Gaming’s Great Recession

Gaming's Great Recession

How does the videogame industry do during a recession?

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I was right there with the prognosticators, thinking this thing was recession-proof. The relationship to movies to the Great Depression just seemed too similar to videogames to our current recession. (Not that things are nearly that bad, just yet.) But the $60 price tag is problematic in a lot of ways. When they're short on cash, people will spend $15 going to the movies every week, but refuse to spend that same $60 on a videogame for the month. It's the same amount of money a month, but there is a whole lot of psychology going on. Nobody wants to put that many of their gaming dollars into one basket. (One game might suck, but it's unlikely all four movies will suck.) They'll balk at spending that much all at once. (Entertainment spending is probably the least rational form of spending.) Blizzard has exploited this fact for years. Nobody would pay $500+ for a videogame up front, but WoW has gotten that much money out of long-time players by patiently tapping them for a modest $15 at a time.

I think the $20 price point is where impulse spending becomes possible. If I were a publisher I'd be thinking about how I could get a product to market at that point, either by cutting games into episodes or moving to a subscription model.

I wonder how TellTale Games is doing this year?

I wonder to what extent this is linked to the end of Microsoft's extended warranty for their poorly-designed 360 hardware. I'm on my third and now the disk-drive is acting up even though I have kept all my DVDs in mint condition, so like the sap I am I have started looking at the new Xbox Arcades that have the apparently RROD-free Jasper motherboards (although they aren't advertised as that). Yet, now I'm put off because I've read there is some other "e74" video fault that these are more likely to have...

Then you've got rumors of a price-hike for Modern Warfare 2 - which the industry cynically hope will make the market accept higher prices, yet at the same time the trend towards short-session, single play through to completion, "casual" gaming would suggest that the prices are already too high when the entertainment product is seen in terms of $/hr (in the same sense as movies and music). Whilst I would have paid $200 for Halo: Combat Evolved, because I replayed it so damn much, I can't say the same about COD4 - which ought to have been 25% less expensive and therefore more in line with the cost of PC games; extra money could have been sought from the sale of optional map packs, which I wouldn't personally have bought because I wasn't wowed by the balance of the gameplay or the expressivity and accessibility of the controls.

So, I think that there are a lot of people who are putting their gaming hobby on hold until the 360 is sorted out, the PS3 becomes affordable and the Wii raises the standards of its 3rd party software (or we see some new games out from Nintendo). I've already pre-ordered my next game: Operation Flashpoint 2: Dragon Rising, but was dismayed to find that this wasn't going to "fill my Summer" when it was delayed from June to August (if it even materializes then).

The industry are a bunch of idiots who seem to release EVERYTHING in November, then bleat about poor sales. They need to spread things out a lot more. They need to lower the initial cost of ownership, or at least provide a decent demo for our evaluation (not just semi-interactive trailers for the crappier games that can't afford to advertise themselves). They need to run on more reliable hardware and in my opinion, the main blame for all of this (GPU overheating hardware failure, massive movie-scale budgets being passed on to consumers with price-hikes and protracted development times with slipping launch dates) is HD and the burden it places on art (texturing) and animation.

It is a flawed supposition that because HD TVs exist consumers will want their next-generation consoles to support output to them. Many people do have one in their living room, but it is used by the family for watching television - videogaming is not tolerated (unless you are a rich 20-something who lives on their own) - it is far more common for the console to be in another games room or bedroom, plugged into a standard Trinitron TV. This means that all the money being poured into raising the quality of the visuals goes unappreciated and pushing all of this data around amounts to a decadent waste of the console's resources.

I can't even see the argument for having a 'completely' HD PS3 in the living room (due to its Blu-Ray movies capability) because the disks are too expensive to collect and you would be better off with SkyHD Box Office.

So, I guess I look forward to a recession. Maybe it will curtail publisher's rising greed and make them commission "less epic" games that are just as much fun - if not more so, for not being pretentious (MGS4... I'm looking at you).

All this tied with the fact that the only thing that sells nowadays are sequels, means the indie side of gaming will slowly cease to exist.

I think game companies will start focusing more and more on downloadable content since you can't buy DLC second hand and it is relatively cheap to make.

Sparrow Tag:
All this tied with the fact that the only thing that sells nowadays are sequels, means the indie side of gaming will slowly cease to exist.

But hasn't that always been the case? The first of the games were quickly grabbed by the original gamers, and those with the best production values would usually come out on top, even if the technology was restricted (by today's standards, anyway). Indie developers are becoming less and less able to make their games viable in today's market; it's the way it's always been.

Sparrow Tag:
All this tied with the fact that the only thing that sells nowadays are sequels

Didn't he just say that Prototype sold very well?

