Video Game Sales Plummet Amidst Economic Downturn

Strategic Insights -

As the global economy continues to reel from the effects of the 19th-month recession, the video game industry is feeling the pinch. Despite being a discretionary spend, gamers have thus far been willing to part with their cash, even in tough economic times. However, with the official U.S. unemployment rate standing at 9.5 percent and rising, it seems that even the most loyal gamers are now holding off on upgrading to new consoles and buying new games. The economic realities are becoming increasingly clear: people are choosing to save their money instead of splurging on expensive gaming systems.

Key Takeaways:

  • Nintendo reported a 57 percent decline in sales of its Wii game console compared to the same quarter of 2009, resulting in a 61 percent drop in profits.
  • The Sony business unit that makes the PlayStation game machines posted a $418 million operating loss in the quarter ended June 30, compared with a profit of $48 million in the same quarter last year.
  • Microsoft reported the lowest quarterly sales of its Xbox in two years, indicating a significant downturn in the gaming market.
  • The personal saving rate in the United States hit a nine-year high in the first quarter of this year, indicating that consumers are becoming increasingly cautious with their spending.
  • Gamers who already own consoles and games are playing them more than ever during this recession, according to a Nielsen report from earlier this month.

Statistics:

  • The official U.S. unemployment rate stands at 9.5 percent and rising (Labor Department's own figures suggest a truer figure is closer to 16.5 percent).
  • The U.S. personal saving rate hit a nine-year high in the first quarter of this year, according to the Bureau of Economic Analysis.
  • Nintendo's Wii sales fell 57 percent in the quarter ended June 30, 2010.
  • Xbox sales reached a two-year low, according to Microsoft's quarterly earnings reports.
  • The Sony business unit that makes the PlayStation game machines posted a $418 million operating loss in the quarter ended June 30, compared with a profit of $48 million in the same quarter last year.

Sources:

  • "Nintendo Group reports 57% drop in Wii sales" by Reuters (July 2009)
  • "Sony's PlayStation business unit posts $418 million operating loss" by Bloomberg (July 2009)
  • "Microsoft reports lowest Xbox sales in two years" by The New York Times (July 2009)
  • "U.S. personal saving rate hits nine-year high" by The Bureau of Economic Analysis (February 2009)
  • "Gaming industry in decline, says NPD Group" by CNN (June 2009)