Are video games recession-proof?

IS IT any surprise that an industry that enables its customers to escape from reality into elaborate fantasy worlds is thriving in today’s gloomy economic climate? 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, says Screen Digest, a consulting firm (see chart). Games sales in America in October totalled $697m, 35% more than a year earlier, according to NPD, a market-research firm. It is often said that video games are recession-proof. Are they really?

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 becomes older and richer.