Runaway demand for console games has helped the CD, DVD and game retailer, which also includes the Waterstone’s book chain, dodge the gloom seen on other parts of the high street.

“We had a terrific year for games last year, with growth of about 60%,” said Simon Fox, HMV’s chief executive. “In the year in, we’re ahead of where we planned to be. We’re riding the game growth curve, and we’re riding ahead of the curve.”

Like-for-like sales grew by 11.4% at HMV in the UK and Ireland while Waterstone’s sales were up 3.3% in the year to April 26. Since then, growth has remained strong thanks to new releases like GTA IV and Wii Fit, Nintendo’s exercise game for the Wii console. “A very hot product when you can get hold of it,” Fox said. Nintendo “are doing their best to keep up” with demand.

HMV, one year into a three-year turnaround plan, said profits before tax and exceptionals rose to £56.6m last year from £45.2m. It already predicted in May that profits would be at the top end of market expectations.

Its share of the UK games market, which increased by one percentage point to 8% by year-end, continues to grow. Its share of the music market has risen more sharply to 29% helped by the demise of rivals such as Fopp while its share of DVDs has increased to around 25%. But share gains will not continue at the same rate as HMV is up against “fierce competition” from supermarkets, particularly in DVDs and books, Fox said.

HMV has introduced a new range of technology products, dominated by digital music and video players. Games and technology now make up 21% of sales, compared with 14% a year ago. It is converting up to 15 stores to the “next generation” format featuring a social hub with access to entertainment websites, multiplayer games areas and kiosks. All new stores will open in the new format.

As the CD market continues to decline – CDs now make up less than 30% of HMV’s sales – it is seeking to replace them with new band merchandise such as T-shirts, caps and backpacks.

The retailer is looking forward to a “fantastic” Christmas for music, Fox said, with a strong lineup of new releases from Razorlight and Morrissey to Oasis and the Kaiser Chiefs.

The chairman, Carl Symon, who was appointed in February 2006, is stepping down at the company’s annual meeting on September 5. Fox insisted the relationship had been “constructive and positive” adding that when Symon was appointed “he felt he had a specific job to do in terms of changing the leadership and feels now is a good time to move on”.

Shares in HMV dropped 6.25p to 123.25p in early trading, a fall of nearly 5%. This erased the gains made yesterday, when HMV jumped 6.25p as traders anticipated a strong set of results.

Nintendo unveiled a highly-sensitive motion controller add-on for its Wii system as it seeks to capitalise on its position as the global console leader.

At the E3 games conference in Los Angeles, the firm showed off its Wii MotionPlus, which it promised would add more realism and depth to games.

The company has sold more than 10 million Wii consoles and 70 million DS handheld machines worldwide.

Rival Sony has announced a larger capacity version of its PlayStation 3.

At a later press conference, Sony unveiled a film download service and an 80-gigabyte hard drive version of PS3 for gamers in North America.

Factfile: The Wii

Surprise success

Nintendo president Satoru Iwata said innovation was key for the company.
“Even if it is revolutionary sooner or later, people become tired of a new form of entertainment,” he said.

Addressing the rapid turnaround in Nintendo’s fortunes over the last two years, Mr Iwata admitted that the success of the company had taken even staff at Nintendo by surprise.

Referring to the success of the Wii, and peripherals like the balance board, he said: “Everyone had a pessimistic view of Nintendo in 2003.

“Even Nintendo employees could not have imagined that five years later the market respond so quickly that we could sell millions of bathroom scales around the world.”

Mr Iwata, who was speaking to media at the Kodak Theatre in Hollywood, said the firm’s success had resulted in a paradigm shift in the industry, with hardware sales growing in periods outside the traditional high spots, and software titles like Brain Training and Nintendogs having two-year life spans on retail shelves.

Nintendo said recently European sales of the Wii numbered more than 200,000 each week.

But Mr Iwata did not touch upon supply issues that have continued to affect Wii sales almost two years after its launch.

Screen Digest analyst Piers Harding-Rolls said Nintendo were proving to be very determined and targeted in their approach.

“They are very good at designing hardware and the production line of content; they have got a knack of producing great content and if they keep doing that, they keep innovating.”

New titles to come

Launching the Wii MotionPlus, which plugs into the existing Wiimote controller, Nintendo America boss Reggie Fils-Aime said: “It renders every light shift of the wrist or arm into the gameplay.”

The firm also unveiled WiiSports Resort, the first title to takes advantage of the new add-on.
Nintendo fans hoping to learn new details on established franchises like Mario and Zelda were left disappointed. Mr Iwata said only that the teams behind the games were “hard at work” and new titles were under development.

The company did unveil a Grand Theft Auto game in development for the DS console and a new Wii title, called Music, which sees gamers play more than 50 musical instruments by using the Wiimote motion-sensitive controller.

Mr Iwata said the success of the Wii and the DS was proof of a new form of social interaction developing.

He said: “I believe we must find more ways for players to feel engaged, different ways for them to be enriched. The overall experience from our products must be increased enthusiasm.”

Online revolution

Across Los Angeles, at the Shrine Auditorium, Sony America boss Jack Tretton delivered his vision for the firm in the coming months.

He told the audience that Sony had succeeded in the business by taking a long-term view of a console’s lifespan, pointing out that some of the biggest games for the previous generation PlayStation 2 were not delivered until a number of years into its cycle.

“We’re well on the way to selling more than 10 million PlayStation 3s,” he said.

The emphasis of the briefing was on the firm’s online service, PlayStation network, which offers games, films and TV content.

Unveiling the new film download system, he said: “Just as our (online) game store serves all game publishers, the PlayStation Network video delivery service is open for business for all studios and networks.”

Users will be able to download titles to their PlayStation 3 or PC, and transfer them to a PlayStation portable console.

“It’s a huge step towards advancing the PSP and PlayStation 3 value. The PSP is part of our overall strategy to bring movies and games to the living room.”

A number of new games were unveiled at the press conference, including MAG, a massively multiplayer online first person shooter. Up to 256 gamers will be able to do battle in teams of eight across the PlayStation Network.

Mr Tretton said it would “revolutionise online gaming”.

God of War 3, a sequel to the popular Sony franchise, was announced for the PS3 and the audience was shown new footage of titles like first-person shooter Resistance 2 and action-platform game LittleBigPlanet, which has an October release date.

Mr Harding-Rolls said Sony’s briefing delivered the most excitement in terms of announcements for gamers.

“The video store has been coming for a long time. But the download-to-own aspect of content is a coup in comparison to the rental model on Xbox Live.

“They are also more varied in their strategies for digital distribution of premium gaming content than their rivals.”