Are Video Game Sales An Economic Indicator?

May 16, 2009 -

Douglas McIntyre of 24/7 Wall Street writes that video games are an excellent economic indicator. And - given their lousy recent sales numbers - the indications aren't good:

 Video games... [are] inexpensive enough so that they should be a reasonable proxy for consumer discretionary spending.

The signals from the video game industry in April were troubling. Sales of games dropped 23% and game console sales were down over 40%...

The slide in console sales is so extreme that it is a clear sign that sales of consumer electronics are in a flat spin. When people cannot spend $300 on a console or $50 on a game which can be used for hours and played over and over again, the money for discretionary spending has dried up.

TIME thought enough of McIntyre's analysis to repost on their site.

On the other hand, analyst Doug Creutz of Cowen and Company pointed out this week in an investors' note that year-over-year April sales comparisons were negatively impacted by the April, 2008 release of two blockbusters, Grand Theft Auto IV and Mario Kart Wii. That was a tough act for April, 2009 to follow. Creutz also notes that most U.S. game publishers did well in April:

Three of the four major U.S. third party publishers saw significant sales increases in April. [Activision] saw a total game sales (incl. PC) increase of roughly +21%... Electronic Arts... saw total game sales increase +26%... THQ's... total sales increased +23%...


Comments

Re: Are Video Game Sales An Economic Indicator?

You think that paying 50$ for a game is high.

Think about the people in Australia, ever since 1990 Australian Gamers have had to pay up to 100$ for a game.

The Australian dollar has been up and down since then, but the price of the games stays the same.

It has only been in the last 12 months that I have noticed that games that are 6 months old have fallen to 70$, 60$ and even 50$ dollars.

 

So yeah, for those in the US who think paying 50$ for a game is too high, just imagine what the Australian Gamers have had to deal with for so many years.

 

TBoneTony

Re: Are Video Game Sales An Economic Indicator?

Not to mention the fact that we get games later, we don't get as many, and we often wind up with features removed when there's no logical reason to take them out. And that's for the damn console games.

Re: Are Video Game Sales An Economic Indicator?

All of which are very true sadly for us Aussie gamers.

Allow me to explain why I think that way for the lucky Japanese and American Gamers here.

 

We get games later because we fall within the PAL territory much like Europe and the UK Gamers.

Unless if the game is predicted to sell well, the PAL release is hold back to see if the games are sold well in America first. This can be from a Publisher's position where they don't want to risk publishing games to countries where the game is not predicted to sell well and sometimes if games are not sold well in America whom is from the NTSC area, there is little chance of them being sold to PAL territories.

 

We don't get as many games because of the situation explained above. Also when it comes to Japanese RPG games, they have to be translated into many European countries that often take months up to at least a year after the American market has already played though that Japanese RPG. Thus it is fustrating for UK gamers and also Australian + New Zealand gamers who love RPGs of the Japanese Anime flavor because we already speak English much like the Americans, but yet we have to wait a painfully long time before we see any good quality RPGs from Japan that have also sold well in America.

 

We often wind up with features cut out or removed because unlike the UK and Europe that allow an 18 rating for their games, Australian gamers have to put up with a few annoying politicians (one goes by the name of Michael Atkinson) who consistantly play the family party card in the name of Protecting the Children from Violent and Sexual Videogames.

This creates the issue where the highest rating for a game sold in Australia can only go up to an MA15+ rating, instead of an R18+ that the Australian Videogame Industry has been lobbying for almost this entire decade. Perhaps for even longer.

But there are a few politicians on the gamers side, with Rob Hulls from Victoria and also another politician from the ACT, there are a few politicians who do want Videogames to be treated allot like Movies and DVDs that also have the same R18+ rating that Videogamers have been striving for so long in Australia.

 

Also, there are a few R18+ games that do make it into Australia that were rated 18 by the BBFC in the UK, but they are slanted into the MA15+ because they are on the borderline between MA15+ and R18+.

Only if the content in the game is going too far that is when it is refused classification. Much like the infamous Fallout 3 with the use of drugs as health benifits that were seen as pushing beyond the MA15+ area where the same game had allot of violence depicted in the game but the violence was never an issue. So therefore it was only the drugs that were given a different name. In some games the Violence is toned down for the Australian market. 

 

So yeah, even though the OFLC may not have always worked with the Australian Gamers, there are allot of Videogames in Australia with the MA15+ logo that had previously been rated 18 by the UK. The reason being that even though the OFLC has a policy to protect the children, they also have a policy of allowing adults to have the freedom of choice to chose what they want and don't want to see, hear, read and play what ever they want.

