Video gamers zapped by first slump - Macleans.ca

Video gamers zapped by first slump

Young male gamers usually keep buying, but not this time

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Video gamers zapped by first slump

A grim economy may have knocked off yet another “recession-proof” industry. In Canada and around the world, video game makers have been hitting control-alt-delete as they shed jobs and shutter studios.

The video game business has long enjoyed an apparent invulnerability to economic ups and downs. Sales have seen impressive and consistent growth throughout the past decade, in good times and bad. Worldwide revenues for 2008 are predicted at nearly US$50 billion, an all-time high.

There are several reasons for the industry’s success until now: a core audience of young men with lots of disposable income, the relative affordability of video games compared to other entertainment options, plus the surprising growth in the non-core gamer demographic driven by the Nintendo Wii. But the extended play session may soon be over. Tight-fisted consumers cut back at Christmastime and now even those young men with disposable incomes are getting laid off. Recent corporate losses suggest 2009 might be the first year on record that video game sales decline.

In its most recent financial report, industry leader Activision Blizzard announced a US$108-million loss. Another heavyweight, THQ, lost US$115 million. Midway, owner of the popular Mortal Kombat series, said it will lay off a quarter of its staff due to losses.

The worst news is from Electronic Arts, which has a large Vancouver-area presence. In December, EA announced a US$310-million quarterly loss, and said it was closing one of its two local studios and cancelling plans to open a third. EA’s misfortune is partly due to its lack of blockbuster titles. Yet the scope of the slump suggests the entire industry is facing a recession super-villain not even the best gamers can defeat.