Recession hits the game industry

It is a widely held belief that the video game industry will prosper during the recession. Much as the film industry prospered during the great recession depression. And there is much evidence to support that view with industry turnover well up on last year and the console platforms selling in record numbers. It all looks rosy. And I believe that the industry will do better than most over the coming months, however there are some massive caveats.

For a starter just now people are enjoying their last Christmas blow out before facing the inevitable. And unemployment is going to rise very sharply in the new year. So things will probably drop back a little from the current high, even allowing for seasonal factors.

Secondly retail will not do as well as the industry as a whole. This is because gaming is going online. Which includes content delivery, subscriptions, micropayments, advertising and other business models. All of which do not involve high street retail. So retail must, inevitably, fall away sharply from the peak that this Christmas will be.

Thirdly, whilst two of the platform holders are running with good profits, there is one, Sony, that is in deep trouble. They have gone from being the leading brand in the last generation to being third and last in this generation. And they are falling further behind with each passing day. Their stock price is in free fall and they are making 16,000 redundancies. This is not good for the industry because Sony bring a lot to it.

Fourthly there will be a different profile as to what sells well. Hyped up hits, often with licensed IP will not do so well. People will be more discerning with their spend, buying solid, quality titles with very many hours worth of play. We are already seeing this effect and the game sales charts are looking a lot different to what people were expecting.

Fifth, with less money around people are more likely to steal games. There will be a far higher incentive for piracy. So industry revenues could be severely hit, even though their products would be reaching more people.

Sixthly, the Wii bubble could very well burst, for a number of reasons that have already been explained on here. The occasional, very casual “toy” user will be more careful with their money. It is the regular, consistent gamer who will keep going most through the bad times.

Seventh, we are at the beginning of a netbook explosion. These things are going to sell in many tens and eventually hundreds of millions. People will move away from spending time with consoles to spending time with netbooks. So online PC is going to grow massively at the expense of the three big console platform holders. Home and mobile gaming consoles will be hit. This is where I would invest money in gaming right now.

So we are looking at interesting times over the next two years, but then this industry is never boring.

4 comments ↓

#1 Jan on 12.17.08 at 4:55 pm

Few very interesting points. But…

“People will move away from spending time with consoles to spending time with netbooks.” – Isn’t it same like saying that people are moving away from quality restaurants to fast foods? It’s also faster, cheaper and easier! I would say it may be competition to DS and PSP, but for Wii/X360/PS3? Not really. Netbooks are competition for notebooks, it’s impact on desktop PCs is marginal. Also, so far I don’t see any reaction on the games market to netbook explosion. And as it will not run new PC games, it will be hard to adapt commercialy as games machine with no company to push it hard via marketing like it works with consoles. Smart gamers will have lot of fun with playing good old games, but on the high street, no one will know.

Instead of netbooks, I would say iPhone and mobile games as whole are on the rise…

#2 BC on 12.17.08 at 8:29 pm

saying that netbooks are going to take over from dedicated games consoles is like saying calculators are going to take over from colouring-in books.

Reading this blog, while funny and occasionally interesting, does feel like being hit by a spanner each paragraph.

#3 dreamhunk on 12.18.08 at 12:17 pm

very good article the rise of the pc is happening
http://www.clickz.com/3631593

#4 len mullen on 12.27.08 at 6:19 pm

I think I disagree nearly 100% with this assessment. The important thing that happened this year is that a lot of HDTV sets were sold. People who switch between SD and HD know the difference and the WII loses out here. In fact, I think the WII era is nearly over. Only a backwards compatible HDWII can keep Nintendo’s sail full.

I don’t think piracy is inevitable. If it increases, it’s because $60 is too much to pay for a game. Get the games and blu-ray movies down to $19.99 and people will flock to the PS3.

Netbooks are still three generations away from being attractive alternatives to anything. They are too big, too slow, and too expensive to compete with either end of the game console market.

I have no crystal ball, but I just bought a PS3. Why I chose the PS3 and when I bought it might provide some insight into the direction of the industry.

I wasn’t just buying a video game console — I was shopping for the centerpiece of my home entertainment center. The WII was never a consideration, but I would have lived with an xbox or a PS3, so I waited for BD vs HDDVD to be settled and the winner got my business.

So, Santa brought, a new TV, a new HTIM, a new BD player, and a new HD video game console.

A lot of people bought HDTVs this year. Many WII owners will consider upgrading their family room console because the WII looks so bad on their new set. If blu-ray disks are inexpensive, PS3 wins hands down.

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