business

Is it any surprise that an industry that helps its customers escape from reality into elaborate fantasy worlds is thriving in today's gloomy economy?

As other industries collapse, sales of video games are racing away. Global sales of console hardware and games software are expected to hit a record $49.9 billion this year, according to Screen Digest, a consulting firm. U.S. games sales in October totaled $697 million, 35 percent more than a year earlier, according to NPD, a market-research firm. It often is said that video games are recession-proof. Are they?

Video gaming is isolated from the wider economic cycle by having a cycle of its own. Every few years a new crop of consoles is launched, spurring a wave of sales as gamers upgrade. (Today's set consists of Microsoft's Xbox 360, launched in 2005, and Sony's PlayStation 3 and the Nintendo Wii, which both appeared in 2006.) During the cycle the prices of the consoles fall, bringing in more buyers. Each cycle is bigger than the last as gaming becomes more popular and the average gamer gets older and richer.

The industry has another layer of recession-proofing in that its biggest-spending customers typically are young men -- the average gamer is around 30 -- with high disposable incomes who regard gaming as an important part of their lives, said Piers Harding-Rolls of Screen Digest.

Now that gaming has become more popular -- a survey by the Pew Internet & American Life Project found that 53 percent of U.S. adults play video games of some kind, as do 97 percent of teens -- it seems to be doing well despite the economic downturn for an extra reason: It offers a relatively cheap form of home entertainment.

But is trouble brewing? In recent months, big games publishers announced layoffs, losses and cancellation of many titles. The industry's two giants, Electronic Arts (EA) and Activision Blizzard, had losses of $310 million and $108 million respectively in the most recent quarter.

The November sales figures from NPD present a mixed picture. Software sales in America were up 11 percent from a year earlier, far below October's 35 percent growth. But hardware sales grew by 10 percent, compared with 5 percent in October. Given the large number of high-quality games released in October, and the fact that consoles cost far more than individual games, it is unclear whether this signals a slowdown or a pre-Christmas shift from software to hardware purchases.