Stock Market Crash: What it means for games

The video game market isn't quite recession-proof, but the end result will be a massive overhaul in how games are marketed.

Budget gaming can finally go mainstream, which means that big-budget titles will have to sell the consumer into buying a game 2-3 times a budget price tag. Games will be classified by worth over score. An inevitability, one that forward-thinking sites have already planned for and implemented.

This means that profit will no longer be determined by the "money-making" concept, rather something similar to Nintendo and Data Design's model of selling every game for profit.

Not every company is ready for this, and I fear how this affects Capcom's 20-50-30 model of progress. America won't give a company 50% of their income, but it could very well give 50% of their profit.

Innovation.

I think also a another crash would help move things along fastr stop all this shovelewere and these very crap games gmaes or the dullness we have but with it double fine will go so and i don't want that to happen.

But still would help the pc have a consoel crash becasue i can see it going that way.

Julien, This is not a "stock market crash." While the 778 point drop for the Dow, 106 point drop for S&P, 199 point drop for Nasdaq, and point drops for markets in Japan, France, and England are generally unprecedented (specifically the Dow's history-making drop), the point drop belies the reality of the situation. Your comparison with the Great Depression is inarguably false. The percentage drop for the Dow today was nearly 6.9%, while the drop on Black Monday and prior to the Great Depression was over 20%. Unless you understand finances and economics you should focus on percentages rather than points.

Rragnaar, the industry is not recession or depression proof. The industry, like all other industries, in integrated within the economy at large. At the same time there is some wisdom in your statement. Because of the video game industry's recent growth (recent being measured in decades), and due to our economic "downturn," the video game industry seems poised to progress and expand in a way the film industry did in the 30's, regardless of a recession or depression; this obviously includes all forms of casual gaming. Interestingly, films were relatively cheap to produce in the 30's compared to the development costs for a high-profile video game. A depression may not be profitable for the industry, well..not OUR segment of the industry anyway. The global relevance of the industry serves as a buffer too, the market saturation is almost immeasurable.

No Foxhound, "we" didn't see this coming. While some analysts predicted a major crisis in sub-prime mortgages, there wasn't a consensus that stated "We're about to have an economic downturn on a global scale," though in terms of U.S. economic circumstances, many analysts astutely compared the economic stagnation of Japan in the 90's with our own economic and housing crisis. No one is saving anyone's money, well..the Fed is...in a kinda-sorta way, but that also means taking away from other peoples' savings (cutting interest rates). On one simple point you are correct - certain measures were taken after the Great Depression to protect our collective economic interests.

SirSpudly, games will not be marketed any differently. If there is a major recession, marketing strategies will change marginally, while fewer high-profile titles will be developed. The possibility of a depression is rather small. "The Great Depression," contrary to alarmist sloganeering, is a 20th century phenomena. Experiencing that degree of economic instability again is nearly impossible; the Depression itself is one of the compelling factors in the development of modern global economics. At the same time, I do expect the business model you suggest to find widespread appeal in the near future, even if the U.S. economy (and global economy) turn around tomorrow morning. The current business model ensures that the groundwork for the entire industry is highly volatile, which means a large portion of investors are leeches that buy and sell. Like you said, in the face of a long-term recession in NA, Europe, and Japan, business models such as Capcom's would produce a miniscule profit margin, and little incentive for investors. I do believe that casual games and/or budget titles (downloadable or otherwise) will gain more support, though I (and analysts that actually have their degrees) don't expect this segment of the market to surpass the meat and potatoes of the industry for some time, if ever. Remember, we're considering "Cooking Mama" a part of the M&P along with GTA and MGS. Your entire premise hinges on over-exaggerated economic instability. We're not going to wake up three years from now in China.

Darren. China isn't communist. Politically China is somewhat communist, economically China is capitalist. Russia also utilizes a capitalist economic system. Furthermore, China and the USSR were collapsing prior to the gradual privatization of various industries/utilities/commodities. Both have made progress due to trading with other industrialized nations. There are scores of reasons why our respective economies are where they are today, and no, "communism works but capitalism isn't doing so well" isn't one of them.

Sorry for being arrogant if I come off that way, but I'm majoring in Economics. I felt that it would be productive to post a message. No one learns anything from uninformed conjecture, do they?

Any statistical data can be framed to look good, especially the comparisons of the great depression to our current crisis.

The dow jones has already been prospected to drop under 10k. Additionally, many of the banking failures were seen coming miles away.

Just think about something. China is a Commnist State and they are the Next Superpower. Russia is A Communist State and they are doing well. The capital system just doesn't work.I'm not saying everyone should become a communist but they certainly do have their financial system under controlDarrenmol

Not to derail the conversation much further, but Chinese banks need bailouts EVERY YEAR. And Russia's not communist.

What does this mean for the gaming industry? It's too early to say- remember, this drop came as a result of the government trying to intervene and then failing to do so. While I'm sure it'll go down a bit further, it doesn't mean there's long term implications....yet.

Any statistical data can be framed to look good, especially the comparisons of the great depression to our current crisis.

The dow jones has already been prospected to drop under 10k. Additionally, many of the banking failures were seen coming miles away.

ikn3z

Reply to first sentence: You're a cynic. That's neither a criticism or a compliment.

To the second sentence (assuming you were responding to me), I did refer to the fact that the current state of the banking system was predicted. I did not say that specifically, but my statement concerning sup-prime mortages is directly related to the failures of the U.S. (and international) banking system. Maybe I made the mistake of assuming that the connection between the two would be acknowledged automatically? I apologize if that was the case.

