Analyst: Game industry March-ing through recession

The Movie Industry got us through the Great Depression and World War II, and many other recessions looks like the Video Game Industry is going to help us get through this one. Oh well, can't really do much about it, except tighten your belt and weather the storm, and play a round of HALO 3 on Xbox LIVE

I think it's a matter of gas is so expensive that it's getting harder for people to get out and do a lot of stuff. We don't want to do uneeded driving and if we can't get out, then we'll stay at home,get online and play some Rainbow Six and Smash Bros.

@fif Of course I'm generalizing. It's extremely difficult to consider every single person in the world. Everyone has different preferences. But even you mentioned it. As your disposable income increases, you will divert those incomes to luxury goods. Yes, I know the median income is around that area. I just mention those luxurious goods as an example - people have different ways to entertain themselves. What I am saying is that whatever your preference is or your income level ... your value and time you have set aside for video games is X (whether it be 5 hours a week, 20 hours a week, buying 2 games a month, etc.). As your income increases, X will decrease as Y (luxury goods and other normal goods) increases. Do you think if you have MORE disposable income, people will want to stay in and play MORE video games? If you think about it, a video game console is relatively cheap compared to other luxurious activities. $200-$600 buys you years of entertainment. That's pretty inexpensive in my book if you compare it to other normal/luxury goods. Video games are suffering though. Not from sales, but I believe there are quite a few video game corporations that are folding.

amazing, still going at it. Shovel them clouds guys, - Shovel'em hard. - Through life's, rocky roads. - Shovel'em Bold.....hard.

amazing, still going at it. Shovel them clouds guys, Shovel'em hard. Through life's, rocky roads. Shovel'em Bold.....hard.

@tnt2k1: I think you are generalizing. Firstly, you assume that people naturally prefer certain goods and services over others. Many of the alternative goods you mention are considered to be luxury goods (Bellagio, etc.). Some people hate Vegas, sailing, nightclubs and would rather save/invest their money. One set of consumer behavior isn't a standard. Also, you mention a $10k pay increase as a reason to find entertainment elsewhere. I think that this in an unrealistic scenario. The median household income in the U.S. in around $46k. So you are suggesting a 20%-25% pay increase. I highly doubt many Americans experience this without first completing a master's degree while employed. Also, I think that the inferior good/service in the video game industry is the arcade. An arcade allows people to save money because they don't have to buy an expensive PC or console. Video games are simply resistant to various economic forces. Take inflation for instance, PC games have been capped at $50 for over a decade (not including collector's ed., etc). X360 and PS3 games are $60 because the consoles are sold with little profit or a loss and they want to make up for it. I remember seeing the original Starcraft price fo up to $60 for a day and the price dropped back to $50 because customers went nuts. It's just very resistant to the market.

How cute, that clould shovelers of the world are arguing semantics on whether the US is in a recession or not. Typical, and happens every time a recession hits.

Historically ... during times of recession simply when disposable income is low, people divert their resources to goods that provide entertainment for less money, such as video games. That is why it's an inferior good. I know I am posting on a site where the majority here are video game fanatics. So your standard level of playing video games will much differ than the rest of the US population. Admit it, you guys that post here aren't really an accurate representation of the approx. 301 million people that reside in America. However, we can all agree on this point. If all of us had an disposable income increase to the point where it's significant (so at least a 10%-15% increase), you would probably go out more rather than diverting it on video games. If you get a $5000 - $10000 raise, you guys would not blow it on video games. I will almost gurauntee that you guys would spend it on that new $500 Schwin 20 speed bicycle, or that new 2009 Suzuki GSX-R1000, a weekend at a Bellagio sweet, go on that 10 day cruise in the bahamas, get VIP access or tables at a club, bar or lounge, or taking your family out for a 5 day getaway to Disney World - whatever it may be. Basically, more money you have to play with ... the less games you will be playing because you will do other things. Even if you spend 20 hours a week playing games, I know for a fact if you have get more money, that 20 hours will decrease because you will want to do something else with that pay increase. And naturally, to earn a significant pay increase, one would have to cut down on video game play (so some would say the relationship is reciprical).

