Video Games in a Recovering Economy: How the Recession Has Shifted Consumers’ Approach to Console and Handheld Videogame Purchasing

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Video Games in a Recovering Economy: How the Recession Has Shifted Consumers’ Approach to Console and Handheld Videogame Purchasing Powered By Docstoc
					                                                 PC/CONSOLE/MOBILE
                                                 GAMES
                                                 Video Games in a Recovering Economy:
                                                 How the Recession Has Shifted
                                                 Consumers’ Approach to Console and
                                                 Handheld Videogame Purchasing


                                                 Lead Analyst
                                                 Regan Hickey

                                                 Contributing Analysts
                                                 Josh Bell
                                                 Michael Cai
                                                 Michael Gartenberg




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Published October 2009. © 2009 Interpret, LLC
Videogames in a Recovering Economy: How the Recession Has Shifted
Consumers’ Approach to Console and Handheld Videogame Purchasing

Catalyst: The US is on the path to recovering from one of the worst recessions in history, and American
consumerism has been drastically impacted. The gaming industry is not immune to these changes, and
consumers have changed how they get their hands on games that they want to play.

Core Questions:

    •   How has videogame purchasing volume changed from before the recession?
    •   How are consumers approaching videogame purchases differently?
    •   How should retailers change their strategies to satisfy customers in the post-recession
        economy?

Interpret Insight: Americans purchased more games in the first six months of 2009 than they did in the
first six months of 2008, before the recession hit. However, videogame consumers are taking a much
more cautious approach to buying games, as increases in used-game purchasing and game renting have
outpaced the growth in new-game purchasing.

Total Game Sales On The Rebound With A Greater Proportion Of Used Games
According to Interpret’s New Media Measure study, total sales volume of console, handheld, and PC
video games from the first half of 2009 increased 33% over the same period the previous year, but the
increase in used-game sales outpaced the increase of new-game sales. For the first half of 2008, 30% of
all video games purchased were used or previously owned, while for the first half of 2009, 38% of all
video games purchased were used or previously owned. This change reflects not just an increase of
volume among past used-game buyers, but an increase in the total number of gamers buying used
games. The percentage of gamers who bought a used game grew over 40% from the first half of 2008 to
the first half of 2009. Though many more gamers purchased used games in the first half of 2009, the
demographic profile of used-game buyers did not significantly change.




Video Game Renting Increased With Rebound In Purchasing

As video game sales have rebounded, video game renting has also grown. The total volume of game
rentals has grown 20% from the first half of 2008 to the first half of 2009. Unlike used-game sales,
however, the number of gamers renting has remained steady. In other words, those who were already
renting games have increased the number of games they are renting. Renters are also buying more (31%
increase from first half of 2008), but the increase is not as strong as among those who are not renting
games.
Retailers Respond To Consumer Shifts With New Used-Game Trade-In Programs

GameStop has dominated the used-game market through a successful game trade-in program.
According to the company’s 2008 Annual Report, 23% of revenues came from “Used video game
products,” accounting for nearly half of the reported gross profits. In the past several months, many
large electronics and big-box retailers have entered the used-games market. Amazon.com and Best Buy
have both launched online trade-in programs, Toys ‘R Us now allows in store trade-ins, and Wal-Mart
and Best Buy are both pilot testing game trade-in kiosks that can provide credit for other merchandise
instantly. These retailers are hoping that consumers will use the credit from their trade-ins to buy new
video games. Unlike GameStop, where games traded-in are then sold back to other consumers, the
retailers launching trade-in programs are not re-selling the games they take in. Rather, the games are
being re-sold to third parties who then sell them to consumers via their own channels.

Retailers Must Take Extra Steps To Provide Video Game Consumers A Clear Value Proposition For Each
Purchase

DVD movies are bundled with similar titles. Electronics are bundled with their applica
				
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Description: The US is on the path to recovering from one of the worst recessions in history, and American consumerism has been drastically impacted. The gaming industry is not immune to these changes, and consumers have changed how they get their hands on games that they want to play.
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