Note:  this editorial may or may not also appear on Gamespot and at my (fledgling) website jameserellogadgets(dot)com.  If you have anything that you would like to add, please post below and I would be happy to update and give credit.

Good morning/afternoon/evening – Happy New Year to all and I hope that life finds everyone well.

For those of you who are U.S. Citizens, I'm sure that (like me) the current state of the economy has hit you in SOME way financially. For example, those of you who are attending school on scholarships, grants or loans may have found that your student aid has been reduced, with some (myself included) not being able to receive student aid at all and have had no choice but to pay out of their pockets. For those of you (like myself) who work full time, you may have received emails from your boss or CEO either warning you of job cutbacks or reassuring you that your job is secure – for the moment. For those of you who are not yet old enough to attend college and have to depend on your parents for gaming cash and finding that little money is available for your gaming habits, my sympathies.

But if you think that the recession is causing problems for you the consumers, imagine how it must be for all interested parties in the industry. I'm not just talking about the three console manufacturers (I'll get to them later), but all corners of the industry, from development, shipping/distribution, retail, and the buying habits of the consumer. My expressions only apply to the North American market as I currently have little knowledge of market prospects overseas, so for those of you who are international subscribers, please send me a post and I'll update the article.

First, the issue of publishers trying to cash in on the casual audience and angering hardcore gamers may be viewed as “selling out” but here in 2009 it's a way of survival. The slumping economy has made developers reconsider creating fresh new intellectual properties as funding for these projects are becoming less and less available. In fact, one of the main reasons for Factor 5's shuttering is because of the critically panned release of Lair and the lack of funds available to start another project. Free Radical's fading is also due in part to their previous project failing to generate revenue, with Timesplitters 3 not generating enough to start another project for high-definition consoles. Plus, banks are more reluctant than ever to finance projects which may or may not sell, hence many publishers, reliance on the causal fanbase to generate some sales. Better to make a little revenue developing lousy Petz, Imagine or Barbie games and generate enough revenue to pay your ever-widening mortgage and groceries than to risk it all on a Final Fantasy XIII, LittleBigPlanet or Halo competitor.

Hardcore gamers who can only afford the Wii grumble and even swear the most vile curses they can think of at the poor amount of hardcore games available and the insane amount of shovelware, but few realize that shovelware for most companies is the only chance to fund games like Splinter Cell or Ghost Recon, and for a few smaller companies this is their last chance to generate revenue before they go under. A dark, pessimistic view to be sure, but realistically there are few alternatives. Even Square Enix's sudden deluge of Nintendo DS and PSP titles show that in reality, they need to fund Final Fantasy XIII by any and all means possible, even if it means a desperate port of Chrono Trigger (seriously, when has Square Enix listened to word that hardcore gamers have said? Do you really think that Chrono Trigger for the DS was possible only out of the kindness of their hearts? Money talks ladies and gentlemen, and Chrono Trigger's release puts much-needed funds into Square Enix's coffers).

To focus on another area of the industry, you wouldn't think that distribution of games would be nearly untouched as far as the economy is concerned as many gamers think that revenue from the games helps the infrastructure in it's entirety but that's not the case. One shipping company, though not widely used as the United Parcel Service or Federal Express (DHL, based in Ohio) has recently closed it's doors due to large outstanding debts, and with layoffs to many employees of the shipping companies, the airline industry in a state of near-collapse, import fees rising and Somalian piracy disrupting shipments from Japan to Europe, delays in game releases hurt the industry as gamers lose interest or spend available funds on necessities. Unless relief is granted to the shipping industry, software imports from Japan, Europe, South Korea and others will be delayed even more or will be alloted in smaller quantities.

Regarding retail channels, as far as my local tri-state area is concerned, old-school retailers who sold gaming software and hardware like Toys-R-Us, Kay Bee Toy and Hobby, Circuit City and smaller, licensed self-run stores have been going out of business by the hundreds while less-than-desirable stores like Gamestop remain. With the lower number of competing distribution channels, casual titles will be massed produced and flooding Gamestops everywhere, while decent Atlus, Nippon Ichi and Konami-published titles will assume less shelf space than ever except for the occasional used title that stores will sell for the maximum allowed amount. Will hardcore gamers be left with no choice but to rely on Amazon or Ebay for more-desired but lesser known titles such as Rygar or Muramasa: The Demon Blade instead of relying on the pre-order system, or will gamers have no choice but Gamestop for their hit titles and pray that Gamestop will honor their pre-orders? We can't depend on Wal-Mart or Target for our hardcore games – they thrive on the Petz, Imagine, Scooby-Doo and Littlest Pet Shop crowd. I've been to both stores while searching for Christmas gifts, and found almost no games for the hardcore crowd in both stores. I CAN however find titles like M&M Kart Racing for the Wii in almost every Walgreen's. This bodes ill for the hardcore gamer and awesome for Gamestop and EB Games as we are now completely at their mercy.