No, the US isn't in a recession ... yet. Give it a year then we will totally bottom out. But I don't know why people are stressing. The Dow Jones is above 10000 points. Per capita income and GDP is increasing. People need to understand the business cycle. Recession is normal and part of that cycle - the economic booms and busts. Historically ... during times of recession simply when disposable income is low, people divert their resources to goods that provide entertainment for less money, such as video games. That is why it's an inferior good. I know I am posting on a site where the majority here are video game fanatics. So your standard level of playing video games will much differ than the rest of the US population. Admit it, you guys that post here aren't really an accurate representation of the approx. 301 million people that reside in America. However, we can all agree on this point. If all of us had an disposable income increase to the point where it's significant (so at least a 10%-15% increase), you would probably go out more rather than diverting it on video games. If you get a $5000 - $10000 raise, you guys would not blow it on video games. I will almost gurauntee that you guys would spend it on that new $500 Schwin 20 speed bicycle, or that new 2009 Suzuki GSX-R1000, a weekend at the Bellagio suite , go on that 10 day cruise in the bahamas, get VIP access or tables at a club, bar or lounge, or taking your family out for a 5 day getaway to Disney World - whatever it may be. Basically, more money you have to play with ... the less games you will be playing because you will do other things. Even if you spend 20 hours a week playing games, I know for a fact if you have get more money, that 20 hours will decrease because you will want to do something else with that pay increase. And naturally, to earn a significant pay increase, one would have to cut down on video game play (so some would say the relationship is reciprical).

Technically we aren't in a recession, though many every folk feel that the economy is pulled down

WOW, nice post swamptick and I can't think of the last time I agreed with darkride66 (recession) on anything...lol

LindBergh2007 said "I'm struck by the fact that most people that own a Wii are young children and girl gamers where as 360 appeals to PC-age gamers, PS3 sells to consumers just looking for a cheap Blu-Ray player." Where to start? Nintendo (who I'm sure is a little more aware of their demographics than you or I) puts the average Wii gamer at 29 years old. I'm not even sure what a "PC aged" gamer is, and the PS3 only a Blu-Ray player? Personally, out of the 7 PS3 owners who are close family and friends I know, I'm the only one that even owns a Blu-Ray at this point. If my little personal statistic pool isn't enough for you just look at sales on recent multiconsole titles worldwide, like Burnout or DMC4. Selling just as well on the PS3 as they are on the 360, so the ole "PS3 is only a Blu-Ray player" myth fails again. You go on to say you don't want to insult the current consoles, then you insult the current consoles. Don't get me wrong, I, like you, haven't really seen anything "next gen" yet out of this current crop of consoles, but I have still had a helluva time playing what is available on all three systems. During times of recession people historically have spent more on entertainment because they need the escape. Despite the fact that the US isn't technically in a recession yet, and even if it does dip into a recession it'll be nowhere near what happened in 2000-2001 (which the game industry survived), I really don't think your pessimism regarding the state of the industry is a true reflection of what's going on. Really, it just seems glum to you.

Buh, buh, buh... but what about muh PSPs? No really, God of War and Crisis Core both came out last month. One of them have got to make the top 10 software for that month. If they get bumped by that pathetic excuse of a big name title, aka Army of Two, that's just plain sad, and I've lost all faith in the hardcore gaming communities taste.

I don't buy any of this garbage that games will NOT be affected buy this recession. Why? Because I've been disinfranchised by the direction of the industry for about two years now, Next gen has always been about cutting edge but there's nothing cutting edge about anything being put out by Sony,Mircosoft, and Nintendo. It's the same garbage from the last gen except it just a costs a bit more. Mind you gamers aren't really casual people, they're just loyal consumers. If gamers were more then just consumers then hardware and software sales would be in the millions every month instead of the thousands. Also, I'm struck by the fact that most people that own a Wii are young children and girl gamers(who always been newbie gamers) where as 360 appeals to PC-age gamers, PS3 sells to consumers just looking for a cheap Blu-Ray player. That said, I'm not insulting the current consoles but what I'm pointing out that there are a few vetern gamers out there like me looking for a console that's free of an overratted FPS or GTA clone, and free of a gimmick controller. The Dreamcast was the last console that had the game library that was different enough. So naturally I'm wating for another SEGA console, I won't got into detal on why I believe Sega will launch another console in the next generation, but I will point out that we WILL see just have far technology can go in a few years with console gaming once SEGA re emerges in the hardware market. As for for the recession affecting the industry, We'll see it pretty soon especially if consumer confidence does wane. While some analysts predict that PCs will replace consoles this same talikng point was used in 1983.

