“My Name is Reggie. I’m about kicking ass and taking names — and We’re about making Games.” – Reggie Fils-Aime, President and CEO of Nintendo of America

Every day we are bombarded with scary information – the mysterious stock market has crashed around us as we suddenly find ourselves in a recession strong enough to rival the great depression. Truth be told we are living in scary times, companies are either dropping out left and right or they are feeding off federal funds to keep going. I do not know about you, but I wonder about the future of video games in this bleak economic stagnation, and with good reason.

Video games are seen as a luxury item, something that is good to have but not a necessity to everyday life. Because of this one might immediately put the survival of Companies like Sony, Microsoft and especially Nintendo in doubt. Unfortunately, while two of the big three bring in heavy profits from other ventures, Nintendo’s luxury items are the only thing keeping it going. So what does this mean? Will the stock market consume Nintendo? Hardly, Ninny is about making games, and that is both a blessing and a curse.

First we have to look at the negative aspects of having such a niche company. The most dangerous aspect of Nintendo’s cache is that it has no other financial backing, if for some reason the gaming industry bombed then Microsoft or Sony could potentially feed of the larger companies until they could sustain themselves again; Nintendo does not have that luxury. Further more, as people spend less and less- fearing for their pocket books- Nintendo might have to cut back on what it produces giving it’s competitors an edge on them.

Nintendo's Stock Market Performance

Of course that is all speculative, if the gaming industry falters Nintendo will be in trouble. However that does not seem to be the case. That chart I posted is the stock market price of Nintendo over the past year –and it certainly does look bad- however that is not the full story. Anyone who knows the Stock market realizes that stocks are sold not based on current value, but their speculative value. Simply put; they are selling at a price they think the stock will be worth later, now. So does this mean the stock market is not actually a running barometer of the economy? Yes, especially in times like these where stocks are taking a nosedive simultaneously. To get a clearer picture of how Nintendo is doing we have to look at sales.

Console Sales Totals for 2008

Looking at this chart gives a much brighter impression of not only Nintendo, but the gaming industry as a whole. It’s not really that hard to figure out why either; Nintendo is doing well for two main reasons, Price, and people.

Price is not hard to figure out, people want to play video games and they don’t really wont to pay a lot of money. A Wii or a DS is a perfect combination of those two wants. Further more with Nintendo’s emphasis on “everyone can play” it makes the price of the equipment more negligible when explaining to ones wife why they bought it. If you don’t believe price could draw people in just look at the sales of the 360 and the PS3. These two systems are often thought of being similar, and having similar games, so why then does the 360 have twice as many sales? The only thing making the 360 a better buy is it’s cheaper price tag.

Of course one might ask why people are buying video games in the first place, I had figured everyone was living off of mud water and canned beans by now. However, it is a little known fact that when the economy tanks the entertainment industry flies. Escapism is the most appropriate word I can think of; people trying to escape their lives turn to movies, music or video games. Of course trying to escape reality doesn’t mean they can, people still have little money no matter how much they dream of being Link…going full circle here it’s clear that the Wii is the best choice for the weak check book.

What does this all mean? In two words: Don’t panic. Nintendo might not have the genius of Bill Gates, or the backing of a entertainment giant behind it, but what it does have is the fact they make games. They make them well. And they make them cheap. In the end that is all the consumer cares about, and that is what will keep Nintendo afloat.

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  • Kaepora21

    A few quick thoughts:

    1. Economic recessions have to aspects; nominal losses in the stock market, and realized losses in the "real" market, i.e. employment, goods, services, etc. Nominal losses primarily affect the affluent, those with retirement plans, and businesses while realized losses primarily hurt blue collar workers, the poor, and middle class. Since nominal losses only become realized if wealth is removed from the system, they can be avoided in a recession while realized losses like unemployment and reduction in sales cannot be. The rich in the world therefore have not been as influenced by this recession when compared to the working classes. Since these people are the primary market for video games in the first place, it is not likely that Nintendo will suffer any major realized losses, at least not in the long run.

    2. That being said, the fact that sales increased at the end of 2008 is not surprising and should not be used as evidence to support the claim that sales are not decreasing. Seasonal variation would suggest that no matter the year, sales will always increase in November and December because of Christmas. It would be very helpful to look at sales data in November and December from several years, such as 2005-2008. That would allow for a trend to be observed.

    3. The entertainment industry flourishes near the end of recessions mostly because electronics are the most heavily marked up goods in the industry. A recession decreases demand and causes a price drop, essentially a mark-to-market move.

    4. Nintendo also has a strong off balance asset; customer loyalty. Many people worldwide truly love Nintendo and will not stop buying from them so long as they have at least some disposable income. And since many people are still quite wealthy in the US even in the midst of recession, I think overall Nintendo will be just fine.

