Just two months after its release, Modern Warfare 2, a highly anticipated game from Activision, has seen $1 billion dollars in sales. It sold $550 million in the first five days of release, a feat that most blockbuster movies don't come close to matching.
Console manufacturers are making good money too. Microsoft, Sony and Nintendo, manufacturers of the three big gaming consoles, earned a combined total of nearly $20 billion dollars from console sales in 2009, according to the market researching firm NPD Group.
But that's not the whole story. A small group of lesser-known companies have figured out a lucrative way to make even more money in the video game industry. They are the game accessory manufacturers, and they know how to play the game.
Just in the last year alone, gaming accessories accounted for $5 billion dollars in sales worldwide, according to Jesse Divnich, an analyst for Electronic Entertainment Design and Research (EEDAR). And that's not a complete figure either; it only accounts for console accessories sales.
"If you include computer accessories," Divnich said, "I couldn't put a number on it."
That's because computer gaming accessories can blur a lot of lines. Does a new monitor with a higher refresh rate count as a gaming accessory, or just part of the computer? What about a video card, keyboard, mouse, mouse pad?
Bowling balls, spatulas, and more
Consoles are singular devices meant only for gaming, so the game accessories are easy to identify: an extra controller, a new faceplate for the Xbox 360, a special gun attachment for the Wiimote, adapters for high-definition displays, special headphones and microphones.
In fact, the console accessories can get pretty strange, and Wii accessories are the perfect example. Bowling ball and spatula attachments are just the tip of the iceberg.
For devices that seem like an afterthought (think maraca attachments for the Wiimote), the accessories market is relatively stable, which is why so many companies have decided to enter. According to Divnich, accessories sales have risen steadily over the last five years, and even survived the recession better than the rest of the video game industry. "Software sales and hardware sales were both down in 2009. Accessories sales in 2009 were on par with 2008," he said.
The other major attraction for making game accessories is the profits. "Typically, video games have a 20 to 25 percent margin for retailers," Divnich said. "With accessories, you're looking at closer to 40 to 50 percent margin."
Those margins make accessories a much better business proposition than a game or a console. They can be developed quickly and cheaply, and they're proven to sell. Even the console manufacturers make their own accessories, though they stick mostly to producing extra controllers.
Madcatz and Nyko are two of the biggest game accessories makers, and both companies create accessories for every current generation game console as well as handhelds like the Nintendo DS and the Sony PSP. In 2009, Madcatz reported $122 million in earnings—a $25 million increase over the previous year. Nyko doesn't report earnings, but Chris Arbogast, Director of Marketing at Nyko Technologies, says sales have grown similarly for Nyko as well.
Only the beginning
Game accessories have been a business all their own for decades now, but it has just been in the last few years that accessories sales have really taken off. According to Arbogast, there are two reasons for this trend: the Wii and musical social games.
"The Wii and games like Guitar Hero have made it not only acceptable but commonplace to purchase multiple accessories and add-ons per person, per game," Arbogast said. "In previous generations accessories were seen as necessary tools in order to interact with the console itself. I feel like this generation's creative input devices have opened people's eyes to accessories … as a means to broaden their interaction level with their entertainment. This adoption rate of accessories has enabled our industry to flourish this generation."
In some ways, it seems music games were almost created for accessories rather than the other way around. Playing Rock Band without an actual guitar controller to strum wouldn't be nearly as engaging. Music games haven't just changed gaming, they've legitimized the accessories market as much more than a gimmick.
"Your best selling accessories are always going to be the controllers and wireless adapters," EEDAR's Divnich said. "But Activision really pushed the accessories market to a new level with the music genre of games."
Despite the success of music games and the sheer number of plastic guitars and rubberized drum kits sitting in homes across the country, the Wii must be recognized as the true champion of the accessories market. As Nyko and a number of other manufacturers have shown, there is no end to the possibilities for Wii accessories, which quickly began outselling Xbox 360 accessories shortly after the Wii's release.
"Our Wii accessory line is our best performer of this generation so far," Arbogast said.
But what's next on the horizon for manufacturers? After several years of holiday shortages and waiting lines for the Wii, sales have started to slow, which means the accessories market has to adapt.
"For the short term I see the biggest growth occurring on the PS3 side aided by the new hardware redesign and increased sell-through due to the price drop," Arbogast said.
Longer term, the game accessories market could be threatened by new gesture- and motion-control peripherals such as Microsoft's Project Natal and Sony's new unnamed motion controller.
"I think the adoption rate of these two new platforms will directly affect not only the length of time before we transition to a new set of consoles but the growth of the accessory market as a whole," Arbogast said.
The increasing enthusiasm for motion control in video games means accessory makers can't dismiss Project Natal and the Sony Motion Controller out of hand. Perhaps Sony's controller is less threatening. It resembles the Wii motion controller in form and function; certainly an array of dumbbell and frying pan attachments can be made for it too.
But Project Natal presents a new problem for accessory makers.
From the beginning of consoles, gamers have had something to hold, and as mentioned before, extra controllers are a large part of accessory revenue. Microsoft's technology endangers the entire market by making the controller into something everyone already has: their own body. How will accessory manufacturers compete with that?
Maybe no one knows yet. Or else they're not saying. And judging by the long tradition of marketing things that people don't strictly need, accessory makers will probably make clothing and props for Project Natal users. After all, that business plan has worked so far.
"A lot of games try to replicate a novelty with motion control props. It immerses the consumer more into the game by having these novelty items," Divnich said.
That's why accessories manufacturers will probably thrive well into the age of motion control, regardless of Project Natal. Even with a controller as instantly usable (and don't forget free) as our own bodies, there will always be the need for something more. One of the primary reasons we game is the need to escape ourselves, even just for a moment, and there's nothing like a little novelty to help the process along.