Kathleen Byrnes and Justin Choi, a married couple attending medical school at Tulane University, say US$40 is just too much to fork over for a Nintendo Wii game they might not enjoy. They haven’t bought one since last fall, when they picked up Star Wars: The Force Unleashed.
“Nothing really interesting came out,” said Byrnes, 23.
Their reluctance helps explain why this is a rough summer for the video game business. More people than ever are playing the games, but it’s been a while since a blockbuster title arrived. Consumers are watching their money more closely in the recession and managing to resist games that can cost as much as US$60.
The trends came into play last week as Sony Corp and Nintendo Co each reported console sales are dropping. Sony posted a loss for the April-June quarter, while Nintendo Co revealed a large drop in its profit.
The Microsoft Corp division that makes the Xbox 360 said last month it lost money in the last quarter too.
“The health of the industry is terrible,” Wedbush Morgan analyst Michael Pachter said.
For gamers, at least, there’s some good news: Console prices will probably come down.
Sony’s PlayStation 3, the costliest of the bunch, still sells for US$400. Nintendo hasn’t lowered the US$250 tag on the Wii since its 2006 launch — an extreme rarity for an industry that relies on regular price cuts to broaden its audience.
Despite the bad earnings results, Sony and Nintendo both reaffirmed their forecasts for the year. Pachter said each company “has no prayer” of meeting the target without cutting prices.
For Nintendo, that might mean keeping the Wii at US$250 but including more free games.
At first, it didn’t seem the recession would be big trouble for the video game business, which has managed to expand its audience in recent years and become a mainstream form of entertainment. By many estimates, the video game industry is now larger than the music business.
Sony, Nintendo and Microsoft, as well as software publishers like Electronic Arts Inc and retailers like GameStop Corp, have pitched video games as cheap entertainment. Players can get many more hours in front of a TV screen from a US$60 video game than from a US$25 DVD.
But people squeezed by the economy may not have even that to spend. Many have turned to online games that are cheaper or free.
Even loyal, “hardcore” gamers are being more selective instead of lining up to buy every new release, and many are trading used games among themselves.
They’re also waiting for bigger, better titles coming later in the year — in the holiday season, when video game companies often roll out their biggest blockbusters. With many players now expecting something close to movie quality in their games, these titles can take years and tens of millions of dollars to develop.
When the spring of last year brought massive hits like Grand Theft Auto IV and the exercise game Wii Fit, that was an exception.
Grand Theft Auto IV raked in more than US$500 million in its first week in stores.
Last year’s big spring would have made for tough comparisons this year even in normal circumstances. But by industry standards, the first half of this year has been unusually slow when it comes to top-flight game launches. Combine that with the recession, and you get one chilly summer.
Ben Nielsen, a 29-year-old architectural designer in Portland, Oregon, usually buys three or four games a year. This year he’s gotten only one: Mirror’s Edge for the Xbox 360. And that’s only because it was on sale for US$30.
Byrnes and Choi might spring for the US$50 Wii Sports Resort, a recently launched follow to the Wii Sports game that comes with the Wii and buoyed its popularity. Wii Sports Resort also comes with an accessory that attaches to the Wii’s controller to make it more sensitive.
But they remain cautious. They own seven games for their Wii, and say they were disappointed with about half of them.
“With that kind of a track record, we are not about to take more chances on future titles,” 25-year-old Choi said.
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