Why Video Games Are Losing Money

Tough Times For Video Game Makers

The video game business is not what it was in years past. The video game industry has seen a 12% drop in sales this year. While at the same time these same video game makers have watched production and marketing costs continue to rise. What attributes to this rise in cost are a few different reasons. First, there is the economy that is hurting video game sales. Then you have the even greater impact of having more free games available on iPhone and Web sites supported by ads.

The biggest video game this season has been “Call of Duty: Modern Warfare 2” from Activision. On its release date of November 10th, there was a huge anticipation for this blockbuster war game. However, Call of Duty will be one of the few bright spots in the video game business this year.

Another reason for the downturn in the video game business has been the cost of game consoles. There is hope for the industry as console manufactures have begun to cut prices on their equipment recently for the holiday season. Nevertheless, the slow down in video game sales have their companies scrambling to chase down consumers. Viacom who recently released the Beatles version of the Rock Band video game, spent over $10 million to license the music for it. Activision will spend over $200 million to launch its Call of Duty game to the public, not counting the $40 million that was spent on developing the game. The development cost for this game was more than double what is spent on other games to produce.

Other than these two bright spots in the video game business, most are having to scale back. Electronic Arts, the producer of Madden NFL announced recently that they would be scaling back on game releases. After reporting a large loss last year, they will be concentrating on more online games.

Will the video game industry rebound after this recession is over? As it is in many high tech industries, it is the newest and best that draws the video gamer to them. The industry will have to continue to develop better consoles and better games to attract those gamers. Significant investments will need to continue, and it may be a case of only the strong will survive.

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