This is the time when people start to become more selective as to what they will buy. The big game companies will make a lot of safe moves and put out lots of games using repetitive IPs that sold well in the past. We're also starting to see some more big blockbuster-type games in the near future. But yeah, the indie sector is definitely going to suffer.

I don't see this news as horribly bad for us the Gamer. Companies being more careful about what they produce? This sounds good to me. Maybe some of those second rate and buggy games that used to get foisted on us will get dropped. Indie developers, with their lower production costs might actually have a competitive edge. And finally I'm hoping that the Big companies that have developed a reputation for horrible customer service (UBI and EA, I'm looking at you) might actually rethink policies to try and bring gamers back into the fold.

As for me, I will continue to be very careful with my money. This is why the escapist is very important to me, the reviews and news will hopefully help me to avoid some of the game stinkers and I can spend my money and time on a more rewarding game experience.

I`m in one of the sinking ships right now but that`s ok, maybe some of the ships need to sink.
However I don`t think that you people see the full picture here and how the gaming scene will look after the end of this minor apocalypse thing. I predict that most of you will cry after X title that was deleted, y console that got burried etc.

Looking at the Wii specifically I can't say some people didn't expect this to happen. The rush of casual gamers to the Wii created a bubble that finally burst. Sure the Wii basically printed money for Nintendo but I see rough times ahead for the company. A lot of people I know who were never really into gaming went out and bought a Wii but now it sits unused in their homes. They certainly won't be buying any games for it and if that ends up being a trend the Wii and Nintendo is in a real bad spot for the forseeable future.

Bigeyez:
Looking at the Wii specifically I can't say some people didn't expect this to happen. The rush of casual gamers to the Wii created a bubble that finally burst. Sure the Wii basically printed money for Nintendo but I see rough times ahead for the company. A lot of people I know who were never really into gaming went out and bought a Wii but now it sits unused in their homes. They certainly won't be buying any games for it and if that ends up being a trend the Wii and Nintendo is in a real bad spot for the forseeable future.

I find it quite funny and ironic that when Nintendo came out with the NES, they wanted to avoid the fate of Atari (Flooding the market with mediocre and bad games). For many years, they did just that. But then they forgot why they were a successful platform in the first place. Their fan base felt abandoned and subsequently moved onto to platforms that catered to their every needs on hand and foot. When the casual gamers rushed in, Nintendo didn't blink. All they saw were dollar signs. Now that the casual gamer has stopped buying games for the Wii, what's there to replace them? Nothing. Their base has left and moved onto the 360 and the PS3 where their desires were being met.

Nintendo's short term strategy paid out a lot of money really fast, but could not be sustained in the long run.

Is Nintendo done? I don't think so, but I think this will be a lesson learned.

stupid wii destroying the market :P lol

It seems to me, Nintendo is suffering from the very thing right now that caused them to create the 'nintendo seal of quality' ages ago...

A system flooded with badly made games...

It appears that critics of the Wii did not make it to Page 2:

But the recession also highlights a challenge the industry has faced in that they had many very expensive, premium products. Those are the first type of products you would expect to see get hurt with consumer spending.

Well if people started to release titles that we wanna see, then maybe ide buy them!!!

Diablo 3, hurry the f up please :)

how does it do? the answer can be found by following flies. shitty.

Well if games suck as they do as of late, piracy is the onlyanswer

Stop blaming the recession for that big drop, the bigger issue is the lack of popular games in the last few months. Game spending is actually UP in my country. Just give people something to actually spend that money on.

From Iwata's statements he does seem to consider gaming recession proof and blames the lower profits squarely on the inadequate late 2008 release schedule for the Wii. You'll notice they're 66% down currently and predict only 12% down for the whole year, means they expect to rebound as the year goes on and their big hitter titles get to sell their load. After coasting for nearly a year with Animal Crossing and Wii Music they've of course lost a lot of momentum that they plan to regain with new games.

" If the casual gamers' experience is that they play a $20 or $40 game only an hour or two, then find themselves bored, it's easy to see how they forgo this type of purchase when money gets tight."

Pachter is proving himself an idiot again. I don't think he has ever witnessed a casual gamer play a game that's appropriate for casual gamers. They have much less restraint than veteran gamers and will often play for LONG stretches. Of course if a game bores them that's more the fault of the game than the player. They don't get bored by Tetris or PopCap games that quick. Just gotta design a game right and not bore the player with hours of tutorials and plot setup.

Bigeyez:
Looking at the Wii specifically I can't say some people didn't expect this to happen. The rush of casual gamers to the Wii created a bubble that finally burst. Sure the Wii basically printed money for Nintendo but I see rough times ahead for the company. A lot of people I know who were never really into gaming went out and bought a Wii but now it sits unused in their homes. They certainly won't be buying any games for it and if that ends up being a trend the Wii and Nintendo is in a real bad spot for the forseeable future.