well, I used to go to movies quite often, and all the movies I refuse to see 'cause $10 for tickets and $10+ for popcorn and a soda have really added up over time, and I just use it to buy games... and taking the bus everywhere instead of driving (gas goes for $3.XX a gallon) has really saved me some money; just thought those savings alone I've had lots of money to spend on games

Krusnikzero2 said " the spending habits of 15-24 year olds aren't influenced by the economic recession." We just touched on this. The average gamer is 33 years old, average game buyer is 38.

Probablly because the spending habits of 15-24 year olds aren't influenced by the economic recession. : P

Heh, I can't seem to cram anything into any year anymore. Oh well, probably a good thing that I'm so busy in the long run. Probably the last game I actually managed to finish on my schedule was the origional Katamari.

yeah, but I really think people are still missing out on alot of really great games. I think it gets to the point where you can't cram everything in one year but I would've liked to see last year more spread out because I would've bought mass effect and bioshock but I was broke after I bought rock band and CoD4. Another thing is exclusivity why does microsoft have to make it so those poor people who bought a ps3 and aren't going to buy a 360 can't play bioshock or mass effect? It's just wrong.

It should surprise no-one that the video game industry is doing so well when a brand new just released video game costs the same as a tank of gas (and that's if you drive a pretty efficient car). I can literally drink slightly less beer and be able to buy a new video game every month with the money I save. The price of new video games hasn't increased noticeably since the early eighties when a NES game went for $50. We've experienced an inflation of almost %100 since then and I now can buy 360 games at $60 a piece the day they are released. What's more, the value in entertainment for the cost is incredible. Say a game plays twelve hours. At sixty dollars, that's five dollars an hour. One can easily spend $8 on an hour and a half movie at the theater. However, once that movie ends, your $8 gets you nothing else. If you like the video game, you might decide to play it again. Now the game costs only $2.50 an hour. What's more, a couple of friends might borrow it and play it over time. Now we're talking about $1.25 an hour. You could also sell it to stores like GameStop and even get some of your money back. I'm not even gonna talk about a game like Oblivion which has over a hundred honest to god hours of gameplay.

"Nintendo may reveal at an upcoming investor event an intent to ramp up "production and/or shifting of regional unit allocation [of the Wii], particularly with the pending launch in North America of Wii Fit."" Oh gee really? Considering the deceptively low amount of consistency in their actual shipments to stores, I would venture a guess that this is their first time doing this since launch, congratulations Nintendo, you have far outdone sony and Microsoft on dragging your feet since launch to create a lack of supply, and have by and large reaped the most PR rewards from it.

The game industry must be saying to themselves "We picked a hell of a year to release these games."

fif. Good post. The only thing I noticed is your assumption the average video game player is late teens, early 20's. Research seems to put the average gamer age at 33 and the average game buyer at 38 years old. This stat is interersting to me mostly because the average gamer age is usually however old I am at the time the research comes out. That's probably why the industry is doing so well. 30 somethings have a lot of disposable income, and we haven't stopped gaming since the Atari 2600 days.

I don't think gaming is hitting a recession anytime soon. '08 has some HUGE games coming out and as long as developers are making good games, people are going to buy them up. Besides, gaming is reaching a broader audience everyday which in turn is going to boost sales regardless of the economy.

Yes, the word recession is thrown around quite a bit. While GDP has experienced reduced growth, it is still positive. That doesn't mean the U.S. economy is in a great position. Currently the inflation rate in the U.S. is 4.03%. While that is not a horrible number, it is still high for the U.S. Combine that with a GDP growth rate that has been decreasing since 2004. A decrease in GDP growth was expected by economists, but not such a large one. That is why many economists began talking about the posibility of stagflation (stagnant economy + high inflation). Basically this is one of the worst case scenarios in econ. Think of a car engine that has stalled but still burns gasoline like a Hummer. Do these concerns have merit? I doubt it. It seems more like another bump than anything. The market is nervous because of recent history. We just came out of the real estate and sub-prime crash and not too long ago was the dot-com crash. People are concerned and GDP suffers as a result. Also, I don't think you can compare video games to nightclubs and cruises. These are different goods and services. There is a very different appeal. The majority of gamers are in their teens and 20's. As people grow up, tastes change. Personally, I buy fewer games because I have played so many that I have become very picky. Other people lose interest in the hobby and decide to pursue other forms of entertainment. Put it this way, when was the last time the average person (with no kids or babysitting jobs) played Operation?