All the while the OFLC only banns questionable content from the market that they don't want anyone to see like Porn for example that has the X18+ rating and that rating is for movies and DVDs only avaliable in the ACT that is Canberra, the Capital of Australia and where many politicians live. 

 

Hope this explains things in more detail for what happens in the Australian Market. However there are a few ways around this, For any game released on the PC or even on handhelds like the PSP and the Nintendo Wii, we can import them from overseas via the wonderful world of the internet. However the Australian Government with their plan to censor the internet might also target online sites that sell stuff into Australia that are not on the market like fireworks or weapons. So sites like Amazon and E-Bay might be attacked by the Government's proposed Internet Filter.

They would still have online shopping sites, but those would be more likely Australian sites that don't sell stuff that you can only get overseas.

 

For console gamers, the problem comes with the Region Lockout feature that has been with consoles ever since after the Videogame Market crash of 1983. This affects the games on the PS2, XBox360 and the Nintendo Wii. This affects the PAL gamers more like from the UK and Europe, so Australia is not the only one in that boat. However Australian Gamers can still get games from the UK that did not make it to the Australian market, but there is allot more from America and Japan that never made it to PAL regions.

The only console to break that 20+ year rule of Region Lockout for consoles has been the PS3 and thank god I can still get onto Amazon.com to order PS3 games that will arrive late into PAL regions on that console like the Japanese RPGs that still suffer from long waits into PAL and also if they don't sell well in the US market then there is little chance of ever appearing in PAL regions.

 

 

So yeah I hope that explains everything. :D

TBoneTony

Re: Are Video Game Sales An Economic Indicator?

True, but at least you don't live in a country with neither rugby nor cricket. It could be worse.

Re: Are Video Game Sales An Economic Indicator?

Yes when things are slow IE no new top selling titles are out things are slow... Things will pick up in time or stop altogather.....

 


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Re: Are Video Game Sales An Economic Indicator?

It doesn't help either when most of the titles being released are garbage. I'm still waiting for something decent on the Wii Virtual Console. Europe has Majora's Mask, Japan has Smash Bros., and we have shit like Commodore 64 games. It also doesn't help that Contra Rebirth won't come to the North American WiiWare until the end of the year. The only time you'll see the good games is near the end of the year. Rest of it, you have shitty games or movie tie-in games.

When Jack Thompson runs his mouth, does anyone really care what he has to say anymore?

Re: Are Video Game Sales An Economic Indicator?

Too true.  There would need to be more quality games to pick it up.  That's the whole point of them saying that GTA 4 spiked the numbers.

 

Freedom of speech means the freedom to say ANYTHING, so long as it is the truth. This does not exclude anything that might hurt someone's feelings.

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Re: Are Video Game Sales An Economic Indicator?

I have always found it funny that financial "experts" try to claim they know what the one thing is that is hurting our economy.  Any financial expert actually worth his Porsche and Armani knows that it is a lot of things coming together, and the gaming industry isn't even close.  Yes, gaming has taken a hit due to our poor economy.  However, the downturn gaming is taking won't last too long, because it never does for entertainment.  Look at the Great Depression.  Ticket sales for films were through the roof vs. beforehand, because people need the escape.  It will be the same with gaming.  We all need the escape.  Thanks to the popularity of the Wii, that escape option will also be extended to people who wouldn't normally choose it.

 

Freedom of speech means the freedom to say ANYTHING, so long as it is the truth. This does not exclude anything that might hurt someone's feelings.

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Re: Are Video Game Sales An Economic Indicator?

The slide in console sales is so extreme that it is a clear sign that sales of consumer electronics are in a flat spin.

By the same logic, can I take Apple's 9% growth in Macintosh computer sales, 3% growth in iPod sales, and 88% growth in iPhone sales in the first quarter of FY2009 over the year-ago quarter and conclude that sales of consumer electronics are booming?

 

Re: Are Video Game Sales An Economic Indicator?

Win.

Re: Are Video Game Sales An Economic Indicator?

 Really, i can't help but think this is bull... i mean there are numerous things to consider. For one thing you have to take into account how long the consoles have been out. i mean, if you already have a wii, you aren't exactly gonna go around buying another one... and with how long it can take to play some games, it's not surprising that a person might only buy a new game like once a month and play that before getting a new one... and if the consoles you have has a large enough library, you end up having little reason to buy a new consoles because you are too busy playing games with your current console as is... the longer consoles have been out and the larger their libraries become, the fewer people their are who still want those consoles (well, want to spend as much as $300 on hem anyway)... hell even before the harsh economic times a lot of people complained that it was too hard to afford more than one next gen console. 

