Video game industry suffers major slump

Revenues from the video games industry in the US were down almost a third last month compared to the same time last year. It’s the biggest annual slump since September 2000.

Even with the 31% drop, gaming remains a billion dollar industry. The figure is made up of $625.8 million on games (down 29%), $382.6 million on consoles (down 38%) and $161 million on accessories (down 22%).

To some extent, the big drop in consoles may be an inevitable pattern as it becomes longer and longer since the last release of a new console. However, an analyst for NPD, the firm which collates the figures, says she believes this is the first time the effects of the troubled economy have had a clear impact on the gaming industry.

In theory gaming could flourish during a recession as consumers spend more time at home rather than going out for leisure activities or socializing. But it’s possible that it’s the most expensive aspects of gaming – the consoles themselves and high-priced new game releases – which are being passed over.

It’s also possible that cash-strapped players may also be switching to the second hand market. A separate recent report estimated that stores sell around 100 million used games each year, making up a third of all sales.

However, that report said second-hand sales should have little effect on new sales. That’s because by the time someone who buys a new game has finished playing it and trades it in for a store to resell, new copies of the same game will usually already be discounted from the original sale price. There’s also a theory that the type of people who buy used games lack either the disposable income or the inclination to buy new games, so don’t affect new game sales.

The new figures will no doubt reopen the debate about whether manufacturers should cut console prices, most notably Sony’s Playstation 3. It’s also possible some would-be buyers are intentionally holding off purchases in the expectations of price cuts.