Nonsense, there are just no games to sell to Wii owners. The attach rate is still decent, about 1 lower than the PS3's but about twice the DS's and noone's proclaiming that the DS is a bubble. People do buy games, the publishers just aren't making it easy for them.

Shamus Young:
I think the $20 price point is where impulse spending becomes possible. If I were a publisher I'd be thinking about how I could get a product to market at that point, either by cutting games into episodes or moving to a subscription model.

How about just discounting older games and keeping them stocked? Those games had their dev cost paid for long ago and can be squeezed for a bit more money at little expense. Making a new game that can sell well at the lower price costs money and risks making the game look inferior (supposedly people become wary to products that are too cheap, with old games they at least expect it)

Sparrow Tag:
All this tied with the fact that the only thing that sells nowadays are sequels, means the indie side of gaming will slowly cease to exist.

Do you have some data showing that indie games are selling less? I'm not sure that is the case.

warfjm:
I find it quite funny and ironic that when Nintendo came out with the NES, they wanted to avoid the fate of Atari (Flooding the market with mediocre and bad games). For many years, they did just that. But then they forgot why they were a successful platform in the first place. Their fan base felt abandoned and subsequently moved onto to platforms that catered to their every needs on hand and foot. When the casual gamers rushed in, Nintendo didn't blink. All they saw were dollar signs. Now that the casual gamer has stopped buying games for the Wii, what's there to replace them? Nothing. Their base has left and moved onto the 360 and the PS3 where their desires were being met.

They actually went back to the NES levels. Maybe not in terms of iron fist third party handling (but third parties wouldn't put up with that anyway) but they're screwing games back in terms of complexity so people can join gaming again. NES games were easy to pick up for everybody. Of course they were seen as casual garbage by the computer gamers who were used to the epic complexity of games that came with 200 page manuals and whatnot and thought that going down to a mere four buttons and a d-pad would be a real retardation for gaming.

KDR_11k:

Sparrow Tag:
All this tied with the fact that the only thing that sells nowadays are sequels, means the indie side of gaming will slowly cease to exist.

Do you have some data showing that indie games are selling less? I'm not sure that is the case.

Just a large set of Escapist articles, general views at IGN and Shamus's articles.

But, I don't have any rough numbers. Just seems to be what everyone is saying.

Its not that I CAN`T afford to buy games, it is just that for months and months, there have been no games that I WANT to buy.

The market is oversaturated with terrible unamusing games

Plus it is natural for profits to go up and down in cycles with new consoles. Given current technological trends, what could they possibly do to improve current consoles enough so that people would buy them?

KDR_11k:

Bigeyez:
Looking at the Wii specifically I can't say some people didn't expect this to happen. The rush of casual gamers to the Wii created a bubble that finally burst. Sure the Wii basically printed money for Nintendo but I see rough times ahead for the company. A lot of people I know who were never really into gaming went out and bought a Wii but now it sits unused in their homes. They certainly won't be buying any games for it and if that ends up being a trend the Wii and Nintendo is in a real bad spot for the forseeable future.

Nonsense, there are just no games to sell to Wii owners. The attach rate is still decent, about 1 lower than the PS3's but about twice the DS's and noone's proclaiming that the DS is a bubble. People do buy games, the publishers just aren't making it easy for them.

I believe you missed the point of my post. The Wii sold so well because it pulled in a large crowd of people who were previously not interested in gaming. I call that a bubble because I figured that eventually the Wii would stop being the "IT" item to buy and people would lose interest and stop dropping money into games for it. Casual players who bought a Wii and find that they don't use it have no real reason to drop money into games for it. Chances are they won't know games are coming out unless they happen to see an ad somewhere. They don't follow gaming news or visit websites.

Sure part of the reason "real" gamers aren't buying Wii games is because yes there isn't that many worthwhile games to buy but I was talking about the people who got a Wii, had never played videogames before, bought a game or two then got over the fad and won't buy another game again. Which from what I have read/seen/heard is quite a lot of people. Like I said I know several people like that IRL so if theres enough of em out there Nintendo is indeed in trouble.

Bigeyez:
I believe you missed the point of my post. The Wii sold so well because it pulled in a large crowd of people who were previously not interested in gaming. I call that a bubble because I figured that eventually the Wii would stop being the "IT" item to buy and people would lose interest and stop dropping money into games for it. Casual players who bought a Wii and find that they don't use it have no real reason to drop money into games for it. Chances are they won't know games are coming out unless they happen to see an ad somewhere. They don't follow gaming news or visit websites.

