Computer games pressing all the right buttons to defy crisis

Mark Prigg, Science and Technology Editor
10 Jul 2009

While consumers may be struggling with the harsh realities of the current financial crisis, it seems one area has actually benefited from the wallet-tightening being seen across the world.

The computer games industry, viewed by many as a frivolous pastime only undertaken by teenagers, is booming.

In the UK alone, we spent £1.9 billion on games last year, a figure analysts say will be repeated this year.

Market research firm Nielsen even says that, as the recession continues to bite, people are actually buying and playing more games.

“Primarily, we believe mainstream gamers are playing more of the broadly appealing games (e.g. Wii Fit, Guitar Hero and Rock Band) pushing their hours of gameplay up,” says Nielsen Games director Michael Flamberg.

The addition of online playing has also boosted sales. Flamberg adds: “The social aspects of these games have really engaged people.”

At the recent E3 gaming conference in Los Angeles, where the entire industry gathered to show off its Christmas products, the recession seemed a distant memory.

As Paul McCartney and Ringo Starr took the stage for a glitzy Microsoft press briefing announcing a Beatles game, and Steven Spielberg talked about the future of gaming, the industry was almost back to its lavish old ways, with corporate hospitality flowing freely.

Over the four-day conference, the evenings were taken up with a series of huge parties, with musicians such as Eminem and Jay-Z playing as each firm tried to outdo its rivals.

“Historically, the games industry has coped well in recession, and this time is no different,” said Piers Harding-Rolls of Screen Digest.

“People see spending £30-£40 on a game as good value for money, more so than going out. The games industry is almost recession-proof, in fact, although we do see some downturns — sales of the hardware, for instance, have gone down, particularly for Sony's £300 PS3 console. However, we expect to see a price cut for that in September, which will give sales a big boost.”

Currently, the industry has three major players — Sony, with 19% of the UK market, Microsoft with 35% and Nintendo with 52%, according to Screen Digest's figures.

There's also a separate battle for the handheld games market, in which Nintendo is up against Sony and Apple, which aims to turn its iPod into a games console.

Nintendo has spearheaded the recession-busting fightback, with the phenomenal success of its Wii console opening up huge new family markets for the games industry.

Cammie Dunaway of Nintendo believes the industry is now the biggest force in entertainment.

“The latest figures from market research firm NPD show video games are as big as home video and toys, even bigger than music and movie box office combined,” she says. The other major players are also bullish. Shane Kim, the head of Microsoft's global Xbox division, says his firm is already reaping the benefits of the recession.

“We have weathered the crisis very well. We sold 30% more consoles in the first four months of this year,” he adds. “We went into the end of last year cautiously optimistic.

“We knew the recession was coming, but we are now adding 500,000 new members to our online games service each month. People still want to be entertained, and while they're cutting back on big items like houses and cars, our business is doing well.

“Games are starting to get eerily lifelike, things are no longer about graphics, but about the experiences we create.”

Microsoft and Sony both admit that it took developers some time to work out exactly how to programme their consoles effectively. For consumers, however, this has boosted sales.

“We are an industry well-suited to recession because we can offer technical advances. Each time we come out with a new game, it gets better, and looks better,” explains Sony Computer Entertainment UK boss Ray Maguire.

Despite parent company Sony posting a $1.7 billion (£1.04 billion) net loss, the division and its range of Playstation consoles is doing well.

“Last year was one of our biggest years, but the warning signs were out from June last year,” says Maguire. “However, for consumers, one of the ways to escape the doom and gloom has been entertainment.”

“People are also now understanding high-definition, and that is driving sales of our PS3 console, which has both high-definition games and a Blu-Ray player.

“I think we are looking at 2009 being a gaming Christmas.”