Humor_guy said... Mark my words, it may not be now, but by the end of next year video gaming will be in recession and PC gaming could be on it's last legs. The industry has one more round of titles on all formates to decide the fate of this industry. Oh, they are marked my friend, and they are wrong...so so wrong.

It's funny when ever gaming pricing comes up you get people talking about RPG's like Oblivion with their 100 hours of gaming for $50. But no one wants to talk about the fact that whereas 10 years ago the average PC game, shooters included, were over 30 hours and now lots of games, especially shooters, are under 20 hours and going down, average gaming is getting more expensive because game prices are staying the same and many more games are under 20 hours (and reviewer always find anything over 15 hours as reasonable nowadays!) You will never get many gamers ever agreeing that gaming is in a state as long as one game is due out that is expected to sell well. This year that game is GTA4. But one game generates it's profit's for one company. It is not enough for retailers, distributors, the media or the games industry. An industry needs multiple big selling titles in many genres spread over the whole year, then it needs even more that sell 'well' if not great. PC gaming doesn't have this at all and PS3 gaming doesn't look like it will. At the moment you can only say the DS is doing this, and the DS is what accounts for 90% of all the success talked about the gaming industry for the last year. Mark my words, it may not be now, but by the end of next year video gaming will be in recession and PC gaming could be on it's last legs. The industry has one more round of titles on all formates to decide the fate of this industry.

lol@Kongousou_ha. Nice post man, nice.

Kongousou_ha You are exactly right!

Well, I really have no stake posting on this article because I really don't care for it (although I'm glad to see that numbers are still great for gaming) I do have a comment for the "only poster here with an MBA," cool out already. I'm glad to see your using your MBA to post on Gamespot. What a fine use of your higher education. Not to discredit posting on gamespot any, but really... don't lord it around here like you're going to get some sort of positive reaction or like the entire gaming world on Gamespot is going to automatically listen. BUT who am I to tell you anything with my measly BA right? Geez....

I guess we could just skip the economic arguments and be pleased that the industry is doing well... a healthy industry should lead to more quality products.

The U.S. may be in Recession but the EU isn't, at least not yet. Even a blind man can see that tough times are ahead, to deny it is to be deaf, blind and dumb.

dkell2 said "we don't know for sure that we're in a recession until 6-12 months after we're already in it." Also correct. There is a lag when determining recession and there is probably a good chance the US is already in one. However, there's also a good chance that the "soft landing" scenario will play itself out as well. We'll probably know more towards the summer. Working in Financial Services I feel the same frustration as Swamptick with relation to the media. A collapsing economy is more newsworthy than positive economic data and there's no balance. I've spent the last two months talking client's down from ledges regarding their investments because the media has lead them to believe it's the end of days and not just another market cycle.

Rickettsz0780 said "recession: the state of the economy declines; a widespread decline in the GDP and employment and trade lasting from six months to a year" Generally it's accepted that two back to back quarters of negative GDP growth (that's negative, not slower, ie: no growth at all) constitute a recession. After a revamp of Dec numbers put the GDP slightly on the positive side it looks like the US still hasn't had even one quarter of negative GDP. I doesn't take an MBA to figure out slowing growth doesn't equal negative growth. Technically, no recession for America yet. Swamptick is 100% correct.

Wow swamptick. Thanks for edjucating us poor ignorent fools. Wish I could get me some of that skoolin' round these parts. By the way, in almost every case, we don't know for sure that we're in a recession until 6-12 months after we're already in it. Chances are, we're in a recession.

All right Scorpion. Ahem...

MBA! woots! A master in the business of selling chairs? OR making them? A master in the business of selling wood? or cutting it? A master in the business of selling pills? or selling courses for to much for nothing? I love how there are errors in speculation, it is speculation, that is all. The things that are accurate are the reports, yet the speculation is false...the mind bogglees. The videogame industry is known for going through recession standing tall. Atari in the early 80`s, Nintendo in the early 90`s and now, even though the fact that a recession is at hand can be debated by the cloud shovelers in their class rooms.

