbuster titles.
Sony Corp. this fall cut $100 from the price of its 80-gigabyte PlayStation 3, to $500. It also introduced a $400 console with a 40-gigabyte drive. Microsoft Corp. dropped the price of its Xbox 360 by $50, to $280.
“Consoles are now vastly more affordable,” said Michael Pachter, an analyst with Wedbush Morgan who expects worldwide game industry revenue to top $40 billion this year, up 19% from 2006. “At the same time, there are more triple-A titles being released than ever before.”
Fears over a stagnant economy also may be part of the equation.
“People are feeling the pinch from higher gas prices and uncertainty over the mortgage crisis,” Pachter said. “When you’re not sure about the economy, you tend to pull back. What you pull back into is the home and things you can do at home, like renting movies or playing games.”
Sales of the Wii in particular are on fire. Nintendo said it sold 350,000 of the $250 consoles during Thanksgiving week, more than in any other seven-day period except for the week it launched the console last November.
Sales of the PlayStation 3 also came in strong, rising nearly threefold since prices were lowered Nov. 2.
The boom disproportionately helps California, home to nearly 40% of the industry’s workers, according to a study of 2006 data released this week by the Entertainment Software Assn., a video game industry group.
The industry’s contribution to the state’s economy as measured by taxes, profits and salaries grew 12.3% in 2006 from the year before, compared with the 4.2% increase in California’s overall economy, according to Economist Inc., a Washington research firm that conducted the study for the entertainment software group.
That shows up at a microeconomic level on a spreadsheet that Buczko meticulously keeps to track her holiday spending. She plans to spend $188.75 on toys this season, down 25%, and $454 on video games, a sixfold increase. On her shopping list are such titles as “Carnival Games,” “Guitar Hero III” and “Brunswick Bowling.”
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