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We're already spending $125 million a year on video game machines and millions more on the games they play, but retailers are hoping the next generation of consoles will kick start growth in a cyclical market that's struggled in the past few years.
Sony sold around 5000, mainly pre-ordered, PlayStation 3 consoles in the 10 days following its local launch last month. Sales of games for the $1200 internet-enabled console pushed the total value of PS3 sales to $6.8 million.
In an industry where console makers sell their hardware at a loss, it is in sales of the games - big hits like Resistance: Fall of Man and MotorStorm - that games companies and retailers cash in.
Retailers missed out at Christmas when the local launch of the PS3 was delayed, making a successful March debut all the more important.
"It's a higher ticket item so naturally there's more revenue going through the till," said Jason Bell, general manager of merchandising at electronics retailer Noel Leeming.
"The market needed a new platform and the PS3 has delivered, albeit a little later than expected."
The PS3, which Sony has pitched as a multimedia hub for the home, also plays high-definition movies, an attribute which may stimulate growth of high-definition LCD and plasma TVs.
"These games consoles are more than just gaming devices, the PS3 being a Blu-ray disc player. It gives people another reason to buy it," said Bell, who thinks the next generation consoles and Sky TV's move to deliver pay TV satellite channels in high-definition next year would be the "next big drivers" of sales in the flat-screen TV market.
Flat-screen TV prices have dropped sharply and while Bell said some customers were buying new TVs at the same time as the PS3, the combined spend is too much for most.
"Many gamers have spent significant money in the last 12 months on new consoles and games, and only a few will be able to afford both a next-generation console and a new TV," said David Morse, a Sydney-based analyst at retail research group GfK.
Sony won't say how many PS3 consoles it hopes to sell this year, but estimates it will sell 55,000 of its older PS2 consoles, which now sell for around $200. It sold 70,000 PS2s last year, making the seven-year-old console the leading format in the market.
"You build year on year as the price starts to come down. We've done that hard work in the past," said Sony Computer Entertainment's general manager Warwick Light. "It's a seasonal business that has its peaks in the school holidays. It also gets a winter lift when gaming becomes a more appealing option."
Frazer Scott, director of sales for Microsoft's Xbox, said the Xbox 360, the PS3's main rival, was selling "more games than any other platform, ever". "There are some meaty titles coming out this year such as Halo 3."
That game's predecessor, Halo 2, is the best-selling game of all time. Microsoft has stopped making the original Xbox console.
A third rival, Nintendo's Wii console, arrived just before Christmas.
It has also struggled, selling just 6000 consoles since its launch. In Australia 80,000 Wiis have been sold in the same period, according to GfK.
"I am surprised the New Zealand consumer is not more embracing of Nintendo's product," said Morse.
While global video game software sales totalled US$11.2 billion ($15.2 billion) last year growth has slowed, with sales expected to rise to just US$12.2 billion this year.
Games are becoming more expensive to produce and hardware vendors are packing more technology into consoles, increasing the cost of manufacture. Some observers suggest that a crash in the sector is likely.
Such a collapse occurred in 1983, when a flood of new games consoles and the rise of the personal computer led to a vicious price war that claimed several large games developers.
Businesses that take advantage of the internet capabilities of the next generation of consoles may prevent a similar disaster. One emerging technology that may improve the economics of the industry is in-game advertising, where real-life brands and billboards are downloaded into video games, their owners shelling out to buy up video game real estate.
Wellingtonian Claudia Batten last year sold her New York-based advertising company, Massive, to Microsoft for an estimated US$400 million. Massive specialises in in-game advertising and garnered a string of high-profile advertising clients when it proved that it could help them reach the tricky 18- to 34-year-old "Lost Boys".
Online games like Second Life have proven the Massive business model to be ahead of its time, with companies now clambering to feature in the Second Life community. "Micro transactions for add-ons for games bought at retail will start to increase and games on out-of-date formats or traditionally hard to get games will find a new home," said Morse.
It's already happening. New songs for music game Guitar Hero 2 are being made available for download on the Xbox Live Marketplace and Nintendo is making the original version of the hit game Zelda available to its Wii console through the internet. The PlayStation Network features a series of arcade games.
But the shrink-wrapped, off-the-shelf model that retailers depend on isn't going away.
"We don't see the business model changing substantially for the next few years," said Light.
"It's something retailers need to be aware of, but the change will be very gradual," Bell added.
