Industry Insider - October 2008

Playing Games in Tough Times

by Eric Marlow

In any industry there are always ups and down. The dot-com bust earlier in the decade is proof that what goes up will come down – eventually. And with a looming financial sector “crisis” in the in the US right now, what may be in store for our gaming passion?

Well, if past experience is any indication, very little, Games have proven to be a very resilient sector when it comes to the economy. As it turns out, consumers believe there is much value in purchasing a game. And as a result they may be more likely to spend their hard earned money on a game rather than something else, such as a movie, DVD, or other forms of entertainment such a theme parks.

And it’s true! Games are a great value. For the price of p2700 or less you can buy a top-quality game that will bring you many hours of enjoyment. I recently completed Metal Gear Solid 4 in 23 hours - I know this because the game logs my playtime and reports it back to me at the end of each act. That’s only p117 per hour! And by many comparisons this is a short game. Arcades such as Timezone continue to be a good value too. And of course there is nothing preventing me from exploring the multiplayer aspects of the games or playing them repeatedly on harder levels. Bonus content comes out from time to time as well. So you can see that video games offer customers a high value over more fleeting entertainment options.

Where there may be an effect on games by this crisis is further up the chain. Understanding this requires a bit more insight into how the game industry works. Simply put – what is going on now in the financial industry is a crisis in credit. Credit is something that companies can use to obtain loans and other infusions of capital intended for growth. With tighter credit may come reduced growth opportunities for companies that use credit to fund their projects. Hence, those AAA games that require $10-20 million dollar budgets may be harder to finance.

This may affect certain game developer’s direction, as some studios may rely on credit to support their game development process. But more impactful may be the effect on publishers – they are the money engine that drives this industry. With credit harder to come by, publishers may take a harder look at their upcoming titles and cut back where they can. Most probably this will affect the big budget titles, but it’s possible we may see the effect on smaller games like Nintendo DS or Wii games too.

The good news is that the popular titles that are assured of big revenues will probably be unaffected. The initial effect may be most felt by marginal games where potential revenues are unknown, or where budget overruns and quality control issues are hurting a game’s completion. As a result of these industry factors, some titles may be cancelled altogether because the money used to fund their development may be better allocated to other more profitable games. Since the development time on many of today’s’ games exceeds two years, we may not see an impact for a while.

Since spending money on games instead of other forms of entertainment is a good value, I know I will sleep better knowing that my gaming passion is a smart way to save money. See! You may have been a smart shopper and you didn’t even know it!

Please feel free to drop me an email with any questions you may have. Space permitting I’ll do what I can to answer your questions in upcoming editions. You can reach me at theinsider@octobereighty.com. Game On!