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There weren't many entertainment options during the depression. Contrast that to today where we have internet and tv which are essentially free. So I think that line of reasoning is somewhat flawed.

People will still buy games. But instead of buying a console and 3 games, a consumer might just buy a console and one game. Anyone who was planning on buying 3 games might only buy 2 games now.

Also, consumers will be more willing to wait for discounts and used games. There are a ton of used games on the shelves for cheap. I think there is enough old content available at significant discount that it will impact new sales in a bad economic environment.