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The Video Game Industry And The Recession Of 2008

783 words - 3 pages

The Video Game Industry and the Recession of 2008In our days, videogames are starting to be more recognized as a powerful entertainment outlet. Because of this, there are more people playing games every day. Since 1971, the game industry evolved economically. In June 2011, the global video game market was valued at US$65 billion. But, even this great industry has had its share of economic troubles. One of them has been the 2008 recession. So, what were the effects of the recession on the videogame industry? In order to fully understand this problem, I'll first define what a recession is then. Then I'll explain the other reason that affected videogame sales. And finally, I'll talk about the direct consequences of the recession: like studios shutting down and lower sales.Firstly, "in economics, a recession is a business cycle contraction, a general slowdown in economic activity. Macroeconomic indicators such as GDP, employment, investment spending, capacity utilization, household income, business profits, and inflation fall, while bankruptcies and the unemployment rate rise. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be triggered by various events, such as a financial crisis, an external trade shock, an adverse supply shock or the bursting of an economic bubble. Governments usually respond to recessions by adopting expansionary macroeconomic policies, such as increasing money supply, increasing government spending and decreasing taxation".Secondly, videogames sales depend highly on hype and presentation. These results in a huge part of the budget dedicated to advertisement and to access new technologies. Because of new needs to succeed, the development costs of videogames have gone up. For example: in 2008, the expensive game ever made was Grand Theft Auto 4. It cost 100 million dollars. Because of this, they needed at least a few million sales to break even. These results in not letting development studios try anything new. The industry becomes stale when there are no new I.P.'s, (intellectual properties) and this leads to lower sales. Also a very important reason that sales were lower was because; the consoles are at the end of their life cycle. That means that most of the games are sequels of already established franchises. This does not permit entry to new I.P.'s. In the end, the video game industry in a vicious cycle of recycling games which results in less sales with each iteration.Thirdly, the 2008 recession affected every industry and person in America. The videogames industry suffered because of this. As we can see in an article from 2009: "U.S. video game sales have held up in the recession, until now. Sales of console games, hardware and accessories fell 17 percent in March to $1.43...

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