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 Is the video-game industry recession-proof?

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PostSubject: Is the video-game industry recession-proof?   Thu Mar 06, 2008 10:35 am

It’s hard to gauge how the industry will fare in a serious slowdown



Whether you think we’re in one or headed for
one, chances are you’ve got recession on the brain. So do video-game
companies, but for different reasons: Many CEOs think the industry can
survive an economic downturn without much of a bump.

It’s
true that video games defied the otherwise discouraging retail sales
figures of December 2007. But are video games truly recession-proof?
Nintendo
North America president Reggie Fils-Aime told CNBC last November that
he thought the sector — and his company in particular — would weather
the coming storm. Historically, he said, video games have done well in
tougher economic times.

But what kind of history are we talking about, here? The industryitself is only about 30 years old. The Entertainment Software Association says that video game revenuescontributed
about $3.8 billion to the nation’s gross domestic product in 2006. The
industry employs about 25,000 people in the U.S. But the trade group wasn’t compiling numbers 17 years ago, when we
had the last really nasty recession. So it’s hard to gauge how video
games will fare when faced with a serious slowdown.

In
this context, video games are often compared to movies — a form of
entertainment that traditionally fares pretty well during slow economic
times.
“The
video games industry — like some other forms of entertainment — has
acted as though they are recession-proof in difficult times,” wrote NPD
analyst Anita Frazier in an e-mail. “People still want to be
entertained and to enjoy a diversion from their everyday concerns.”
During
the Great Depression, the down-and-out took to the theaters in droves,
willing to spend a quarter per person to forget about their troubles
for a few hours.
Frazier
cites a study the NPD Group recently conducted regarding consumers’
thoughts about the economy. Of the 2,000 adults polled, more than half
said they were least likely to change spending habits on affordable
purchases like books, movies, cosmetics or fragrances.
But
the average video game retails for somewhere between $50 and $60 — and
you need a system to play it on. Compare that to a movie ticket, which
is about 10 bucks (without the popcorn and Coke, of course).
But Nariman Behravesh, chief economist at Global Insight, doesn’t buy the one-to-one games-to-movies comparison.
“Are
the people who bought an Xbox 360 going to go out and buy more and more
and more software to go on this thing? There are limits,” he says. “You
might buy five games or 10 games, but you’re not going to buy 100.”
Still,
Frazier predicts modest growth in the video-game sector in 2008. And
Colin Sebastian, an analyst with Lazard Capital Markets, is even more
bullish.
The
firm, which makes investment recommendations, put out a research note
to its clients last week. In it, Sebastian writes that the video-game
industry is entering the “largest, most robust cycle in history, and we
expect U.S. software sales to exceed $10 billion in 2008.” That’s a
10-to-15 percent bump over 2007, which was the best year on record for
video-game sales in the U.S.
But
does that mean the industry itself is recession-proof? Hardly, says
Behravesh, who thinks there are few industries that can make that claim.
“Anyone
tied to the government is fairly safe. Health care is another one,
especially with an aging population,” he says. “But beyond that,
anything that relates to consumer preferences? I think it’s silly to
talk about something being recession-proof.”
That
said, Behravesh does think the game industry has a good chance of
coming through a mild recession pretty well — much as it did back in
2001, the last time we saw an economic dip. In a major recession,
though, he foresees the industry “contracting,” along with consumer
spending in general.
“I’d say there’s a one in four chance that we go through a major recession and the video game industry gets hit.”
What
does this mean to you, the consumer? Some of you are reining in your
discretionary spending just a bit. You might put off your video-card
upgrade on your PC until things even out, for instance.
But
avid gamers, like Kevin Rummings of West Palm Beach, Fla., say that the

recession isn’t going to affect their game purchases.

If I have a job and the extra money to spend, I will,” he wrote in an
e-mail. “Games are my only hobby. I don’t play golf or tinker with cars
… games are a great escape for me, always have been.”


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PostSubject: Re: Is the video-game industry recession-proof?   Sat Mar 15, 2008 11:18 pm

I saw that same article on the G4 TV The Gaming Channel.
On a show called X-Play some people expects a collapse of the gaming business soon. I don't know if that may be so. You can't always believe what you see on TV or read in the media.
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