Video games spend to overtake music and video

According to Verdict predictions, the gaming industry will grow by 42 per cent by the end of 2008, and will be worth£4.6 billion.

This compares to£4.5 billion for the combined music and video sectors, which are expected to grow by 0.6 per cent.

Although the likes of HMV and Zavvi were having a “measure of success in returning things around”, the music market has been suffering from piracy, price deflation, intensifying competition and the ongoing decline of the CD format, the report found.

Growth in the DVD market is being impaired by falling prices and heavy discounting. In order to respond, retailers will have to offer innovative features and premium albums with bonus material, the report said.

Matthew Piner, author of the report, said one surprising aspect of the games market over the past year is that the more severe the economic downturn has become, the better the gaming market has performed. Games represent a relatively cheap, but also exciting and innovative, pastime, he said.

“Whereas music and video has become somewhat stale, video games has enjoyed an array of technological innovation, which has widened the market demographic enormously and driven phenomenal growth," added Piner.

The report attributes much of gaming’s success to consoles such as the Nintendo Wii, which “has had a particular impact on the market”, as have dance mats, drum machines and microphones to play games.

“Sales of these peripheral gadgets have widened interest in the sector and generated a new revenue stream for retailers,” said Piner.