Market turmoil hits video games industry hard

Mike Bantick
Saturday, 04 October 2008 14:33

Opinion and Analysis

Not so long ago, many felt that the video game sector would be immune from any market volatility.  The industry is actually going through another golden era of gaming wealth and quality not seen since the early eighties.

The current generation of consoles, along with PC gaming, Hand-held devices, mobile content and even the old Sony workhorse the PlayStation 2 all figure strongly across the globe each month sales figures are analysed.

According to analysts quizzed by the LA Times however, much of the wealth invested in video game companies is inherently liquid in its form. 

“More than 90% of game stocks are held by institutions such as hedge funds and mutual funds that are attracted by the sector's strong sales growth. When the market collapsed Monday, hedge fund investors seeking to minimize their losses cashed out, said one hedge fund investor who declined to be identified. Mutual funds also dumped game stocks to take their profits sooner rather than later.” the report says.

Wedbush Morgan analyst Michael Pachter – who specialises in analysing the video game industry, remains confident about the future however. "We're still going to spend the same amount of hours entertaining ourselves," Pachter said. "It's just a matter of which entertainment we choose to buy, and games are still perceived to be a super value."

This statement is on the back of an earlier Pachter prediction that video game sales, both hardware and software will grow by more that 23 percent this year to over US$50 billion.

Much of the financial crises is yet to be played out, when the rollercoaster pull up, there will be winners and losers, the fact remains however, both in content and quality, 2007/2008 have been magnificent years for fans of the video game environment.