Sunday, 19 July 2009

Collapse of the Beer Syndrome?

(By Richard Holway 6.00pm 19th July 09) I started my series of Beer Syndrome posts on 3rd Oct 07 – soon after the financial crisis started (You can reread the original post here and the following eight in the series by searching the archives on the word ‘Beer’ – you have to be a TechMarketView subscriber to do this, I might add!)

The theory went that “Staying in would be the new Going out” and that people would grab a six-pack of beer from the supermarket and stay at home ‘playing with their gadgets’.

For the following 18 months or six quarters, I wallowed in the success of my forecast. As most parts of the IT sector saw sales slump, Nintendo sales – and shares – soared. Flat screen TVs flew off the shelves. Sky recorded ever higher subscriber numbers. Yet again, Holway had ‘called it right’!

But in the last quarter – ie since March 09 – the environment has changed dramatically. The world is still buying flat screen TVs – DisplaySearch reckons there will be a 21% increase in LCD TVs sold in 2009 at 127m. But revenues will decline 6%.

In the all important home gaming console market, research firm NPD estimates that console sales in the US fell by a staggering 38% in June with the Sony Playstation and Nintendo Wii being particularly badly hit. Microsoft’s XBox managed to marginally increase sales. Revenues slumped even more (as unit prices tumbled) – down from $617m in June 08 to $382m in June 09. You might expect those with consoles already to continue to buy new games. But the games software market slumped by 29% too.

This, of course, does not invalidate my Beer Syndrome. It’s not as if people have started to go out again – as takings in pubs and fast food emporia have continued to slump too. What is happening is that people are staying in but they are ‘making do’ with their existing gadgets and games. Basically they have stopped (or reduced) their spending even in this previous bastion.

There is another trend - and I witnessed this first hand when visiting my 4 year old grandson in Oz last month. He has a Wii – but it wasn’t used on the last trip. Instead my grandson was besotted by the games on the iPhone/iPod Touch. I suspect the Apple Apps Store has taken a big chunk away from the console market. Handheld games are holding up well. The Nintendo DS sold 766,500 units in June – only marginally lower than the 783,000 sold in June 08.

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