Another thing to consider is the quality of the games out... you can't expect people to go around buying crap, so if there are fewer great new releases, then overall sales are gonna be relatively low... and for some reason, a lot of publishers don't like releasing hits outside of certain times of the year... meaning you get crap being released most of the year and all the decent games come out at the same time; and people are unlikely to buy THAT many hits at the same time since they take so long to play.

So factors to consider before saying april is an indicator of economic times... first, how many people still don't have a next gen console and really want one?... how many people have atleast one, but really do want another one?... and what is the quality of the games that have been newly released? All these factors could lead to lower overall sales for a given month

Re: Are Video Game Sales An Economic Indicator?

"Video games... [are] inexpensive enough so that they should be a reasonable proxy for consumer discretionary spending. [...] When people cannot spend $300 on a console or $50 on a game which can be used for hours and played over and over again, the money for discretionary spending has dried up."

Spoken like a guy who has significantly more money than the people he claims to have studied. $300 for a game console is hard to justify for a lot of people, regardless of the state of the economy.

Re: Are Video Game Sales An Economic Indicator?

 Indeed... i mean, ever since the new console generation started, people have been complaining about how expensive game consoles had become... at one time it was relatively easy to have multiple consoles, but when the average console costs $400 and the games cost like $60, it's hard enough to justify buying just ONE new console, much less more than one... and this was long BEFORE last fall.

Re: Are Video Game Sales An Economic Indicator?

Adjusting for inflation, these are the cheapest consoles ever.  The NES was $600 when it came out in the early 80's.  The PS3 is $600 now, and the most expensive one out right now.  I do agree, though, that it's harder to get all of the consoles, but there is a lot of multi-platform games now vs. before, which makes the inherent value of owning multiple consoles much less.

 

Freedom of speech means the freedom to say ANYTHING, so long as it is the truth. This does not exclude anything that might hurt someone's feelings.

--- With the first link, the chain is forged.

Re: Are Video Game Sales An Economic Indicator?

The US version of the NES came out in 1985. According to an old Sears Catalog, one year later in 1986 you could get an NES with 2 controllers and a Super Mario Brothers cartridge for only $90. Adjusting for inflation, that's $174 for a console that's only a year old. So, even when adjusting for inflation, the idea that today's consoles are the cheapest ever is simply not true.

Add to that the "sticker shock" of $250 (for the Wii, the cheapest and most popular current-gen console) versus $90 (for a 1986 NES), and you can easily see why today's consoles might not be a good indicator for casual purchases. $90 is an easy christmas gift, while $250 is something you have to justify.

Re: Are Video Game Sales An Economic Indicator?

"The NES was $600 when it came out in the early 80's"

????

The original NES had two versions to pick from, the standard and delux. The standard came with two controllers and a copy of Super Mario Bros. and retailed for $199.99, the delux included Duck Hunt and the zapper for $249.99. (A Nintendo console for $249.99 that is highly successful....seems familiar.)

Don't get me wrong, inflation should have driven up the price of video game consoles that are essentially home media machines and serve multiple purposes, however, they are still pricey purchases for something that many people will solely use a video game console period and not a media device.  I love my PS3, but I have to admit it is way to pricey for many casual players to consider for a purchase. A $100 price cut won't make the console fly off the shelfs either. (I won't say 'save the console' because with close to 22 million sold it doesn't need to be 'saved' it could just sell better). A $200 price reduction would send that thing soaring off shelfs though.

The most expensive PS3 is $499 not $600 and really with an upgradable harddrive people should look toward getting its $399 little brother. Take $200 off that machine and you have an awesome gaming device for $199.  I guarantee it will be the biggest seller of the three at that price.

"

Re: Are Video Game Sales An Economic Indicator?

Three-hundred bucks for a console and fiddy bucks for a game is a reasonable indicator of discretionary spending? What happened to my favorite indicator: the $10 movie ticket?  

Re: Are Video Game Sales An Economic Indicator?

That was one of his points. A $10 movie ticket will get you part of a night out; even if you go straight there and back it doesn't cover things like the cost of transport, movie refreshments, or medical expenses incurred when you see the price list for the movie refreshments. In terms of time-for-money, a $50 game that can rake in 80 hours of play just to complete once is a wise investment. So when people aren't willing to pay that much for that much, it suggests that times are bad.

