Games Industry Suffers From Recession, Finally
After a few months of lagging sales, market researcher NPD Group is finally saying the recession caught up with the video games industry. All it took was for gaming to suffer its biggest year-over-year sales drop in 9 years.
Context & Ripple Effects
Six months ago the story was the opposite: early returns showed strong holiday video game console sales, feeding the familiar line that games were holding up through the downturn. NPD Group's latest monthly read ends that narrative — the researcher now attributes the industry's largest year-over-year sales decline in nine years to the recession finally catching up with the category.
The significance is less the single month than the lag itself: gaming outperformed for months before cracking, and NPD's retail tracking is the yardstick the whole industry watches, so this print converts anecdote about softening sales into confirmed data.
First-order effects
- Publishers and hardware vendors enter the second half of 2009 facing a demand curve that has turned decisively negative after a resilient start to the year, with NPD Group's monthly figures now confirming the slowdown rather than merely hinting at it.
Second-order effects
- Retailers carrying console inventory face markdown pressure into the critical holiday build season, and the January strength that had buoyed the sector's outlook becomes a tough comparison for the rest of 2009.
Third-order effects
- If the pattern holds, video games get reclassified by investors and executives alike from 'recession-proof' to a cyclical discretionary category whose fortunes track household budgets — raising the stakes on NPD's monthly prints as the industry's de facto economic indicator.
The trend: The video game business is learning that its decade-long expansion was not exempt from the macroeconomic cycle, with NPD's retail data marking the turning point.