What are the influences of possible economic recession on the gaming console market? What can be done to anticipate this?
Although a recession from 2001 the video gaming industry generates more and more revenues each year. It can be imagined that there would be less sales of video games during a recession. But the sales of video games increase every year and prospects forecast that this trend will remain in the near future. There are several reasons. The most important one is that the video gaming has become a substitute for other entertainment media like TV, books, cinema etc.
Another reason is that there is a fierce competition going on between Microsoft, Playstation and Nintendo to become the market leader in this industry. This competition has resulted in more advertisements to persuade potential customers to buy a console. Also a clear price discount on the console is used to persuade customers. Both the advertisements and the price discounts contribute to more awareness for the video gaming. This means more sales and more revenues for the video gaming industry.
Another reason why the video gaming industry does not suffer from the recession is because the introductions of new platforms. From historical data can be concluded that sales grow after the introduction a new platform. This will hold for five years. After this period sales flat or fall. This means that a new platform must be launched if sales want to be boosted. Examples of such actions are the introduction of the Xbox2 and the Playstation3 after 4 years of the introduction of the Xbox and the Playstation2.
Of course these 2 reasons do not mean that the video gaming industry will never suffer from a recession. If a recession goes on for years it will affect the revenues negatively. Especially if the biggest market, The U.S.A., Europe or Japan, suffers a long recession. The video gaming industry can face this problem by anticipating what can be done to prevent a sudden fall in revenues.
The simplest idea is to introduce new technology which adds value to the game console. This can increase the sales of video games. In the last few years new devices like cameras, microphones, dual shock controllers were introduced to add value to video games. This can also be done in the near future. The only condition to realize this is that the game consoles are made in such a way that it can be extensional. This means that a customer can buy a new device or piece of technology and plug it in his game console without breaking his head. New services can be provided. Today’s most popular service is the online gaming. Both Microsoft and Playstation have invested in building a network infrastructure which makes it possible to play a video game against someone living on the other side of the world. These networks can be used to offer additional online services besides only playing again someone else. But these networks can be exploited only if there is a demand for online gaming. This service has been available since the year 2003. In the year 2005 just a small fraction of all game consoles uses this service. Predictions forecast a growing number of online gamers. But low bandwidth, not reliable networks (virus, hackers), a too commercial approach (e.g: a lot of advertisement is send over the network by commercial companies) can change this trend into an offline trend.
The video gaming industries is also subjected to other conflicting issues. The video gaming industry wants more and more customers over the world to buy their products. But how will this industry accomplish this? Many researches have proven that different part in the world has different tastes. Sales of a football video game can be a hit in Europe and a disaster in Asia. And emerging markets like China and India will be a source of new potential customers. But nobody knows their gaming preferences Furthermore, some countries like the Middle East and North Korea do not want to play video games with western influences. This is a dilemma for the video gaming industry. This industry would gain benefit if one product can be sold the same way and with the same content in all parts of the world. Unfortunately this is not the case due to different preferences. A possible solution for this problem is a multinational approach concerning making and selling the products. One big company can have several subsidiaries in different part of the world. Each subsidiary senses the preferences of a certain part of the world. The perceived information is used to make customized products meant for customers of a certain part of the world. Also the content of video games made for other part of the world can be changed on basis of this information.
Another conflicting issue is the changing primary target group. Customers who grew up with the Nintendo 8 bit have now another preference in genres. They used to play video games just for fun. But know they want more sophisticated video games with many puzzles and with actual political, social and economical issues. Also more female and adults video gamers are coming up. Especially adult video gamers are an interesting group with whom a bond must be created. After all this group has the money to spend on video games. This all means that the industry must not only fully understand their current preferences but also their preferences in the near future. And who can predict which genre they like over 5 years?
Another conflicting issue is how this industry must work the movie industry. As early mentioned the video game has become a substitute for other entertainment media. But if they can cooperate or take over one of these entertainment media then this means that the gaming industry can gain the profits of this media. One of the possibilities is that the video gaming industry will cooperate with the film industry. There are several alternatives. A video game and a movie can be released simultaneously, a movie is released before the video game or the video game is released before the movie. In all the cases the products promote each other and cause a cross-selling.
The extreme version of the relation between the movie industry and the game industry is that the game industry takes over the movie industry. Also this scenario has different alternatives. One scenario can be that a movie is made which can be played by the gamer. This results in multiple storylines and endings. This scenario is meant for active “movie gamers”. For passive “movie gamers” a movie is made graphical. In this case the movie stars are needed for the talking and human movement like walking and dancing. The remaining scene is rendered by the video gaming industry.
So it can be said that the video gaming industry can survive a recession by ensuring increasing revenues. Different possibilities are possible what means that different scenarios can be drawn from them. Which one will be the truth? Time will learn.
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