Gaming in the Recession Part 1: Survival of the Fittest - RaychelSnr's Blog

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RaychelSnr's Blog

Gaming in the Recession Part 1: Survival of the Fittest Stuck

Posted on July 28, 2009 at 11:01 AM.

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As I noted yesterday, I'm taking a look at what effects we could see in our industry with video game sales plummeting nearly 30% year over year last month. Right now with consumer spending changing, possibly long-term, this drop in sales could become the new norm for people working in the industry for a couple of years.

The one thing you will almost certainly see are the less profitable gaming projects being sidelined, possibly forever. What type of titles are less profitable are pretty easy to identify. For sports gamers, just think about games like NFL Head Coach, Virtua Tennis, or MLB Front Office Manager. With less revenue to go around, companies won't be willing to take the same risks they have over the last five years or so.

If you look at how companies made money in 2Q 2009, it was not by increasing revenues (sales). Almost every company across the board cut costs big time in order to beat expectations on Wall Street. Video Game developers are seeing a similar type of drop in revenues (~30%) as other industries, and will likely have to cut costs to stay profitable in this tough time. That means fringe development projects will be eliminated, and development teams will be downsized in order to meet that demand.

Economists are, at best, mixed in their outlook for the remainder of the year. It is anyone's guess about how things will work out. However, for each quarter this downturn does go on, that means more and more potentially profitable -- but yet very risky -- projects will be turned away. As for the effect on current projects or the bigger projects, we will dive into that tomorrow.

How do you think developers can cut costs but keep developing games which might not be as profitable?