Gaming & Technology

Losses add up

It's been a rough summer for the video game business.

More people than ever are playing games, but it's been a while since a blockbuster title arrived. And consumers are watching their money more closely in the recession and managing to resist games that can cost as much as $60.

The trends came into focus recently as Sony and Nintendo each reported that console sales are dropping. Sony posted a loss for the April-June quarter, while Nintendo revealed a large drop in its profit.

The Microsoft division that makes the Xbox 360 also said recently that it lost money in the last quarter.

For gamers, at least, there's some good news: Console prices probably will come down.

Sony's PlayStation 3, the costliest of the bunch, still sells for $400. Nintendo hasn't lowered the $250 tag on the Wii since its 2006 launch — an extreme rarity for an industry that relies on regular price cuts to broaden its audience.

Despite the bad earnings results, Sony and Nintendo reaffirmed their forecasts for the year. Wedbush Morgan analyst Michael Pachter thinks each company "has no prayer" of meeting the target without cutting prices to lure buyers. In Nintendo's case, that might mean keeping the Wii at $250 but throwing in more free games.

At first, it didn't seem the recession would be big trouble for the video game business, which has managed to expand its audience in recent years and become a mainstream form of entertainment. By many estimates, the video game industry is now larger than the music business.

Companies have pitched video games as cheap entertainment. Players can get many more hours in front of a TV screen from a $60 video game than from a $25 DVD.

But people squeezed by the economy might not have even that to spend. Many have turned to online games that are cheaper or free. Even hard-core gamers are being more selective instead of lining up to buy every new release, and many are trading used games among themselves.

They're also waiting for bigger, better titles coming later in the year.

When spring 2008 brought massive hits like Grand Theft Auto IV and the exercise game Wii Fit, that was an exception.

Last year's big spring would have made for tough comparisons this year even in normal circumstances. But by industry standards, the first half of 2009 has been unusually slow when it comes to top-flight game launches. Combine that with the recession, and you get one chilly summer.

"The health of the industry is terrible," Pachter said.