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If you’ve been reading the papers, watching the news, listening to the radio or, if in New York, been wandering past the huge LED tickers that dominate Times Square, you’ll probably be aware that some of the world’s largest economies are in trouble at the moment. With oil and fuel prices rising and people having less and less money to spend, several big companies are reporting huge losses and announcing cutbacks in the epic economic slowdown known as the ‘credit crunch’.

The thing is…could this be affecting games companies?



In recent months, plenty of companies across the world have reported losses and necessitated rescue programs by their respective governments: one only has to look at the UK (where mortgage lender Northern Rock needed saving by the Government to prevent a market crash) or the US (where Fannie Mae and Freddie Mac have also both required rescuing) to see that there are problems. Even after being rescued with Government funding, Northern Rock has reported a billion dollar loss. The multinational bank HSBC has just reported a 28% loss, warning that financial markets are at their toughest “for several decades” (http://news.bbc.co.uk/1/hi/business/7540404.stm).

If none of this is really meaning anything to you, let’s look at it from another point of view. Starbucks, that hugely popular coffee chain with thousands of stores across the world, has reported its first loss in over fifteen years. (http://news.bbc.co.uk/1/hi/business/7534270.stm) The difference between its profiteering and loss is a massive $165million.

Still, you’re probably asking why this is sitting on Sarcastic Gamer, rather than Bloomberg. The thing is, the gaming industry isn’t invincible. It might not be as ‘considered’ an industry as others (mortgages, banking..coffee) but the fact remains that it is an industry and hence will feel the crunch that others feel in times of economic strain.

I’m not just speculating though, as some gaming firms are feeling the bite of the impending recession already. For those unaware, a recession is a half-year period where, over two business quarters, a country’s overall output profit (gross domestic product, or GDP) decreases. Since you’d expect a country’s economy to grow and grow, two constant quarters of loss can be pretty hard hitting on an economy and can cause mass lay-offs and cutbacks, and even the closure of some large companies altogether.

First up, Midway’s feeling the strain. Just today the company behind the up-and-coming Mortal Kombat Vs. DC Universe reported a loss of $35 million (http://www.edge-online.com/news/midway-posts-348m-loss), and the former ‘Biggest Game Company In The World’ Electronic Arts reported a small loss and a huge drop in share prices. Square Enix recently said that profits were up, but that overall sales were down, potentially due to consumers wanting to spend less with the threat of a recession looming. THQ has lost $27 million (http://kotaku.com/5031370/thq-sales-up-losses-too), despite an increase in sales.

Is it all bad though? Maybe not. Page two has the scoop. (http://sarcasticgamer.com/wp/index.php/2008/08/will-the-credit-crunch-harm-the-games-industry.html/2)

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http://feeds.feedburner.com/~r/TheSarcasticGamer/~4/356773928

Click here to view the article. (http://feeds.feedburner.com/~r/TheSarcasticGamer/~3/356773928/will-the-credit-crunch-harm-the-games-industry.html)

The answer is very very simple...yes... the credit crunch is affecting every form of economy there could be (potentially even in some online video games , but this will only be slight instead of the large RL version)...

I said this was going to happen a long time ago, the only way they are going to survive is by allowing poorer people to be able to get access to this, ie wii. So that means unless the US economy improves next gen might still be this gen...

Gaming is still cheap enough to coast under the recession IMHO.

Historically movies and alcohol are both industries that survived (and thrived) during the the great depression. The big question is whether or not video games can compete or eventually overshadow the TV and movie industry.

WHat we are seeing are game companies not taking chances on newer riskier games that may either become a blockbuster or bomb. (hence the influx of casual games.)

Gaming is still cheap enough to coast under the recession IMHO.

Historically movies and alcohol are both industries that survived (and thrived) during the the great depression. The big question is whether or not video games can compete or eventually overshadow the TV and movie industry.

WHat we are seeing are game companies not taking chances on newer riskier games that may either become a blockbuster or bomb. (hence the influx of casual games.)

The reason that TV survives under repression is that less people are at work, so they are watching TV. The more people at home, the more adverts are being watched. The problem with Games is that you only pay once and then you can play it as much as you like. People (including me) wont be buying all of the blockbuster games this xmas, simply because it's really time to start saving now.

Remember a games company repoting a loss of £Xmillion doesnt totally mean it is being hit by the recession. Rockstar North would have been reporting a loss of $100,000,000 on April 28th 2008, tehy then release the game and within one day they are puttin a nice healthy profit at the bottom of their balance sheet.