I am probably one of the only posters here with an MBA. As such I would like to point out several glaring errors in this report. First of all the headline claims that the US economy is in recession, but that is not the case. Recession is defined as economic contraction. That has not happened yet. What the economy is experiencing is a period of reduced growth. I just love the alarmist in the media (most of whom have degrees in something other than economics) claim recession without knowing what it means. The second glaring mistake is in direct contrast to the first. "With consumer confidence at a 16-year low and many economists talking recession". This is a journalism and editing mistake. Don't make a headline that says one thing and then contradict yourself in the opening paragraph. Another fine example of alarmist, leftist journalism. Make things sound terrible and make it sound like fact. Then hide the truth in the article. Sad, sad, sad. The good news is that the reports are fairly accurate. The reason gaming continues to grow is because the market is reaching a broader audience. Gaming has been steadily growing since the mid 80s and will continue to do so. This gives the appearance that the market is in contrast to the broader economy. In truth there are more new users not just a huge growth in established buyers and that is very good news for gamers.

CHECKTHISTA i agree but try to use the right acronyms, Gears of War 2 is GeOW 2, GOW2 is god of war 2, your going to confuse ppl with that!

"as you have more disposible income, people will stop playing video games and do other things." tnt2k1, that might be true, but just because you play games more when you're poor doesn't mean you don't buy more when you have the cash and barely play them. A person with more money is more likely to buy whatever game interests them, even if they don't get around to playing them all.

Quote: Ding, ding, ding!!! Give that man a prize. You just nailed the exact reason why games are selling just as well, if not better, during a so-called "recession". Good post and good explanation.

AND there even more good game to come! like MGS, KILLZONE 2, DEAD SPACE and GoW 2. i told my friend "2008" is gonna be the year of THE games! i also suggest that this trend won't stop that fast... lets see how it looks like when we see the year 2010

The game industry in my view is pretty much like that of the beverage industry. In the regard that people are going to game even more so when things get tight. With most entertainment now costing upwards of 20$ just to view one movie for two people there really is not much you can do that last as long as gaming offers. Games offer and escape from the drag of every day life. Our government is so out of touch with the real public it does not have a clue.

Take ECON101? Dude, I graduated with a B.S in Econ with a Major GPA of 3.5 from a University with two nobel prize winners in the field of Economics. I'm not bragging, I'm just stating my credentials. I knew people would doubt this as an inferior good. As someone mentioned before, video games provide a great amount of utility. There's more bang for your buck. For $60, it will provide weeks, even months, of entertainment. As you have more disposible income, people will stop playing video games and do other things. Trust me, it's happening to me too. With more money, people go outside, they go clubbing, they go to bars, they go onto snowboard trips, they go on cruises, fancy dinners, they travel, etc. Basically, they don't have time to play games anymore because they are doing other things that cost more money. This is a general statement, but holds true. Now, I know what everyone is thinking. I'm rich and I still play video games. Yes, I know. I play video games too. But believe me, when I was a broke ass I played a **** load of video games - too poor to go out. Hell, I completed Final Fantasy 7 with every single side quest in a week. I still play video games but not as much as before because I'm too busy surfing, playing rugby, or going to bars and lounges with my friends ... y'know, things that cost way more than $60. I bought Final Fantasy 12 a year ago and I still haven't opened it because I haven't had time to play it; I've been doing other things. That's why it's an inferior good. As people have less disposable income, they stop going out. They stop going downtown and on road trips. They stay in, conserve money, and play video games which is relatively cheap and provides the most bang for your buck.

I'm pretty sure that even after the U.S. economy recovers from this recession, Congress will still try to screw over the games industry even though we'll be one of the few industries that will keep the economy afloat. The games industry is like a school swim team. No matter how good you are, no one gives you credit and you're the first to be blamed for anything that goes wrong in the budget.

In passing, I think that you're correct, PhantomRoy08.

Fascinating.

Can't wait till next week to get GT5: prolouge and Warhawk operation broken mirror, and whatever else sony has planned for the new store

Now I know why we are in a recession, if we really are in one, every is spending money on video games lol