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The Divnich Tapes: The Video Game Industry vs. The Economy

The Divnich Tapes: The Video Game Industry vs. The Economy

March 18, 2008 | By Jesse Divnich

March 18, 2008 | By Jesse Divnich
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More: Console/PC

[Throughout this week, simExchange analyst Jesse Divnich is presenting exclusive Gamasutra analysis of February's hardware and software trends, using data from The simExchange, NPD, IGN GamerMetrics and GameTrailers. Following a look at PS3 vs. Xbox 360, today's analysis examines the video game industry's remarkable performance in our slowing economy.]

As we've established, the video game industry stunned us all in February by beating market expectations, bringing in over $669 million in software, a 47% increase over last year.

These spectacular sales show no indications of slowing down any time soon with the simExchange prediction market expecting another 47% revenue increase in March and 122% in April, as can be seen from the following graph:

So, given that February was impressive in itself, why are the predictions for March and April so much higher? Well, March has already seen the launch of Super Smash Bros. Brawl, which has surged to 1.4 million sales already - an incredibly impressive tally.

As for April, can thank Grand Theft Auto IV chiefly for the massive predicted surge - though Mario Kart Wii also ships towards the end of the month and may further push up that month's game software sales.

These results and expectations are impressive because, as the video game industry continues to post record growth, the U.S. economy as a whole is heading in the opposite direction.

Retail sales are struggling, gas prices are on the rise, the housing market is in shambles, and the economy is either in a recession or on the brink of one " what makes our industry so special?

To keep it simple, the video game industry has successfully captured a new mass market of gamers of all ages from both genders. They see video games as offering the best value per dollar than other forms of entertainment in the leisure/entertainment sector.

This poses another difficult question " just where is all the money coming from? Unfortunately, there is no clear answer as the entertainment and leisure sectors are so massive and assorted, it is difficult to pinpoint who is negatively affected by the video game industry's tremendous growth.

But in all likelihood, the video game industry is gradually taking dollars (or at least sapping growth) from various industries in the entertainment and leisure sector, from movie watching through toy buying and even the music biz with crossover titles like Rock Band " the perfect crime!

[Jesse Divnich is the analyst for the simExchange, a prediction market that allows users to buy and sell fake video game stocks in attempts to predict Global Lifetime Sales (GLS), monthly sales based on NPD data(called “future”), and Metacritic scores. Tune in again tomorrow for the simExchange's hardware and software predictions for March.]

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