Is the Game Industry Recovering from the Recession?

Is the Game Industry Recovering from the Recession?

Another big video game publisher is prophesying huge profit losses for the fiscal year ending in March 2011, news that’s now on the same level as “the sun rose today.” This time, Square-Enix is in trouble. The company behind the Final Fantasy and Dragon Quest franchises projects a loss of ¥12 billion or $148.2 million USD for the previous fiscal year, a significant tumble from the fiscal year ending in March 2010.

The worst of the 2008 recession is behind us, but given the constant flow of bad news from some of the games industry’s biggest contributors, we have to wonder when the fallout from those lean months will clear away–if ever. Is the video game industry recovering from the recession, or is it still hurting?

The industry is recovering, but it’s also changing. Game companies aren’t posting losses because people have lost interest in video games, or can’t afford them. Quite the opposite. More people than ever are interested in games, but the market began branching out shortly after the recession hit its peak. Cheap entertainment is necessary during lean times, and although affordable game consoles like the Wii found a place in living rooms around the world, people also began discovering social games and free-to-play games. For a primarily casual gamer, cheap games are nice, but free games are better.

Now that times are a little better, people have more disposable income, but that doesn’t mean the popularity of free-to-play games has diminished. Like many large developers including Capcom and EA, Square-Enix has been expanding into smartphone games and social games to meet this new demand. The company would understandably need to narrow down its list of big-budget console releases in order to tighten its belt and survive the changing market, though it already has a head start: Square-Enix has been developing mobile games since 2003.

Then again, Square-Enix’s troubles can’t be blamed solely on the industry’s shift or the earthquake that devastated north eastern Japan. GamingUnion has a write-up that highlights Square-Enix’s troubles and sins, not the smallest of which is recycling retro franchises on mobile platforms for high prices. Final Fantasy III for the iPhone is a good game and will surely find a fanbase, but a title that’s priced $15.99 on the App Store juts out from the ocean of 99 cent offerings, and not in a good way. Final Fantasy III is a touched-up port of a Nintendo DS game that was released in 2006. We expect it to be priced higher than most iPhone fare, but to what degree is Square-Enix, well, milking the Final Fantasy name in this instance? After all, Street Fighter IV, a much newer game developed for consoles more powerful than the DS costs $9.99 on the App Store, and it goes on sale often.

There’s also the colossal car-crash that is Final Fantasy XIV, which was has been a problem title since its release in September 2010. Critics blasted the game for feeling incomplete and being buggy, and Square-Enix has been trying to retool the title into something playable ever since. In the meantime, it’s still a free-to-play game, and that’s no doubt costing Square-Enix some money.

These are pretty rough times for even the most vigilant developers, but it’s an especially bad time for studios to make bad choices. Square-Enix’s troubles are regrettable, but not irreversible, and they don’t foretell the eventual crash of all big game studios.

About Nadia Oxford
Nadia is a freelance writer living in Toronto. She played her first game at four, decided games were awesome, and has maintained her position since. She writes for 1UP.com, Slide to Play, GamePro and other publications, and is About.com’s Guide to the Nintendo DS.

1 Comments

  1. I am curious how think the recession is over with Greece, most of the European Union, and America (U6 Unemployed at 15+%) on the verge of defaulting on national debts?

    I suspect the game industry is a lagging indicator or a leading reverse indicator. As people were out of work they had more time for games, which are cheap entertainment. On the other hand if the econ is picking up and people are going back to work, they will stop buying games and spend less time playing.

    With poor media reporting and gamed government numbers it is hard to know.

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