The “Break it Down” Blog

From cdfreaks.com:

At least in terms of consumer spending, retail video games were more popular than DVD and Blu-ray discs in 2008, according to an international research group.

Games accounted for 53 percent of entertainment software spending worldwide, Media Control GfK International said. These figures do not include movie or game rentals.

The momentum is clearly in video games’ direction, growing 20 percent to $32 billion in worldwide sales last year. Movies slipped 6 percent to $29 billion on the decreasing popularity of DVD. Though Blu-ray sales increased, DVD sales dropped, a trend that echoes similar findings in the U.S.

This speaks directly to the point we were making a few months ago about how controlling the future of entertainment starts with the game consoles.

That article ended up sparking two pretty interesting conversations for me. One was with long-time friend Todd Swarthout, an economist at Georgia State University and a separate conversaion with Sonny Bunch from the Washington Times and author of “Sabotaging the Sony Playstation 3 market?“.

My primary argument is that in 10+ years, games will represent the majority (or almost-majority) of entertainment, and with the growing functionality in our consoles, the primary console makers (Microsoft and Sony) will control your entertainment experience as well as the DLC market in that regard.

For the first time last year we saw games trump movies in entertainment sales and interest by shoppers. This represents a huge shift in focus by consumers but also points to just how much the up-and-coming tween consumers of last year will become the primary consumers of the next decade — and what they are interested in are games.

Both Sonny and Todd, independently, made the assertion that:

• ISPs are not going to sit idly by and allow Sony/Microsoft to dominate their bandwidth with movies and games that they get no piece of.
• Cable companies have more penetration than game consoles, they will fight this market with addition set-top-box functionality.

I tend to believe the first argument as a possible sticking point — we saw it with the Net Neutrality debacle that Google waited to settle before finally rolling out their HD support on YouTube; could you have imagine how expensive YouTube would have become for Google if the Bush Administration had knocked down Net Neutrality and let AT&T/Comcast have their way with additional traffic fees?

I have less faith in the cable companies being able to unify and deliver a consolidated/feature-packed device or service like the game consoles are providing. I do see them locking game consoles out of certain functional areas like PVR functionality for TV signals — but then I would just fully expect the game companies to route around this exactly as Apple has done with it’s own service (iTunes) and product (Apple TV).

As internet service continues to move more towards a required functional public service, I see the likely hood of the game companies, that already have strong Hollywood ties and DLC functionality, to continue to push forward dominating this entertainment experience in your home.

Imagine if Microsoft buys Netflix this year? Maybe it wouldn’t seem so far-fetched anymore.