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Forums - Sales - The effects of the economy on the videogame market

Ail on 25 September 2008
Mendicate Bias said:
Godot said:
Mendicate Bias said:
gnawkz said:

I dont think comparing Vegas to the Video Games Industry can be completed.

Las Vegas:

The business model of Las Vegas has changed substantially within the past several years.  From a place where gambling was the original focus it has become more focused on a high luxory resort island in the middle of a desert. 

The old Vegas was cheap ... $50-100 a night for decent hotels, + a little money for gambling and several cheap shows and cheap food.  Coming out barely a few hundred for a family.

The new Vegas (today) that is unthinkable.  The business model has shifted from relying on gambling as the only source of income to a mix of Shows, Entertainment, Food, and Shopping.  Gambling is still significant but is not the majority anymore.  Hotels prices have sky rocketed, gas has gone up, food and shows are more expansive, and no one is going to Vegas for the shopping anymore. The price for a weekend can easily run into the thousands for just a few days.

Video Games:

Video Games business model has not shifted to becoming a high priced luxory item.  Rather, it is still migrating to become finally a main stream entertainment device.  Price points are still shifting lower, and as games become older and less valuable but still great, the ASP of each game has been dropping.  Enjoying a game over the period of 2 weeks can cost around $300 (if console has not been purchased, and its not the PS3 since it has the lowest market share).

$300 cannot be compared to the current Vegas where a few days of entertainment can cost around $1000.  There will be no large shift in spending over games.  A small shift can definitely occur, but nothing drastic where the Video Games industry does not end up growing again this year.

One good point you did bring up was to show that money is leaving the Luxory sector and leaving fast.  It is flowing to cheaper forms of entertainment.

 

I concede consoles have not reached a price point where they would be seen as a high class luxory item however coupling the price of consoles with the current price of games still leaves the pricepoint well above an impulse buy or mass market appeal, leaving the industry somewhat vulnerable during rougher economic times.

 

Video games are cheap. Snes, nes and N64 games were all more expansive than what we pay today and that's without inflation. Wii games are between 20 to 50$. 50$ for a game isn't that much so parents can buy 1 game for Christmas and 1 for their kid's birthday. For those that can't afford the console (199$ for a 360 or 249$ for a Wii), they can't buy a DS which is really cheap. DS games are even cheaper.

About iPods... I think they are reaching a saturation point. Everybody I know and their grandmother have a mp3 player of some sort. It's just that sometimes it's a iPod from 2-3 years ago or a cell phone.

 

 

Thats actually what I'm thinking, that the handheld market will come out of this depression the strongest. Handhelds have the advantage of being cheap and portable which allows for the consumer to take a short break from life even when their not at home.

@Ail

I disagree I think mmorpg's will do the worst durring a recession. $15 a month just to play one game is ridiculous not to mention adding the original cost of the game.

 

 

It's actually cheap if you have a lot of time to game...

Any other medium for gaming would be a lot more expensive for someone with a decent amount of free time.

I'm not making that up either I'm speaking from experience for some of my guild members in Wow ( stay at home mum with 2 young kids to watch and not much money to go around , wow is all she plays and she plays it alot....).

She doesn't have expensive cable or any console. She plays wow on a 3 year old computer and really when you think about it is cheaper than any other gaming out there...

 

PS : It's expensive if you pay the MMORPG subscription and end up playing it a couple hours a week and play a tonn of others games on the side, but those other games cost you a fortune...

That monthly wow subscription is a lot cheaper than a monthly cable or satellite TV subscription..



PS3-Xbox360 gap : 1.5 millions and going up in PS3 favor !

PS3-Wii gap : 20 millions and going down !

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Mendicate Bias on 25 September 2008
Dodece said:
There is no such thing as a recession proof industry, and especially no such thing as a depression proof industry. When we look at the games industry we are probably seeing a deferred reaction, because it was a logical downgrade in entertainment budgets. However there is little doubt that entertainment budgets themselves will be curtailed if economic trends persist.

