A Recessed Economy: What does it mean for Sports Gaming? - RaychelSnr's Blog

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RaychelSnr's Blog

A Recessed Economy: What does it mean for Sports Gaming? Stuck

Posted on August 10, 2011 at 01:24 PM.

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EA's (ERTS) Stock Year-to-Date chart as of this morning.

It feels like 2008 all over again in so many ways -- except for the fact Madden is actually somewhat good nowadays and most sports games are much older and wiser.

However, just like in 2008, strong sales headwinds could be heading for sports gaming.

If you remember at the depths of the recession of 2008-2009 (before trillions were spent to bring us out) video game sales were in the toilet. The market was effectively cut quite remarkably, and despite some steady growth since then, $60 video games are going to be especially susceptible to any economic slowdown once again.

We're already seeing the early signs of this taking place, with the appetite for risk and failure being quite low in the market right now. Take for instance, THQ's laying off of 200 employees yesterday due in large part to the failure of the MX vs. ATV franchise to catch on with gamers.

You might say you don't want to hear any bad economic news on Operation Sports, you come here to escape that reality, and I say you are totally correct. The best parts of my day aren't spent watching economic data but interacting with you guys. But I think, just as I did in the depths of the last crises, I should remind gamers that when sales plunge, things tend to happen in our genre. So if you don't want to be surprised, keep reading:

Publishers are going to be less risky. -- Sometimes, publishers will ok developers taking big risks with their products because the game has very little chance of downside on a year to year basis. Some past examples could easily be the heavy investment into Online Dynasty and NBA 2K going after pricey old-school players. Those were both moves which weren't guaranteeing a good return, and they both worked out well. But there are other examples, such as the MLB 2K franchise's various attempts over the years to add spice to their game, which result in sales flops. Don't expect publishers to be as willing to bet the house on a crazy idea from developers. More formulaic additions will probably be in order if the negative trends in the economy continue. Publishers are businesses which are trying to please stockholders with increasing revenues over time.

Some may very well get desperate, but the rule of thumb is if you have a solid business model -- you typically hunker down in the bad times and just focus on getting by. When the good times come, you have more room to experiment and try new things, those times aren't now.
Mobile Gaming Will See the Bulk of Investment If you play games on mobile devices you'll see the quality of many of these titles go way up. They are cheap and easy to make, especially for big publishers. A big publisher can dedicate $200,000 on a project and easily make revenues of $1 million. Those kinds of margins don't exist in traditional big box gaming. So if you like mobile gaming, especially sports gaming, you'll likely be enjoying what's coming your way in the coming couple of years.
Any franchises on the fringe might not be here much longer. I'm talking to you EA Sports NBA Title, EA Sports MMA, and MLB 2K...and NHL 2K (if you still believe the franchise is going to ever return, I don't). The last recession took away college basketball from us, this one would likely make every sport a one horse race except for Baseball. I'm willing to bet EA is going to enter the race there and replace 2K, who has basically said they hate their MLB franchise at this point. But the simple fact is going to be, every sport is going to be profitable for one game, not two. So get ready, that day I said was coming (where there is only one game per sport) is probably very near.

Are all of these things positive for sports gaming? Not really, except most games that are released will be solid and will probably not jump off the deep end like some titles have done in the past decade. Regardless, this year is set to be the best year of sports gaming ever (like last year was) -- so the good times are going to be rolling at least through one more release season.

FIFA, NBA 2K, MLB: The Show, Madden, NCAA, NHL are all solid titles with bright futures. They'll provide the basis for great sports gaming seasons to come.

Just don't get too attached to anything else.

Comments

# 1 13whitebread @ Aug 10

Yes this is true much of what you said the economy does dictate what we buy. But there is also one big reason why there is only going to be one game per sport and that is quality. MLB the show much better than 2K's entry also NBA2k much better than the last EA sports entry. And NHL series knocking the rubber of the puck compared to the 2k series. There is just not enough room for sub par titles plus the juggernaut EA sports putting a lot of money into quality and trying to fix the problems of past titles spells doom for the competition.

# 2 chi_hawks @ Aug 10

Good points raised here.

The real negative for consumers is the drop in competition between sports games. We've seen what an exclusive license for NCAA Football and Madden NFL has done over the last half decade...I really don't want to see this expand into the NBA and NHL games as well.

# 3 Galarius @ Aug 10

not just a recession, but probably a depression after the next presidential election......there is no escape

# 4 Goblowsoup @ Aug 10

Always good to see a story that actually shows how life affects gaming. We are in such economic shambles in this country and in several others around the world. Our economy has become so dependent on others that when one of us flops we all flop. Hopefully game companies take the movie industry route. If you've noticed over the past few years movies are cheaper at release than they were for many years before that. I don't think it's added a huge increase in movie buying, but I think it's helped a little. I know movie theaters haven't gotten any cheaper, if anything it's gone up and that may be part of the decline in moving buying even at the lower price point. That being said, places like Blockbuster, Gamefly, and Redbox can't adjust pricing to offset losses because it could eventually punish the gaming industry equally. With Gamefly's new "Play as much as you want PC downloads" coming this fall, it could be a major blow to the PC gaming retailers.

It's tough to work together in harmony since each corporation wants to be better than the next one, but sometimes businesses (like politicians) need to get past their greed and look at what's best for everyone in the long term situation.

# 5 SHAKYR @ Aug 10

Great read. I can't see a game like Fight Night Champion having another game being made, but the producers said for now they don't see it as being a cancelled title...yet!
Fight Night Champion had so many glitches, bugs, and other unexcusable problems.

# 6 LucianoJJ @ Aug 10

The recession will have obvious effects. People will be buying fewer titles. The industry may be making a mistake by expecting to make major sales off DLC. It will be hard enough to spend $60 on a new game for some people. Expecting them to spend more on the same title will be even more troublesome. The games will have to deliver improved core gameplay or deeper, more accurate career modes. As is, games have spread themselves too thin, and the sim and RPG aspects come out half baked. Developers will have to decide, do we want this game to be a sim or an RPG experience, and really pay close attention to quality. A buggy game will be doomed.

With layoffs and other cuts, there are opportunities. I hope the talented people who have walked or have been cut will form new companies and challenge the big game companies. If they can sell a title on PS3 or X360 online, for download at a decent price, they could change the market that much further. Smart phone and tablet games will take market share, but their quality has to improve, or they have to innovate. The games on iPad look like five year old ports.

People will buy more used games. They will resist the urge to buy on release day. Retailers will have to discount more games, sooner, or they will suffer. Advantage consumer.
There are changes ahead.

# 7 therockstar2005 @ Aug 10

I still say, if 2K came out with a full fledged Power Pros for the 360, it would sell well. Probably won't happen now though...

# 8 BRxSKINSx @ Aug 10

2k should tank MLB 2K and give us back College Hoops to go with NBA 2k....

# 9 thesportsgameguy @ Aug 11

"If you remember at the depths of the recession of 2008-2009 (before trillions were spent to bring us out)"

Nobody can remember that, because it didn't happen. The economy continued to worsen despite TARP and the stimulus.

Game sales recovered because people tend to go for more, not less, escape when times are tough.

# 10 stlstudios189 @ Aug 11

that is true that people "escape" more during the tough times but, I am sure that I am not alone in the fact that instead of buying 10 games a year I am only getting 4-5 and mostly used except Madden this year