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Analyze This: Is The Video Game Industry Recession-Proof?


April 9, 2008 Article Start Previous Page 4 of 4
 

Ed Barton, Screen Digest

Recent history demonstrates that the video games industry is largely recession-proof. During recessions, people tighten belts and go out less. Video games offer a good value source of entertainment.

Of greater importance to industry growth is the hardware cycle and games release volume and pipeline rather than the wider economic environment.

This was amply demonstrated during the last severe recession in the early 90's and at the beginning of this century when the industry effortlessly and gracefully expanded despite economic recession.

The video games market in the UK certainly wasn't dampened by the more severe recession in the early 90's, and expanded on the back of the success of Sega's Mega Drive and the SNES.

A quarter of a million sales of Sonic the Hedgehog 2 in 1992 and a further quarter of a million sales of Donkey Kong Country a couple of years later attest to the robustness of the industry during periods of wider economic malaise.

Overall, we remain largely positive regarding current-generation consoles and handhelds.

Do "hardcore" gamers have mortgages or huge food and utilities bills? On the whole, the answer is "no." Some of their parents might, but the 16-to-25 age group will find the cash for gaming. Although the hardcore represent a small percentage of all video games consumers, their purchasing power and frequency should not be underestimated.

For most committed gamers, buying the latest version of their favorite game is not a discretionary purchase; it is a mandatory purchase and will not be delayed until the price drops, they have more available income, or substituted for a cheaper, alternative form of entertainment.

[Got a business-related question concerning the games industry that you would like to suggest for discussion in Analyze This? Are you a professional analyst and would like to take part in this column? Email [email protected]]


Article Start Previous Page 4 of 4

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