I do believe that casual games and/or budget titles (downloadable or otherwise) will gain more support, though I (and analysts that actually have their degrees) don't expect this segment of the market to surpass the meat and potatoes of the industry for some time, if ever. Remember, we're considering "Cooking Mama" a part of the M&P along with GTA and MGS. Your entire premise hinges on over-exaggerated economic instability. We're not going to wake up three years from now in China.

YourChaosIsntMe

Not I (nor experts) are blaming an exaggerated market. That decision was made for us by consumers. However the value bin at Wal-marts have been placing Patapon alongside Sonic:Wii for nearly a year now. Both were considered profitable titles, but one started at budget while the other made the consious decision to employ the model earlier than later. The simple truth is the stigma of the bargain bin has nearly faded. Bargains are now considered a positive, as buying new still places money in a game developer's pocket.

I am not expecting every company to change their business model, I am expecting companies that do not adapt financially to live and die over surpassing their own hype machines.

Actually, a few companies in particular should be an interesting watch. Atlus now has a reputation with Persona 3. As part of their "give otakus what they want" holiday special, all pre-orders (except Dokapon Kingdom....) are featuring special boxes to represent dedication to a company for no extra cost. EA is charging for extras, as the majority of their fans will pay for extra content (as has been proven). Epic is giving fans a pre-order choice of a replica gun from Gears of War 2 for over double MSRP. A refined model of the Halo 3 pre-order, but in a more limited supply.

Will the pre-order model succeed? Will it fund companies who charge full asking price to continue their model? Or will gaming be less about research and more about availability?

[QUOTE="YourChaosIsntMe"]

I do believe that casual games and/or budget titles (downloadable or otherwise) will gain more support, though I (and analysts that actually have their degrees) don't expect this segment of the market to surpass the meat and potatoes of the industry for some time, if ever. Remember, we're considering "Cooking Mama" a part of the M&P along with GTA and MGS. Your entire premise hinges on over-exaggerated economic instability. We're not going to wake up three years from now in China.

SirSpudly

Not I (nor experts) are blaming an exaggerated market. That decision was made for us by consumers. However the value bin at Wal-marts have been placing Patapon alongside Sonic:Wii for nearly a year now. Both were considered profitable titles, but one started at budget while the other made the consious decision to employ the model earlier than later. The simple truth is the stigma of the bargain bin has nearly faded. Bargains are now considered a positive, as buying new still places money in a game developer's pocket.

I am not expecting every company to change their business model, I am expecting companies that do not adapt financially to live and die over surpassing their own hype machines.

Actually, a few companies in particular should be an interesting watch. Atlus now has a reputation with Persona 3. As part of their "give otakus what they want" holiday special, all pre-orders (except Dokapon Kingdom....) are featuring special boxes to represent dedication to a company for no extra cost. EA is charging for extras, as the majority of their fans will pay for extra content (as has been proven). Epic is giving fans a pre-order choice of a replica gun from Gears of War 2 for over double MSRP. A refined model of the Halo 3 pre-order, but in a more limited supply.

Will the pre-order model succeed? Will it fund companies who charge full asking price to continue their model? Or will gaming be less about research and more about availability?

I argued that your assumption is based on an exaggerated perception of our economic crisis - not an exaggerated market. Our entire economy is directed by consumer spending, which is something I'm not arguing against; it's simply a fact. I wasn't arguing against bargain bin video game shopping either. Importantly, bargain bin shopping has always been a large part of the industry, but you're right..it has grown, and probably will continue to do so. I don't see this as positive though, and I assume you don't either. Second-hand video game shopping is counterproductive for the industry. While it's productive when it is marginal, the only reason our industry has grown so rapidly is because of high-profile and casual titles. Bargain bin shopping has only raised Gamestop's share-price and minimized the profit margin on video games for Wal-Mart.

I DO expect most companies to adapt, or at the very least become a subsidiary of another publisher that has adapted. It's not that high-profile titles "don't work," it's that "high-profile" titles don't work (emphasis on quotation marks) because of how they often underperform. I just don't expect the business model to change rapidly, unless we're facing a long-term recession. I don't expect it to do so because the current model reflects consumer spending. For most publishers it is profitable. In response to your example of Patapon and Sonic, all titles become "bargains" after a period of time. The only fact your example displays is that many titles do so earlier than they used to.

It's interesting that you bring up Atlus, because I too am interested in where Atlus goes over the next few years. They will not produce as much revenue as Square-Enix, but our industry supports a dozen secondary publishers. Atlus's profit margin percentage, to date, is growing against that of major publishers because of efficiency. Something that needs to be considered, of course, is the difference between the Japanese and U.S. markets. Their market has revolved around different types of games for awhile now, while our market still focuses on high-profile games. The resources may not exist for Take-Two Interactive or Ubisoft to operate in a similar fashion, at least in the short-term.

The industry used to be about availability, and it crashed. That may suffice for budget gaming, but we can't expect it to replace research and knowledge for gaming at its current price-point. Simply put, our consideration doesn't come down to the economic crisis directly. We're considering demand, and until demand falters a new business model will not be realized. Interestingly, demand has continued to grow in the past two years, which is what led many analysts to label the industry as "recession-proof," which is too optimistic. The industry is only recession-proof as long as consumers are willing to purchase the same amount of or more video games. Given the oblivious spending habits of 18-30 year old men, we may not see that demand so much as stagnate over the next 2 years (some predict that our economic crisis will be relatively resolved by the end of the fiscal year for 2010). A change in the over-arching business model for the industry won't be one of necessity unless our crisis continues for an extended period of time.

The pre-order + incentives fad is marginal; I don't believe it reflects anything about the direction of the industry, nor will it suffice in bolstering any firm's profit margin enough to support the continuation of their current business model in a long-term recession.