That said, there are reasons why this April would show a drop as mentioned above. Without mega-releases like GTAIV and Mario Kart Wii, it's going to look stale in comparison. All future analysis for May figures is now shot to hell thanks to Plants Vs Zombies.

Re: Are Video Game Sales An Economic Indicator?

Granted, in terms of entertainment hours returned on investment dollars, $350 spent on a console and game is very likely a much better investment than $30 spent on going to a movie. However, the flaw in using the console and game sales as a proxy for discretionary spending is the much higher initial investment cost of $350 relative to $30. That's certainly not what I would call an "impulse purchase." I don't usually have $350 burning a hole in my pocket. But I do have $30.

Besides, while I'm no economist, I see the best proxies of discretionary spending as being expenditures for which you ain't gonna have a damn thing to show the next day (e.g., nightclubbing in the VIP section, lap-dances at the shakey-shakey bar, movies with Ju-Ju Fruits and Twizzlers). If you've got money to blow on that kinda non-essential nonsense (well, maybe the occassional lap-dance is a neccessity), then it damn sure, without a doubt, is discretionary. Unlike the $350 I dropped on a console and a game. I've now got some hard, tangible assets as a result of that expenditure (sitting right there under the $3,000 64' flat-screen). It's not so clear that I've blown my money.

Re: Are Video Game Sales An Economic Indicator?

80 hours? Unless its RPGs or MMORPGs we're talking about here, I've really been missing out.

Most games nowadays are just shovelware, so it's rather difficult to invest in some game that last 7-12 hours (if you're fortunate).

______________________________ Because I have NO Life... :P I introduce the following. PSN User ID: FirebirdXR (Yes, I use that moniker often) Xbox Live ID: FirebirdLR (Don't bother, It's a Silver Membership) *Limited Time Only* I put both because I

Re: Are Video Game Sales An Economic Indicator?

I was thinking nearly the exact same thing.

Get out of my head!

Re: Are Video Game Sales An Economic Indicator?

According to statistics, game sales decline 17% in April . (An MSNBC article statistic)

...and yet the DS (probably mostly DSi) sold 1 million units (more than any other console combined)

No accountability for taste, eh?

______________________________ Because I have NO Life... :P I introduce the following. PSN User ID: FirebirdXR (Yes, I use that moniker often) Xbox Live ID: FirebirdLR (Don't bother, It's a Silver Membership) *Limited Time Only* I put both because I

Re: Are Video Game Sales An Economic Indicator?

P.S. As for people complaining about the bad sales of the Wii/DS Mature games, keep in mind everyone suffered these last couple months.

Re: Are Video Game Sales An Economic Indicator?

In actuality, the bigger crime is who in their right mind buys the DSi over the DS.

At least give it some time for the store to accumulate some online games...

Not that prefer the DS over any other console (I play my PSP more often, for various reasons other than gaming), but it seems to me that the new wave of casual gamers are buncha idiots.

______________________________ Because I have NO Life... :P I introduce the following. PSN User ID: FirebirdXR (Yes, I use that moniker often) Xbox Live ID: FirebirdLR (Don't bother, It's a Silver Membership) *Limited Time Only* I put both because I

Re: Are Video Game Sales An Economic Indicator?

So what exactly does the DS have over the DSi besides the GBA slot? Nothing. The DSi has bigger screens. More power. Two Cameras. Better power and volume buttons. Better Mic. SD slot. Slimmer design. So what makes the DS so much the better deal?

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Re: Are Video Game Sales An Economic Indicator?

Exactly. Game sales always slump with a major console release. As for the rest of the consoles, aside from PS2 which is also up, it's that time of the cycle again. Everyone who wants one, has one. Now it's about games, which, as I said, if it weren't for the DSi, would be up. Give them a few months to recover.

Re: Are Video Game Sales An Economic Indicator?

Edge has a write-up on the April numbers, and mentions that April 2009 was the 2nd best April the games industry had ever seen.  This could just be an attempt to drum up hysteria (like the swine flu).

Hell, in my industry (agriculturally based) there are always "experts" who predict doom-and-gloom based on "new indicators" every single year.  Their predictions never come true, but they sure manage to drum up commodity costs.

I'll take this McIntyre opinion with some salt...

Re: Are Video Game Sales An Economic Indicator?

I agree, this analysts opinions smell of Grade-A bullcrap.l

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