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Peripherals Controlling Video Game Market


The video game industry is slumping, but new game controls are soaring.

For the growing number of couch potatoes who have found their salvation in the hours upon hours of free time spent playing video games, it's shocking to think that American video games sales were down 23% in May compared to 2008, making for the worst gaming sales slump in three years.

But it turns out there's one sector of the industry that isn't just defying the sales downturn, but actually propelling the market.

While the evolution of games has been well-documented, little has been made of the awesome developments in video game controllers over the past year.

What started as a joystick with a single button has since grown into a series of motion-sensitive, branded, ingenious controllers that have become as iconic as the games they play.

"It's not the standard 12-button controller, which can be very intimidating for people that don't play games," says Kai Huang, the president and founder of RedOctane, the company whose popular Guitar Hero series, complete with its groundbreaking guitar-shaped controller, has changed the industry. "When we released Guitar Hero in 2005, most people were telling us in the industry that there has never been a successful peripheral-based game. They were too expensive and hard to merchandise. Games like Guitar Hero and a lot of the games on the Wii platform now have shown that peripheral-based games do have a tremendous acceptance."

While hardware and software sales this past August saw double-digit drops, the accessories segment, made up in part by peripherals, actually saw a sales increase.

It's a remarkable figure that actually makes sense. While most of this year's top-selling games from major publishers like Electronic Arts (ERTS), Activision (ATVI), and Capcom were new installments of older, established titles, any real innovation in the gaming world has been driven by game controllers.

The ball started rolling thanks to innovations like the guitar controller and Nintendo's (NTDOY) motion-sensitive Wiimote, both of which opened up the gaming world to an entirely new audience.

On the heels of the awesome success of these peripherals, third-party manufacturers are getting into the game. Not only are established tech companies like Logitech (LOGI) coming to the fore with their own take on innovative controllers, but companies, particularly music companies like Fender and Numark, are entering the gaming fray for the first time by introducing their own controllers.

If gaming sales bounce back in the next year, it could be thanks to peripheral innovations from the major gaming players. Sony (SNE) has already unveiled its own motion-sensitive wand-like controller for its next PlayStation console while Microsoft (MSFT) is rumored to be introducing a new console that will be controller-free, allowing users to navigate their games through simple body motions, a project so far known as Natal.

As for Huang and RedOctane, their ready to unleash a new franchise built around an entirely new peripheral.

Coming out in October, the new DJ Hero franchise will use an innovative turntable controller in a game that could open up an entirely new gaming audience.

"There is a lot of work that goes into making new peripherals. Picking the right design so the product is friendly, it's accessible, it's easy to use. We want to make games that everybody can play," says Huang.

And just like that, the joystick is ancient history.

No positions in stocks mentioned.

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