A stack of personal computer games software publishers will go out of business by the first quarter of next year: but this is a good thing, according to Douglas Lowenstein, president of the Interactive Digital Software Association. The Association is the trade body that represents the business needs of the US computer and console games industry and has the likes of Sony, Nintendo, Sega, Acclaim Entertainment, Electronic Arts among its members. Lowenstein said that by the first quarter of next year, personal computer software companies will start going out of business by being acquired, restructured or shrunk. The personal computer games market is facing real challenges in the US, he explained. There is a glut of product with too much software and lot of it is not very good. In addition, there is limited retail shelf space and that is pushing up marketing budgets and there is rising product development costs. Along with this, there is strong but not overwhelming consumer demand. The market can’t absorb all this product. But he said that the consolidation is a positive development for the industry, even though it will be painful for some individuals. In the long run marginal companies and products will be weaned out, reducing competition on talent which will dampen product development costs. Fewer but stronger, is his message for the industry. This shake out will be reflected on a worldwide basis but the US market will feel the pinch first. The shake out is the result of a gold rush into the personal computer games market three years ago and because of the long development time for games – companies are now finding it difficult to place their products, he said. By comparison, the console games market is a lot stronger because consumers have a track record of buying lots of games, he said, typically six to ten a year. Figures for the installed base of 32- and 64-bit consoles was six million in the US for 1996. Despite the changes, he said he was very positive about the computer and console games market because it is growing. Total sale grew 16% last year with personal computer game sales up 19% and console games up 14% over 1995 figures. Numbers from Port Washington, New York-based analysts NPD Group show 1,196 sales of console software at $2bn and personal computer games at $1.7bn.
