Dixons proposes to more than double the space allocated to computer games in each of its 340 outlets. The number of Sony Playstation games will be increased from 60-160 in all its stores over the the summer.
The aggressive move by Britain's largest electrical retailer will be a blow to the specialist games groups like Electronics Boutiques and Game, which have been growing quickly on the back of a booming market and the success of games like Tomb Raider.
The timing of Dixons' attack could affect the placing of Game's pounds 140m flotation, which is due to be announced in two weeks time. Game had hoped to float at a significant premium to the market helped by the surging share price of Electronics Boutique, whose shares have trebled since last summer.
Dixons has sold pounds 100m of computer game hardware and software this year and claims to have a growing share of the UK entertainment market. It has been pleased with the performance of its new "mega" store format at Cribbs Causeway in Bristol, which opened two months ago and devotes substantial space to computer and video games. The store also has other features such as a photo-processing centre, which may be added to more stores.
Jonathan Hart, Dixons' managing director said: "We see games as a large and growing market. That's why we're responding to our customers' demands for the best range and choice Dixons can offer."
The company will create the space for more games in its branches by mounting televisions on walls. It reckons wall-mounted TV displays will help demonstrate the qualities of digital TV sets as they come on stream later this year.
The UK entertainment software market was worth pounds 624m last year and is growing fast. Dixons says 19 per cent of UK households own a PC and that consumers buy six to eight games a year on average.
The market is at present dominated by specialists like Game and Electronic Boutiques. Other strong players in the market include music megastores like Virgin and HMV.