Games and the Economy

Everyone these days is taking a hit because of the economy. Even the Games industry to some degree, there have been many studio closings over the past several months. Yet, the video game industry as of yet hasn’t been hit nearly as hard as other companies, after all this last Christmas they saw more video game sales than the year before. This makes me wonder, will the game industry be the exception to the rule? Will they actually come out of the recession/depression nearly unscathed?

In a few words; I doubt it.

I honestly think that 2009 will be the year of reckoning for the video game industry. Largely because I think that the real economic hurt occurred so late in the year last year that many people went ahead and bought video games partly because they felt that things would get better and partly because it was in fact cheaper than some other gifts out there so it became a decent value. Both of these combined for a somewhat decent holiday season.

This year however, things have continued to get worse and though I think the year will be far better in the terms of actual games, I have a feeling sales will slink off a bit. This Christmas will be a horror for the games industry and many will really begin to hurt. The timing just seems right, people now are really starting to strap up their cash and buying new systems and games just isn’t in their budgets anymore. On top of that, the consoles have been out for awhile now. With the X-Box 360 just lowering its price this last year, I don’t expect that it will happen again this year. PS3 may lower its price but it is so costly that I don’t even think that will help.

On the bright side, Nintendo may actually be one company that does fine. The Wii did lose steam a little bit this last year, we know this because you can finally get one in the store without camping out. Nintendo may have been able to pick up production a little, but the good thing about it is that even at launch they were making $50 per sale. Now, two years later they are likely making $60-$75 per sale which leaves them room to lower price. With a recession and a down year, and Nintendo finally able to keep up with the demand, I think this is the year we see a price drop.

Well maybe, I think that what we might see Nintendo do is drop the price of the Wii to $220, but with this drop they will take Wii Sports out of the box and sell it for $19.99. This does a couple of positives for Nintendo. Overall, they would be lowering the cost of the Wii by only $10, but now 3 years in, many people might buy into the lower cost and opt out of the Sports game, after all many people thought it was mostly a demo anyway.

The other nice thing this would do for Nintendo is that it would make way to allow third parties to sell more to new console owners. One of the early complaints from the third parties was that people would buy the console and not need to buy other games because WiiSports was such high quality. But with this, a person might decide to buy the Wii and say Deadly Creatures instead.

On top of a possible price decrease, I think that Nintendo stands firm because in general games on the system cost less in the first place. The other two systems came out early with $60 games, while Wii games stuck to $50 and we even see a few launching at just $40 like Okami. This will especially be nice with the launch of the various New Play Style gamecube games this year that will bring quality games at a lower price.

Lastly, is the DS. The DS rules the portable market hands down. The PSP doesn’t even compete with it. What helps Nintendo in this respect is the lower cost. When people start deciding to tighten the strings on their entertainment buck. Many may in fact decide that video games offer the best bang for the buck, though I think this year this won’t turn out to be as true as game developers may hope, DS becomes a perfect solution. With the system at a fraction of the cost of a real console, and games usually at half the price for the same value, I think the DS will have a strong year. Especially with the release of the DSi which I personally plan on buying in April

2 Replies to “Games and the Economy”

  1. The reckoning is already happening. Massive layoffs, entire (Successful) studios being shut down, big restructuring internally, etc.

    2009 is when the indie/small developers should strike with a vengeance, hitting Steam and other distribution platforms with a tiny but mighty fist.

    –B.

  2. I do think that indie potential keeps growing and the bigger studios are heading into some major issues thanks to the 360 & PS3 cost of development and their stubbornness in supporting cheaper alternatives.

    Steam, X-Box Live, PS whatever it is they call it, WiiWare and now DSiWare, there’s a ton of ways to get your indie game out there these days and I welcome it myself.

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