It is said that the soaring success of the Wii and DS is indebted to Nintendo’s successful reach into the casual market. Yet the consumers within this market are more susceptible to the conditions of an economic recession, says Screen Digest’s senior games analyst Piers Harding-Rolls, meaning that both consoles could be hit by the global financial crisis.
 
Edge reported yesterday that Japan had officially entered an economic recession following two successive quarterly drops in Gross Domestic Product, and while Harding-Rolls believes that the games market is less vulnerable to such a recession, some platforms may be affected. 

“The games market is comparatively unaffected by recession due to a number of reasons,” he says. “The market is very much driven by its own hardware cycles and previous cycles have not been significantly impacted by recessions. The core gamer demographic has always been the 18-35 male, who has a generally high disposable income. Consumers that spend less money on going out for entertainment during a recession and that stay in more tend to continue playing games and view games as good value for money.”
 
He added, however, that this general view must take into account several caveats.
 
“The new mainstream consumers that play lifestyle and social games on the Wii and DS are more likely to be outside that core demographic and may be impacted more by a recession,” he says, adding that it is this market who may consider games and consoles a much more discretionary spend compared to 18-35 males.

He also suggests that traditional gamers that are considering buying a console will be more price sensitive. “Although software sales to the traditional gamer that already owns one or more consoles may not be that impacted, hardware sales are likely to be affected somewhat, and obviously price comes into this equation.”

The first nine months of 2008 showed a 24 percent annualised decline in hardware sales, and Harding-Rolls considers this to be mainly due to the comparative 54 percent drop in sales for the DS as its successor, the DSi, begins to reignite sales. Japan is around a year ahead of the US and Europe in regards to the DS/DSi cycle, so while the Japanese DS market has seen a heavy decline in 2008 as its lifecycle tails off, US and Europe are expected to follow with similar declines in 2009.
 
Earlier this month Edge spoke to research retail group Verdict Research after it had projected that in the UK sales of videogames and consoles are expected to make more money than sales of both music and video combined. The co-author of the report, however, told Edge that the rise in hardware sales is set to slow, calling the surge in sales a “one-off”.

Harding-Rolls also believes that Sony’s PS3 is more exposed to a recession due to its price: “At the top end, the PS3 with its high price is arguably more likely to be impacted by a recession than the other platforms. This may prompt consumers to consider other consoles or wait for the PS3 price to drop.”
 
However Harding-Rolls explains that the nature of Japan’s current recession is likely to affect more than hardware sales: “Where I do see an impact is with regards to access to credit for publishers that look to borrow to invest in content production. Obviously credit is less available generally so this may result in cost cutting and some projects being cancelled and put on hold.”
 
He added that the recession would lead to more cost-cutting and a risk-averse business culture. “New and original IP projects that are difficult to measure with regards to potential return on investment come under the 'risky' category, so we may see less original IP from Japanese developers.”