Games: Recession Proof No More?

It has been said that entertainment in general and video games in specific are recession proof. After all, they provide a relatively inexpensive way to spend time at home having fun. The video game advertising business continues to go up, and there have been several solid sellers this year, with the biggest games coming this month. Overall game sales are up for the year, but were down in September. Now, individual publishers seem to be struggling in the current economy.

We reported on Midway’s Q2 losses a couple months ago, and unfortunately, there’s more bad news. Activision Blizzard, the massive publisher formed from Vivendi and Activision’s merger, has posted a net loss of $108 million for the quarter that ended with September. The large majority of this loss was due to the merger itself. So far this quarter, they’ve released Spider-man: Web of Shadows and Guitar Hero: World Tour, and have Quantum of Solace and Call of Duty: World at War on the way, amongst others for this holiday season, and are confident that the performance of these major franchises and licenses will pick up the pace for the conglomerate. The newly merged company did beat revenue expectations as well as loss expectations, so it’s not all bad news.

Over at the other of the “big two” publishers in the gaming world, Electronic Arts, the news is even worse. Their net loss grew from $195 million to $310 million for the quarter, year over year. Their overall revenue outpaced the loss’s growth, but the Sports and Sims giant has announced plans to drop 6% of its workforce, or approximately 600 jobs, to save the company $50 million dollars annually.

THQ, publisher of Saints Row 2, WWE Smackdown vs Raw, and many others, joined in the layoff column with 250 jobs cut. Last year, they lost $7 million in this quarter, and this year that increased to $115.3 million. Net revenues dropped, as well, narrowing the margin between the two values. Most of the 250 jobs will come from the 5 development studios under the THQ umbrella that are closing their doors forever.

This may all seem pretty doom-and-gloom, and while revenues are still outpacing loss for all three of these major publishers, it is a serious development. With the holidays fast approaching and a TV-style “November Sweeps” of releases, it will be worth watching this quarter. The glut of anticipated titles may have an adverse reaction for gamers, however, with them choosing only one or two of the large selection. One thing is for sure, a lot of the US gaming industry hinges on the next two months.