A new level of difficulty for the computer game industry

Selling video games on the high street does not look like a business with a future - so this morning's profit warning from the Game retail group hardly comes as surprising news. But does it tell us a more worrying story about the overall health of the games industry?

Game collapsed three years ago after an over-ambitious expansion programme, and was then bought out of administration. Its new owners then cut it back to a more modest size and floated it again on the London Stock Exchange. But today's statement says sales in this - its busiest period - have already proved disappointing and trading conditions in the UK market have been "challenging".

This isn't, however, just a story about gamers abandoning high street stores. Game has a big online operation and says it has a 60% share of digital downloads of console games. But the overall retail market is down 13.5% year-on-year, according to the research firm Gfk.

Game says the big issue is the transfer from one generation of consoles to the next. Does that mean Sony's PlayStation 4 and Microsoft's Xbox One have proved a disappointment? Well, no - the figures show that in their first two years, 3.7 million of the next-generation consoles were sold in the UK, compared with the 2.4 million sales of the PS3 and the Xbox 3 in their first two years.

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The trouble is that the margin on a console is much thinner than on a game, and the Xbox One and PS4 came bundled with some very attractive games at first, which meant their owners did not splash out on many new titles. Even now, it seems, they are being slower to snap up new games than had been anticipated, while owners of older consoles have cut back much faster than expected on their purchases.

So what's going on? Are new titles just too expensive, or is it that players are sticking for much longer with games they already have? Perhaps the sheer depth and artistry of some games is proving almost too satisfying, harming the industry's bottom line because gamers don't feel the need for something new quite as often?

The other explanation could be that even if console gaming remains very popular, there is now a range of other ways for their owners to get their fix - from platforms such as Steam, to casual games played on smartphones and tablets.

But the games industry body UKIE insists the picture is much brighter than the Game profit warning might suggest. It quotes figures from MCV showing that total spending on games by UK consumers rose 13% to £3.9bn in 2014.

"Faster broadband and evolving business models have meant consumers now have multiple ways to buy and play games," says UKIE's Chief Executive Jo Twist. But despite the availability of these new ways of gaming she insists that a physical presence for the games sector on the high street remains vital.

The UK has a big and thriving games industry. In new areas like eSports and live-streaming it has shown that it can innovate with the best. But in a fast-changing landscape, you cannot count on predictable profits, as Game has discovered yet again.