They still react to new games coming out. Many people are still not interested in getting a Wii and the proper killer apps would change that. The new gamers react to killer apps just as much as long time gamers do.

Sure part of the reason "real" gamers aren't buying Wii games is because yes there isn't that many worthwhile games to buy but I was talking about the people who got a Wii, had never played videogames before, bought a game or two then got over the fad and won't buy another game again. Which from what I have read/seen/heard is quite a lot of people. Like I said I know several people like that IRL so if theres enough of em out there Nintendo is indeed in trouble.

You know what the attach rate means, right? On average Wii owners have something like 6 (or was it 7?) games. That's 1 game less than PS3 owners. Either the people who own more than 1-2 games buy disproportionately many games (why would they?) or your stereotype of new gamers as buying only 1-2 games is flawed and the actual numbers of those people are quite low. For reference, the DS has an attach rate between 2 and 3 and noone's calling that a bubble.

It's amusing that I actually predicted this in one of my older posts, while it comes as a surprise to The Escapist, a magazine which often catches industry trends early. At the time, I said basically what this article is pointing out now: that the hardcore would be needed in a recession, and that this Wii-induced shift to the casual would be harmful in the context of the financial downturn. I concluded at that time that the industry would essentially "come crawling back" to the hardcore audience on some levels.

To me, it's obvious that no industry is "recession-proof", except the industry of gold-plated pianos constructed solely for Bill Gates. And such products should not count as an "industry".

Let's look at the consuming audience of gaming, because that's really the reason behind all of this. As I've just demonstrated, the upper class, particularly the very rich, are not high in number, and don't consume ordinary resources to a disproportionate enough degree thanks to limits on the time they can spend playing games; when you're running Microsoft, do you really kick back and play a 360 when you get home? Will you really have time? Exactly. And even if you did, there's just not enough hours in the day to use all of that income on media and see it all.

That leaves the lower class and middle class. Lower class is out as well. The reason why this is isn't always obvious to the middle class, especially after a long economic boom like the one we just had for ten odd years, but in essence: games cost far too much. In Australia, it's $100AUD ($82.32US) for a full-price game. That's a whole day's work for our minimum wagers, before tax. There's just not enough for games to be accessible to them, particularly when considering that groceries for three people go for about twice that, weekly.

So the industry is left with the middle-class, who get tight with money when they're paid less, when they suffer the chance of losing their job or already HAVE lost their job, and have plenty of essential things to spend money on, like mortgages in Australia or health care in the US. And all of these pressures are focused on that class right now.

This "bottlenecking" of the wallet flow will always hit every single creative industry aimed at that economic class, even if the products are very expensive and intended for the upper echelons of that class. So, the hit might be less powerful with games than with the cinema, but that's only if there remains a hardcore audience. And unfortunately, the hardcore has had very little reason to be impressed with what the industry's been releasing in the last generation.

"Eternal growth", as the industry giants who called themselves "recession-proof" dared to postulate, never abided anyone as an economic philosophy. I wish the industry luck crawling back to stability.

I love video games

jonnypistolshot:
I don't see this news as horribly bad for us the Gamer. Companies being more careful about what they produce? This sounds good to me. Maybe some of those second rate and buggy games that used to get foisted on us will get dropped. Indie developers, with their lower production costs might actually have a competitive edge. And finally I'm hoping that the Big companies that have developed a reputation for horrible customer service (UBI and EA, I'm looking at you) might actually rethink policies to try and bring gamers back into the fold.

As for me, I will continue to be very careful with my money. This is why the escapist is very important to me, the reviews and news will hopefully help me to avoid some of the game stinkers and I can spend my money and time on a more rewarding game experience.

I rather agree with this. But I never believed the game industry was recession proof. I'm sorry, but when people are losing their homes and starving on the street, they are NOT worried about a new game system. No home=no electricity and very possibly no food either. Most industries depend on a quantity of sales as opposed to a few high quality sales. That being so, when something this harsh and wide-spread hits it affects everything.

Worse, it has a domino effect. The more companies that fail, the more people without jobs and thus with less money to spend causing the companies they support to fail and wash-rinse-repeat. Once we hit a leveling off point and stop hemorrhaging jobs, we should see the gaming industry recover rather quickly. People DO want entertainment and games offer more of that than movies, plays, opera, etc. But people are going to be very selective. Their money is precious so they aren't going to jump on just anything. And the reviews of trustworthy critics like those here on Escapist receive a lot more value!

So I do believe we will see an upturn for the industry by 2011-2012. It should begin to be felt a bit this year but it will take time for it to gain momentum. Although not recession-proof, the games industry has the best spring in it to allow fast recovery.

 

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