As we enter E3 2008, the videogame market is extremely healthy and more dynamic than ever. Total software sales in North America and Europe topped $20 billion last year, up 30% from calendar 2006, and we are expecting double-digit growth this year. We also saw growth in hardware units of more than 30% last year, and we expect hardware units to grow in the double digits this year, which is good news for future software sales.
We are essentially in the second year of what feels like at least a six-to-eight year hardware cycle. The PlayStation 3 is just starting to hit its stride, as publishers and developers begin to master its advanced Cell technology and publish great software for the platform. The Xbox 360’s robust online gaming platform has created a strong online community and has helped transform the way we approach game design and development.
The Nintendo Wii continues to attract new consumers to gaming, and has been a major driver of the growth in female and older gamer demographics. According to The NPD Group, female gamers were the fastest growing segment from 2004-2007, at 46%, with over-35 gamers following close behind at 43%. In addition, handheld gaming continues to grow at a rapid pace, led by the Nintendo DS and a resurgence of the PSP.
With so many great platforms, each with distinct capabilities reaching different audiences, we believe it is more important than ever before to segment the market when determining our publishing strategy.
THQ’s 2008 E3 product line speaks to a number of important consumer audiences. First, we are showing three original high-end technology showpieces for the avid gamers active on the Xbox 360 and PlayStation 3 platforms: Saints Row 2, Red Faction: Guerrilla and Darksiders: Wrath of War. Saints Row 2 is an open world action game that delivers a huge sandbox for gamers. It features over-the-top combat, a fun and engaging co-op mode, and extensive character customization. Red Faction: Guerrilla is also open world and features a proprietary real-world physics engine, that delivers true next generation destruction. Darksiders: Wrath of War, with its beautiful cinematic quality and epic story, really takes advantage of the high-definition graphics capabilities of the new systems.
We have always been proud that THQ is the #1 publisher of fighting games. At E3, we are showing our upcoming titles WWE®SmackDown vs. Raw 2009, WWE Legends of Wrestlemania and UFC 2009 Undisputed, our first game under a multi-year exclusive agreement with the Ultimate Fighting Championship. We are very excited to expand on our dominant fighting position with our new UFC game, which features 80 real fighters from the UFC league and showcases a completely new fighting engine. Our fighting titles take full advantage of the new technology with superior graphics, great online features, advanced character customization and downloadable content.
We will also feature several games that are exclusive to the Nintendo platform and are targeted to the rapidly growing base of family and casual gamers active on the Nintendo Wii and DS platforms. One of our favorites is de Blob, which features an unlikely hero who must defeat the army of the I.N.K.T. Corp. to add color back to the bleached Chroma City. Players use the Nintendo Wii's motion-sensitive controller to instruct de Blob to bound, bash and squeeze past the enemies to the beat of an original jazz soundtrack. We also have a great game for girls, All-Star Cheer Squad, which is a lot of fun and offers one of the Wii’s first third-party balance board experiences. Players can even save their routines and bring them to a friend’s house.
We’ll also be showcasing the next installment of our very popular Warhammer® 40,000 series for the PC, Dawn of War II. Dawn of War II is built on our proprietary Essence engine, and should be a contender for PC Game of the Year.
Looking ahead, we believe that many of the same catalysts driving robust growth in the video game market during the current cycle will continue to fuel future growth for the industry. The processing power and high definition graphics delivered by the Xbox 360 and Sony PS3 have attracted new gamers and should continue to expand the audience for video games over time. Our development teams are just beginning to fully exploit the power of these new machines to create groundbreaking software. We see much potential in casual and social gaming, spurred by Nintendo and online services such as Xbox Live, the PC and mobile devices. We’re starting to build more community in gaming through online play and we expect this trend to continue to evolve over time.
Geographically, many developing economies such as India, China and Eastern Europe are becoming more affluent and provide new growth opportunities for the video game industry. Within the US, the transition to digital television by 2009 will help drive households to purchase new high-definition televisions, which should help drive purchases of new gaming systems.
We believe the consumer packaged goods business and physical retail model will still be the main driver of revenue for this cycle and for several years to come. However, digital delivery of data will continue to increase as a percent of total industry sales. We plan to make our content available on the most popular platforms and distribution methods.
In terms of the online gaming market, we are working with leading game operator Shanda to bring our award winning Company of Heroes to online gamers in China. The game will be offered under free subscription and players will be charged for micro-transactions to enhance their gaming experience. We are looking forward to learning more about this micro-transaction model as we explore ways to bring this type of game to territories outside of Asia.
In summary, this is a very exciting time for the videogame industry and for THQ. We have a strong portfolio of big franchises that are capitalizing on industry trends and exploiting the new hardware platforms. And, we’re pleased that we are a player with true scale that is well positioned for future growth both in new markets and via new online gaming models.