DVD sales are lagging and game sales are up. Something's gotta give, as they say.

Retail shelf space is a finite thing in the world of brick and mortar, so each inch has to be maximized with product that is going to sell. As video games continue their rise, we're likely to see less and less shelf space given to DVDs, and more to video games and related merchandise.

NPD analyst Anita Frazier weighed in on the record game sales last month when talking about October's sales numbers. "This year sales have already achieved the annual sales number for 2005—and the two biggest months are yet to come. I think we'll see not only record-breaking revenues but record-breaking year-over-year growth when the final numbers are tallied," she said. The month before, Frazier made another hopeful comment about the industry: "Although we've been confident for many months now that the industry was poised to realize it's best year ever in terms of revenue, the results in recent months makes me even more bullish." In other words, the sales keep getting better and better, with titles like Guitar Hero 3 and Halo 3 leading the charge.

In contrast, DVD sales have been sluggish for quite some time, with the major studios taking note. Halo 3 sold more copies than the big-name DVD release Shrek the 3rd, even at a much higher retail price; the largest Halo 3 package cost an astounding $130. With the blockbuster video games going toe-to-toe with Hollywood's biggest franchises and winning, the writing is on the wall for retail space. "Intuitively, you think that consumers have a finite amount of money to spend," Bob Geistman, senior VP of sales and marketing at Ingram Entertainment told Video Business. "One has to hurt the other. Studios are becoming cognizant of the fact that they need to plan their DVD releases around games."

What is fueling this change? While it has been building for some time, games are finally going mainstream in a big way. Penny Arcade recently ran a poignant comic strip showing a grandmother's pink DS on a doily, her reading glasses perched on top. This kind of sight is proving common, as families and older consumers begin to pick up Nintendo Wiis and DSes in large numbers. Nintendo isn't the only force moving this trend forward, however, as many high-school and college-age gamers would much rather stay home and pretend to be a rock star with Guitar Hero and Rock Band games... a very social activity that draws groups of people to one house instead of going to a bar or the movie theater. In reaction, many bars are actually cashing in on the rhythm game phenomena by hosting parties with the game's hardware and offering prize while selling many drinks in the process.

At the same time, newer gamers are discovering that many developers and publishers are making titles aimed at them, and are subsequently moving their leisure dollars to those games instead of DVDs. Add to that the high-definition format war which is turning people off from upgrading to new players and repurchasing their content, and you have the perfect opportunity for gaming to become one of the most popular ways for people to spend their time.

Retailers don't have any loyalty to the DVD market; if they can make more money by stocking their shelves with video games and hardware, they will. With even 7-11 locations beginning to stock games for big launches, games could become the dominant product on the shelves of historically music- and movie-focused stores.