Gaming has reaped a shortfall this year as consumers curtailed expensive entertainments they instead gravitated to more cost effective entertainment. A game has longer entertainment longevity, effective resale prospects, and has few secondary expenses. Further more it can be shared with others providing even greater benefit.

This all said the increase can be followed by a comparative decrease, and a polarization of the audience towards particular games. Most specifically games with greater replay value. Gaming is like most anything else consumers when they need to will do what it takes to stretch their money to the greatest benefit.

Let us use an example of a person that spends two hundred dollars every month on entertainment. Prior to economic hard times they would buy a retail game every other month at full retail price. The rest was spent on cable, eating out, movies, music, and group activities. Once the economy started to go south, and the price of gas started to go up they shifted to buying two games a month. The games went farther. That would be a four fold increase.

However if the economy continues a downward spiral there is little doubt that fears will curtail an entertainment budget, and the guy buying two games a month might return to a single game every two months or even less. What happens when the budget reaches a hundred dollars a month. Not enough to buy a game every month, have cable, have broadband, and occasionally go out with their friends. So economic pressures can force the games industry to retract its initial gains, as everyone has to fight for a diminishing entertainment dollar.

Bottom line if the economy turns below a certain point then gaming that enjoyed the initial fruits could become the industry that flounders the hardest. While it may be good entertainment value it also usually requires the greater up front investment. Now were you placed in a position between deciding to buy a new game or have cable which would you choose? After all most gamers have a couple dozen games to play you can make due. However unless you have a massive unwatched movie collection you might have a problem letting go of the more diverse entertainment.

Gaming is not this generations movies. This generations movies are cable and the internet, and for most consumers those entertainments will take priority over buying a new video game let alone a console.

Thats exactly the point I'm trying to make

If you had to choose between having internet or buying a new console, which would you choose?

 



                                           

                      The definitive evidence that video games turn people into mass murderers

Mendicate Bias on 25 September 2008

Of course this is all on the premise that the economy will continue to decline into levels no one has had to deal with in the last couple decades.



                                           

                      The definitive evidence that video games turn people into mass murderers

Ail on 25 September 2008

I think you would be surprised by the number of people that would take internet over cableTV.
Especially with the fact that you can now find more and more TV shows online....



PS3-Xbox360 gap : 1.5 millions and going up in PS3 favor !

PS3-Wii gap : 20 millions and going down !

Mendicate Bias on 25 September 2008
Ail said:
I think you would be surprised by the number of people that would take internet over cableTV.
Especially with the fact that you can now find more and more TV shows online....

 

Of course I too would take internet over tv, but would you choose a new console or game over internet?



                                           

                      The definitive evidence that video games turn people into mass murderers

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Ail on 25 September 2008
Mendicate Bias said:
Ail said:
I think you would be surprised by the number of people that would take internet over cableTV.
Especially with the fact that you can now find more and more TV shows online....

 

Of course I too would take internet over tv, but would you choose a new console or game over internet?

 

Nope but if it came down to that I would cut my cableTV subscription first to save money.( if I had to cut I would stop consoles and play only Wow it the best money/hours of entertainment).



PS3-Xbox360 gap : 1.5 millions and going up in PS3 favor !

PS3-Wii gap : 20 millions and going down !

KatinJin on 25 September 2008

It is already starting to take an effect. Most analysts last month said it was clearly evident. What is more, IIRC, is one analyst from one of top firms on Wall Street even jokingly said I thought the game industry is not impacted by the economy and then went on to downgrade some names in the industry. With that said I believe this holiday will do ok, but maybe not gang busters. As a whole I have seen comments from analysts stating this could be the worst holiday shopping season in over fifteen years. Certain games however will do great. Price point will be very important this holiday season.



gnawkz on 25 September 2008
Mendicate Bias said:
Dodece said:
There is no such thing as a recession proof industry, and especially no such thing as a depression proof industry. When we look at the games industry we are probably seeing a deferred reaction, because it was a logical downgrade in entertainment budgets. However there is little doubt that entertainment budgets themselves will be curtailed if economic trends persist.

Gaming has reaped a shortfall this year as consumers curtailed expensive entertainments they instead gravitated to more cost effective entertainment. A game has longer entertainment longevity, effective resale prospects, and has few secondary expenses. Further more it can be shared with others providing even greater benefit.

