Analyze This: Is The Video Game Industry Recession-Proof?
April 9, 2008 Page 2 of 4
Nick Williams, OTX Research
The video game business has shown remarkable resiliency to the economic downturn in recent months. However, it would be presumptuous to say that any entertainment industry is 100% recession-proof.
That said, the outlook for 2008 remains strong. There is no sign of the market slowing down in the next couple of months.
During the last 12 months, Wii ownership in the U.S. has more than quadrupled, PS3 ownership has tripled, and Xbox 360 ownership has almost doubled [Source: The NPD Group]. The argument could easily be made that if we weren't on the brink of a recession, the video game industry would be growing at a considerably faster rate.
Thanks in large part to Nintendo's ambitious mass-market strategy, the traditional gamer boundaries have officially been broken. While the expansion of the market beyond hardcore gamers has undoubtedly contributed to the record growth in 2008, these new gamers will likely be the first ones to stop buying games if they need to cut their entertainment budget.
There is a risk that Wii titles could struggle in 2008, especially if the economy continues to slide towards a recession.
Traditional gamers simply will not settle on a mediocre game for $60. Furthermore, gamers will only have a limited budget for titles that require a significant investment in peripherals -- i.e. Rock Band.
In this hot new space, only the strongest will survive. Wii Fit, LittleBigPlanet, Spore, GTA IV and Fable 2 are just a few of the titles that are expected to raise the proverbial bar in 2008.
To counter the effects of the economic downturn, many gamers will sell or trade-in their old game collections. GameStop is the clear market leader in this space, and is poised to benefit.
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