Game Consoles: Industry Attempt at Self Destruction

Includes: MSFT, NTDOY, SNE
by: Bruce Everiss

So the world economies are in the middle of a recession, and while the game industry was Teflon coated and kept on booming, having a record Q4 ‘08, it will not be any more, the retail / high street side of the industry has hit a brick wall.

The first problem is that the consoles are too expensive. The Wii is still at launch price and the PS3 is still at the price when they stripped out a lot of its capabilities, whilst the 360 has gone a long time since the last price drop. So we are only selling about half the number of consoles that we should be. We all know that all three of them are coming down in price later this year, why not do it now and benefit from the extra game sales such a move would bring? Of course in reality there is some price dropping, by retailers and presumably supported by the manufacturers. But this is not the same as a fully fledged price drop.

The second problem is that the game publishers have stopped publishing games. I have never understood the industry obsession of cramming all its releases for the year into Q4, it does nobody any good and holds back the total revenue for the industry. Now we are in a desert and there is no point going to the game store. Yet people earn wages all year round.

The danger of this double whammy is that people will move onto other things to fill their time. And some of them might forget to come back to gaming later in the year when the industry finally gets its act into gear. So we will lose their spending forever. It really is not very good for us to treat our valuable customers in this way.

Disclosure: No positions