Is the Games Industry Recession Proof?

As the Christmas Clamour to buy the “must have” video games and consoles starts, we ask, is the Games Industry recession proof?

Sales of Games and Consoles in October 2008 were the highest yet, at $1.31bn, and the release of the World of Warcraft extension pack resulted in 2.8m units being sold in the single first day.  It sets the scene for a market that looks set to survive the recession well.

Video Games are the New Cinema

This recession is frequently referred to as the “worst since the great depression”, and the 1930’s saw the movie industry excel, producing some of the largest and grandest productions, including some of the huge musicals.  Cinema was seen by the masses as a cheap form of escapist entertainment, and video games are being perceived as this recessions answer to the movies.

Games Console Sales Increase

The games industry reported that 46% of Americans were intending to buy a games unit of some kind on the day after Thanks Giving.   And the Nintendo Wii looks ready to sell out again in the UK for Christmas, with over 330,000 units being bought in the UK last month alone, substantially more than sales of the Xbox and Playstation combined.  Nintendo say that they are increasing supply by 50% over the last two months of 2008 to ensure that everyone who wants a Wii will be able to get one.

Some analysts are arguing that this Christmas may see the Wii at saturation point, and that this could bode well for the xbox and playstation who are targeting themselves at the less family orientated markets, and combine features such as Blue-ray players.

Stocks and Share Prices

So is the high street activity reflected in the share prices.  All of the major Games manufacturers and suppliers have seen their share prices knocked, but most have only fallen in proportion to the market wide fall of around 33%

EA saw the largest drop, with their share price falling by around 50%, this reflects concerns that even though video games are a good form of cheap escapism entertainment, the full retail price of the games at between £30 and £50 is still a large amount for people to find when times are tight.  The market anticipates that there will be need to be some discounting on the prices of the games to encourage players to keep buying new games.

The evidence is that the games industry looks set to ride the recession out well, even factors such as the cold weather mean that cheap indoor entertainment is what families are looking for, and in a recession giving the public what they want is key.