The Forgotten Video-Game Market

At last check, the average age of a video game player was 37. We therefore tend to focus on the behavior of adult gamers to gauge where the market is going. However, new data from NPD Group and the Entertainment Software Association suggests that we may have narrowed our focus too much.

Please, think of the children
According to NPD's Kids and Gaming 2011, 91% of kids ages 2 to 17 play video games. What's more, while the number of kids aged 2 to 17 in the United States has grown 1.54% since 2009, the gaming population in that age group has grown by 12.68%. Kids ages 2 to 5 represent the fastest-growing segment. In total, kids account for 44% of physical video game sales. In a separate study, the Entertainment Software Association found that 45% of parents play video games with their kids "at least weekly."

The family that games together
Now that the first generation of gamers has come of age and reproduced, playing a video game has become something parents do with their kids to bond, and that's just easier to do on a console than on a computer or mobile device. Basically, Nintendo (OTC: NTDOY.PK) might be right to stick to its strategy of making hardware and software.

Despite huge growth in the mobile-gaming market, kids and their parents spent 5 times as much on physical games as they did on mobile apps. Granted, physical games tend to cost a lot more than your average mobile app, but they also represent a greater value for a family of gamers. One copy of Mario Kart can entertain the whole family simultaneously, but Angry Birds, not so much.

Seriously, think of the children
This news doesn't mean you should ignore social and mobile gaming. Both of those areas represent fast-growing corners of the industry. The number of kids playing mobile games has risen from 8% in 2009 to 38%. However, the number of kids playing on portable consoles grew from 38% to 45%. This growth suggests that the market is expanding, rather than transforming. We're also starting to see game makers taking family games seriously again.

  • Microsoft (Nasdaq: MSFT  ) dedicated much of its E3 keynote this year to Kinect games, the majority of which were family friendly. For the younger kids, the company highlighted Sesame Street: Once Upon a Monster and Kinect Disneyland Adventures -- which allows kids to take a virtual tour of Disney's (NYSE: DIS  ) theme park.
  • Majesco Entertainment (Nasdaq: COOL  ) has fully embraced the Kinect. This holiday season, it will release a host of titles for the motion controller, including a dance game based on Alvin and the Chipmunks: Chipwrecked; Motion Explosion, a collection of motion-based mini-games; and Twister Mania, which brings Hasbro's (NYSE: HAS  ) popular party game into the digital era.
  • Activision Blizzard (Nasdaq: ATVI  ) will lauch Skylanders: Spyro's Adventure this fall. The game comes with three action figures that players can transfer into the game by placing them on a portal peripheral. Players can add new characters by purchasing additional figurines from the toy store.

Foolish takeaway
There's no doubt the video-game industry is changing, or that the rise of social and mobile gaming will create tremendous opportunities for investors. But I wouldn't dismiss the more traditional platforms. With so many kids gaming these days, I don't see the demand for consoles and console games drying up for a while.

If you'd like to keep an eye on the evolution of the video-game industry, add these companies to your watchlist:

The Motley Fool owns shares of Activision Blizzard and Microsoft and has written calls on Activision Blizzard. Motley Fool newsletter services have recommended buying shares of Nintendo, Hasbro, Microsoft, Activision Blizzard, and Walt Disney, creating a bull call spread position in Microsoft, and creating a synthetic long position in Activision Blizzard. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy..

Fool contributor Patrick Martin owns shares of Activision Blizzard. You can follow him on Twitter, where he goes by @TMFpcmart03. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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