The Sorry State of Videogames

Ars Technica reports: It has become popular to say that the gaming industry has become recession-proof, simply because the overall sales for 2008 are up year over year... but those numbers only tell part of the story. Other sources are starting to report some troubling trends in gaming sales; not the least of which is the plummeting price of used games. These trends could lead to some troubling times for gaming in 2009.

Video Game Price Charts tracks the value of used games over a variety of sites such as Amazon.com and eBay, the so-called "gray market" for games. These are people selling games directly to other people, which means no one is setting an artificial price such as used-game stores like GameStop. The data isn't pretty: prices of used games took a beating in the end of the year, as the chart below illustrates.

"During the last five months of 2008 the prices continued to separateand showed the biggest difference during the annual holiday pricespike," the site reported. "The holiday increase was +26.6% in '07 but only +13.0% in '08."

No one knows what will happen in the new year, but as budgets are tightened gamers may simply be unwilling to pay as much for their used games.

The monthly NPD sales numbers are impressive in the face of a limp economy, but a look at the top ten games that are selling paints a scary picture for the industry. The blockbusters are coming from a limited number of publishers, with Activision and Nintendo dominating the charts. The hot sellers are doing very well, but you'd better have a big hit and a large advertising budget if you hope to grab a piece of the retail pie.

Smaller developers and publishers aren't doing nearly as well, and even EA has been hit with layoffs. Midway seems to be on death's door, with both Factor 5 and Free Radicalalso closing up shop, at least as we know them. The stakes in the industry have been raised significantly: a single miss in the marketplace, combined with banks tightening up on credit, can spell death for companies without a large war chest.

What does all this mean for gamers? You'll likely get less money when selling your games, for starters. Even more troubling may be how the industry reacts; sequels and spin-off properties will become even more attractive as everyone becomes skittish about losing money on products. Factor 5 and Free Radical stepped out of their comfort zones with Lair and Haze, respectively, and those experiments wiped out the companies when neither piece of IP caught on with gamers. It didn't help that the games weren't good, but the takeaway for publishers is likely to be that 2009 will be a poor time to try to launch new properties.

The gaming industry may be doing surprisingly well according to some metrics, but it's folly to suggest it will emerge unscathed from the recession.