Picking winners in tough times – part 2

As with books, it would seem that video games are also proving quite income inelastic. This report from the Economist notes that “Games sales in America in October totalled $697m, 35% more than a year earlier”. There is some logic there. Like books, games are experience goods that substitute well for more transitory, ephemeral experiences like the consumption of ‘nights out’, fine dining, or (as the article notes) vacations. As consumers count the pennies and become more frugal, a game that might be still providing entertainment in a month’s time does seem much more cost effective.

Interestingly, the article raises the prospect that any recessionary effect might be lagged. This is a rather strange argument. The example they give (EA) is just one firm in the industry, and one that has copped a lot of criticism in the past year for not delivering enough quality products to market, and for taking on higher and higher cost projects when other, more nimble competitors have been experimenting with cheaper formats (such as games for the Wii and the iPhone) or games with hardware tie-ins (like Rock Band). It would still seem that gaming is a recession-proof growth industry.

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