As far as the current customer base, though the hardcore gamers will do anything they can to afford titles like Killzone 2, Final Fantasy XIII or Halo Wars this year, these titles are only three of the few high-budget titles for 2009 that will be low-risk as far as development and marketing. Because of the recession here in the U. S., a lot of people just don't have the money to spend on leisure entertainment – they're attempting to keep their houses and feed their families. Judging by hardware sales and trends for the for the previous quarter, the exorbitant amount of Wii units sold can not only be attributed to word-of-mouth and popularity but also the simple fact that too many families have too little money to spend, and since the Wii is garnering more popularity than the lower-priced Xbox 360 Arcade Unit (I'm guessing that it's because of the controller being too complex for casual gamers than Nintendo's Wiimote, as well as the many appearances on Martha Stewart and Ellen) than it's the popular of the low-priced gaming-related SKUs.

This doesn't mean that the software will improve for the Wii this year – quite the contrary. Hardcore gamers have been jaded by the Wii so much that they've already purchased a 360 or Playstation 3 to place alongside it. The hardcore gamers that still have Wiis and who have to choose between which console to support won't bother purchasing games like Rygar, Dragon Quest X, Tales of Symphonia: Dawn of the New World or Need For Speed XXVIII – they'll gladly spend their hard-earned cash on games with greater value such as Resistance 2, Gears of War 2, Midnight Club Los Angeles, the upcoming Halo Wars, Grand Theft Auto IV and it's expansions – basically anything that will produce value and longevity for the money. While I myself own a Wii I tend to do a LOT of research before I pay $40-50 for software to play on a unit that isn't marketed towards hardcore gamers – and it's because of Nintendo's marketing strategy coupled with the recession that games catering toward the hardcore will suffer this year. I would love to see games like Madworld, The Conduit, Muramasa: The Demon Blade and Monster Hunter 3 do well, but if the reason that Wii is selling so well during the holidays is only for the Wii Sports/Music/Fit/Play crowd, then it's not going to work.

That doesn't mean that things will look rosy for the hardcore consoles either. Sony's Playstation 3 (as of writing this) is still $399.99 USD. It's still too high for the mass market, and buying trends for the two decades dictated that gaming consoles should be within the $199-$349 USD range in order to break into mainstream success. Though their strategy of forcing Blu-ray down the consumers' collective throats has arguably worked, the low sales are attributed to the current price. I admit that having a Playstation, Playstation 3, CD player, DVD player, Blu-ray player, Linux computer and home server is a bargain, but the up-front asking price is very prohibitive at this time. I had hoped that enough hardcore gamers and technophiles would be enough to support the company until the price drops to a more reasonable level but that doesn't appear to be the case.

As for the Xbox 360, the only negative thing I can say is that they don't appear to have much in the way of original IPs this year – choosing instead to rely on third-party sequels. If that's the only criticism that I could think of (well, besides the fact that the Arcade version is subpar for a SKU, lacking a wireless module of all things) Microsoft is the one console manufacturer with nothing to fear. Though their hardware sales pale in comparison to the Wii, the real money lies in software sales and development licensing and that's where Microsoft's large stream of revenue is coming from. There may or may not be fewer of the more expensive titles purchased during the recession, but Microsoft's lead in third-party support should help it to survive.

These are just a few of the many concerns I have for the calendar year of 2009 for the gaming industry. To close this post I just want to make a few educated guesses regarding the outcome based on the current recession here in the U. S. and what it means for gaming:

  • Nintendo's DSi will sell but will also confuse the market due to the continuing popularity of the DS Lite. As many gamers and nongamers have posted throughout message boards all over the net, the DS Lite has more value for the dollar and proven software franchises, many of them available now for as low as $14.99 USD (unopened).

  • The Wii will continue to be successful based on their aging first-party lineup (much to the dismay of third-party developers, causing a further wave of defections to the Xbox 360). This is for the simple fact that the Wii's target audience is either for nongamers who see the value in owning Wii Sports and using the Wiimote or for gamers hit by the recession who are simply looking for a bargain. Many of you gamers know this already but I felt that I should elaborate because I'm seeing this with my own eyes. Every week a sixty-year-old talks to a bus driver about the Wii but when I interrupt and ask about their plans on purchasing other titles you can hear crickets.

    Not once have I heard about a twenty-something or thirty-something (other than a NJ Transit vehicle operator talk my ear off about Animal Crossing), and this bodes ill for third-party support this year. With the recession, though, they have the least to lose internally.

  • Third-party developers will continue to choose Xbox Live Arcade as their favorite gateway to gamers for sales of innovative titles for the simple fact their games will reach more discerning people. Wiiware is not the success that everyone makes it out to be as the casual audience is more concerned with the first-party software and hardware and not innovative titles like World of Goo or My Life As A King. Playstation Network is innovative but it's also a victim of a lower install base. Having problems with the Home interface does not help matters, especially for a main interface of a $400.00 USD unit. This proves that Sony's strategy of push the technological envelope is commendable but isn't financially sound.

James M Wallace

Sicklerville NJ, USA

Posted by jwallace Mon, 05 Jan 2009 13:44:40 (comments: 2)
Tue, 06 Jan 2009 22:40:32

Interesting read!

You forgot to mention that there is also a problem with rising development costs. This combined with the recession can cause big troubles for the smaller third parties.

The second is about the Wii. Wii is going to be a casual and niche machine. Lets not forget the Wii games do not need to sell lots of hardware to turn a profit.

Do not take my word for it, check here.

Little Kings Story is expected to sell 275k in Europe and North America combined. No way in hell would this be cleared for the HD consoles, but it can for the Wii. Why? Low cost of development.

Thu, 08 Jan 2009 12:18:24
Excellent write up.
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