How Recession-Proof Are Video Games?

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While major home electronics are still selling despite the sagging economy, smaller personal electronics are sitting on store shelves, according to the Consumer Reports Index, our new economic survey. I expect that finding is hardly a surprise to the video game industry--sales of video games and game consoles have been dropping for months.

The decisions by Sony and Microsoft to slash $100 off the price of their Playstation 3 and X-Box 360 Elite systems, respectively, could help slumping sales. (With the cuts both consoles now cost $299.) Those price cuts could increase unit sales by as much as 60%, NPD Group analyst Anita Frazier told Gamasutra recently. That’s welcome news to both console and game makers: NPD has reported a year-over-year sales drop of 37% in console sales and 29% drop in game sales.

Thanks to the $100 cut, the Xbox 360 Elite system is now $300, while the Xbox 360 Pro package, which is being phased out, is $250 following a $50 price cut. A basic Arcade version is still priced at $200. One change is that the Elite system, which has a larger hard drive, will no longer include an HDMI cable.

New game titles may also help not only manufacturers but the retailers that sell their wares, such as game-rental giant GameStop, which reported a 32% profit dive in the second quarter. GameStop CEO Daniel DeMatteo sees some hope with the impending release of several new games this fall (including "Halo 3: ODST" and "Call of Duty: Modern Warfare 2"), according to Reuters, but says his company is “cautious” given ongoing concern about the economy and consumer spending.

Less than a year ago, some analysts speculated that the video-game industry could be recession-proof. Obviously, that’s not the case. Nintendo, the third of the “Big 3” game-console manufacturers, is now facing pressure to drop the price of its $250 Wii.

Are you considering buying any video games or consoles this fall, or are they still too expensive? Let us know in the comments section below.

—Subscribe to ConsumerReports.org or check out Consumer Reports’ electronics buying advice.

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