Video Game Industry Is Not Recession-Proof
Sales Remain Strong, But Publishers Are Cutting Jobs
Feb 3, 2009
Financial analysts, members of the gaming enthusiast and mainstream press, as well as numerous indviduals in the industry have all been touting the fact that video games are essentially immune from the current financial state of many countries in the world.
To their credit, the industry has continued to grow by leaps and bounds and hit a new sales record in 2008. According to the NPD group, sales of video game software and hardware rose 19 percent over 2007, but it's important to note that increase was not as high as many had predicted earlier in the year.
Video Game Value
Many of the pundits who have stated the stability of games often point to the fact that video games provide more value for the dollar than other forms of entertainment, like dining out or going on vacation.
That would certainly seem to be true in Nintendo's case, as sales of the Wii and DS continue to hit staggering numbers.
Nintendo of America's president Reggie Fils-Aime told Fortune magazine, “The consumer is voting with their wallets and pocketbooks. That the Wii and DS represent the best entertainment value in the marketplace explains why these strong sales are happening.”
Nintendo Bucks Trend
Others would seem to agree that Nintendo alone is continuing to drive the industry's growth. Bloomberg reported in December that Nintendo is currently responsible for more than three quarters of the industry's total sales.
Removing Nintendo from the mix, the industry sees a much more modest 3 percent rate of growth.
Layoffs in Video Game Industry
A telling sign of strain in any industry is the presence of major players making job cuts, and the video game industry is starting to see its share of these as well.
In late December, Sony reported that it would be cutting more than 8,000 jobs and would be decreasing its investment in its electronics division by 30 percent by March 2010.
In October, Electronic Arts announced that it would be cutting 6 percent of its workforce. But after failing to meet sales and profit targets for the year, the company announced it would be making deeper cuts and cancelling a number of projects as well.
Not Recession-Proof After All
With these announcements, many in the industry have been beginning to change their tune about just how the strong video games are.
Sony Computer Entertainment Europe head David Reeves told Eurogamer.net that the industry is not recession-proof, but is essentially still doing well.
"It's a function of the economic situation that you are going to find people who are resilient, who do not play with their pricing, who are very efficient," said Reeves in that interview. "The videogames industry is inherently very healthy."
During a talk given at the Game Business Law Summit, NPD's senior account manager, Michael Klotz noted that the year over year increases seen in October, November and December of 2008 should have been a lot higher.
Klotz said without a doubt, the industry has been impacted by the economic downturn and likely would have seen much more growth if things were going well.
Overall the video game industry is faring much better than other industries, but its clear the current financial climate has had its effect.
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