Videogamers take on new battle - the recession

RALEIGH, North Carolina Thu Apr 2, 2009 12:00pm EDT

Sony Corp's PlayStation 3 (PS3) game controller is pictured at a Sofmap electric store in Tokyo May 14, 2008. REUTERS/Yuriko Nakao

Sony Corp's PlayStation 3 (PS3) game controller is pictured at a Sofmap electric store in Tokyo May 14, 2008.

Credit: Reuters/Yuriko Nakao

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RALEIGH, North Carolina (Reuters) - As people cut back on travel and going out, they are turning more to home entertainment, providing a boost to the videogame industry that is under pressure to keep gamers amused and beat the recession.

Analyst Toon van Beeck from industry market research firm IbisWorld said videogame industry revenue is set to reach $41.9 billion this year, having risen from $27.2 billion in 2004, with over 37 million consoles sold in the United States alone in 2008.

A new report from IbisWorld said the introduction of Nintendo's 7974.OS Wii had helped bolster the industry by changing the face of videogamers, bringing in more female players who now make up 38 percent of the gaming demographic.

"Videogame sales have been impacted the least from the global recession and there are no real signs of it slowing," said Michael Cai, vice president of videogame research at Interpret.

"In order to maintain this healthy growth momentum, however, the gaming industry needs to continue providing appealing content and innovative experiences to compete for consumers' entertainment time and share of wallet."

Cai expected used games and value-priced games to take a greater share of total sales in this economic environment.

Last fall, as the effects of the economic downturn were being felt, videogame sales rose internationally. In the United States alone, sales increased 19 percent over 2007, topping $21.3 billion, according to The NPD Group.

In January and February this year, U.S. videogame sales rose 11 percent to $2.81 billion, according to The NPD Group.

GAMERS SPENDING MORE CAREFULLY

Billy Pidgeon, videogame analyst at IDC, said the recession would clearly reduce consumer spending but games provided strong entertainment value and performed well as a category in a recession.

"What this means is that games will see double digit growth in North America and worldwide, but that gamers will consider purchases more carefully," said Pidgeon.

"Gaming enthusiasts will demand quality games and will not buy games that are considered second rate. The mainstream consumer will also buy fewer games but will be less savvy about quality."

Michael Pachter, videogame analyst at Wedbush Morgan Securities, expected companies to cut the price of their consoles to fuel this growth in game sales and encourage more consumers to buy into the "next generation" of gaming.

This week Sony (6758.T) cut the price of its older videogame console, the PlayStation 2, by 23 percent to $99.99 amid rumors that it was about to cut the price of its $400 PlayStation 3.

Nintendo President Satoru Iwata told a recent Game Developers Conference in San Francisco that the videogame market has expanded to mainstream levels that no one could have imagined, with moms and grandparents playing Wii games with families.

This growth in female players helps to explain how Nintendo has sold over 14 million "Wii Fit" balance boards, a product that offers yoga and other exercise using a motion-sensor board.

According to the Entertainment Software Association, gamers are also getting older. The average game player today is 35 years old and has been gaming for 13 years. In 2008, 26 percent of Americans over the age of 50 played videogames.

In addition to expanding beyond the core male 18 to 34 year-old gamer, the videogame industry is also changing the way it releases big games, publishing them throughout the year rather than saving them up for the big spending holiday season.

Already this year, big games like Sony's "Killzone 2," Capcom's "Street Fighter IV" and "Resident Evil 5," and Microsoft's "Halo Wars" have shipped and sold extremely well.

Nintendo will be launching its new Nintendo DSi portable on April 5 in the United States.

"So many companies try to get all of their games launched in the holiday season that we all end up fighting and competing for the same dollars," said Mona Hamilton, vice president of marketing, Capcom.

"Consumers, particularly in this day, can only buy so many videogames at one time."

(Editing by Belinda Goldsmith)

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