This all said the increase can be followed by a comparative decrease, and a polarization of the audience towards particular games. Most specifically games with greater replay value. Gaming is like most anything else consumers when they need to will do what it takes to stretch their money to the greatest benefit.

Let us use an example of a person that spends two hundred dollars every month on entertainment. Prior to economic hard times they would buy a retail game every other month at full retail price. The rest was spent on cable, eating out, movies, music, and group activities. Once the economy started to go south, and the price of gas started to go up they shifted to buying two games a month. The games went farther. That would be a four fold increase.

However if the economy continues a downward spiral there is little doubt that fears will curtail an entertainment budget, and the guy buying two games a month might return to a single game every two months or even less. What happens when the budget reaches a hundred dollars a month. Not enough to buy a game every month, have cable, have broadband, and occasionally go out with their friends. So economic pressures can force the games industry to retract its initial gains, as everyone has to fight for a diminishing entertainment dollar.

Bottom line if the economy turns below a certain point then gaming that enjoyed the initial fruits could become the industry that flounders the hardest. While it may be good entertainment value it also usually requires the greater up front investment. Now were you placed in a position between deciding to buy a new game or have cable which would you choose? After all most gamers have a couple dozen games to play you can make due. However unless you have a massive unwatched movie collection you might have a problem letting go of the more diverse entertainment.

Gaming is not this generations movies. This generations movies are cable and the internet, and for most consumers those entertainments will take priority over buying a new video game let alone a console.

Thats exactly the point I'm trying to make

If you had to choose between having internet or buying a new console, which would you choose?

 

I can't say I completely agree, but I can't say I disagree.  I dont think High Speed Internet is not a back breaker ... nor is cable television.  I would label those almost as necessity since even individuals under the proverty line are able to pruchase those services.  Having to choose if internet or cable needs to be disconnected sounds like the family is already streched to the point where food is hard come by.

At that point, all entertainment should be tossed out the window.  I do not think the economy will hit a great depression.  It will be a longer recession than what we are necessarily used to.

What it should be compared to instead to something like a night out every week for a movie (running u around $100 ... $30 for 2 tickets, $30-50 for dinner, $10-20 for refreshments).

But I cannot disagree on the fact that a guy who used to buy 1 game ever month just switched over to 1 game every 2 months.  That is a great point and could point to a future slow down in growth, but the industry I believe will still continue to grow as the number of people becoming 1st time gamers will more than make up for the smaller number of purchasers people will tend to make.

 



Oyvoyvoyv on 25 September 2008

I don't live in America. I live in Norway, where there has (yet) not been any real effect, and journalists here are morons, so I don't really know how serious it is.

Here's my take on it though.

In a depression, one would need entertainment. People aren't just going to sit around doing nothing. Gaming is (relatively) cheap. Probably cheaper than movies in the long run. The question isn't really that, but whether people understand that or not.

 

In a thread I made (can't find it), I found out that the average Wii owner buys around 4 games a year. The average is a bit higher for X360, and a bit lower for Ps3, but both are pretty close, so it doesn't really matter.

So that's 200 dollars a year in games. Average (the median) Joe probably spends 150 dollars a year.

Is that really going to be something that they can't afford? Nope, I can't believe that.

What I sooner believe, is that people won't buy a new console. The old console is good enough for them. Thus, a worldwide drop would lead to a far longer generation.

This would also mean that the Ps2 will sell software for another 4-5 years.



http://www.vgchartz.com/games/userreviewdisp.php?id=261

That is VGChartz LONGEST review. And it's NOT Cute Kitten DS

Mendicate Bias on 25 September 2008

@Oyvoyvoyv

The effect could also extend to the current generation especially the wii in the sense that the race to bring out the next gen console has become void. Whats the point of bringing out a new console when the current one runs just fine is cheap and has plenty of games. Its already been proven that graphics don't mean shit for sales so with a bad economy when do you release the next gen console?



                                           

                      The definitive evidence that video games turn people into mass murderers