    Good article, I'm looking forward to more in the future.

  • Wolfen

    I found a typo at the end.

    I believe you mean "cheap" and not "cheep"

    /grammar nazi moment

    All in all, good article. Puck is a good journalist.

  • Robin Goodfellow

    Thanks wolfen, I'll get someone to fix that. *Oddly enough has no power to change the article*

    Kaepora: Thank you very much for your comments, I'm just going to clarify a few things.

    1:Actually you made a good point here, I'll keep that in mind if I ever do an article like this again. Though I had figured the Gaming industry was targeted at the middle class, which would be working class, no?

    2:The point of the sales was not really the increase in sales, obviously Christmas did that. But instead was to show the comparison between Nintendo and the other two big companies, to show Nintendo was still going strong. For the rcord though I think Nintendo did break a few records in December for sales, but i would need to re-check my sources.

    3: Actually I did not know this *Takes notes*

    4:It's hard to rationally explain Customer loyalty so i just left that part out. Though it is true, especially in Japan where Xbox's are seen as a joke.

    Thank you for taking the time to critique my article, and I hope you enjoyed it =D

  • Kaepora21

    This posting system pisses me off. The first time it double posts, now it didn't post at all. In any case, I'm going to do a quicker summary of this now deleted reply, so email me if anything is unclear.

    1. I'm not sure actually now that I think about it. Nintendo has tried to decrease its initial price offering of consoles, so perhaps they would be making inroads into the working and middle class. I will have to look into this and think about it some more, and I'll let you know if I find anything.

    2. Ah, ok that is good to know. I guess the only point i would raise in light of your response is that the DS and Wii are the newest products in this holiday season, and this graph might necessarily skew their sales because people like having the newest and best. In any case, it does show that Nintendo has outsold its competition, thus giving them a better edge in staying profitable.

    3. Yes indeed. High demand pushes prices up, but the moment it falls, electronics are the quickest to fall because their prices are inflated, and even a small drop in price will still produce a profit while simultaneously increasing sales even if demand is falling.

    4. I agree. The only metric I can think of using for customer loyalty is to observe changes in the percentage of sales from one year to another. If this number falls less in a recession compared to other companies, then I would say Nintendo customers are comparatively more loyal. I would of course need to find this information, so I'll look into it.

    In any case, thank you for putting up with my ranting and your thoughtful article/replies. Keep up the good work!

  • KingOfHeart

    Even though people are still buying games, sales are probably less then what they should be. As more people lose jobs people will not be able to afford anything, including games. Nintendo should be able to hold out as long as they keep their games affordable.

  • shadow9466

    curse the economy!!!!!!!!!!!!!! why cant the economy just stay as one thing not just go up and down and up and down.if the economy just stayed normal instead of jumping around nobody would have to worry, but sadly that's not how life works.

  • Sabbo

    There's another aspect of this problem which it doesn't seem you looked at – how much Japan is affected by the economic crisis compared to other places such as the US and Europe. Although I don't have any figures, I seem to remember reading that they are among the least-effected countries. This, of course, would lend further evidence to your conclusion that Nintendo is relatively safe from the recession much of the rest of the world is feeling right now.

  • SheikahSage

    I frankly think there will be little to know effect. Lets continue with the Drepression comparision (which I think is blowing a little out of proportion; it hasn't gotten that bad yet). During that time, entertainment like movies and theater continued to thrive, and even grew. I predict the same with the gaming market.

  • Captain Cornflake

    So, the top-selling systems sold the most in Christmastime?

    Holy shitballs! This is quite the revelation.

  • The fact of the matter is, the economy isn't doing nearly as bad as it could be, and that is why entertainment sales haven't plummeted. Even in a slumped economy, sales are going to be high at the end of the year because of the holiday season, and the consumer 'GOTTA BUY THIS GOTTA BUY THIS' mentality which is NOT going to go away until things are bad enough that people have to decide if they want to have food to feed their kids that month. As for Nintendo selling more than its competitors, that means nothing because SOMEBODY has to be in the top selling spot.

    The article is really indicative of nothing, other than the fact that for some reason that I can't wrap my head around, that in the middle of economic downturn we're worrying about a company that sure as fuck is not going to be worrying about you when you/your parents are unemployed and you're standing in a soup kitchen line.

  • Naokohiro

    On that subject, someone might as well fix this line: "people want to play video games and they don’t really *wont* to pay a lot of money"

  • I love this article! Makes me feel like less of an outcast when it comes to my friends… (I like Nintendo, and they only like systems from Sony & Microsoft…)

  • 1up

    Hmm… Here I was thinking that Nintendo was going suprisingly well despite the recession… I was told by a friend that the only things still flourishing in the recession are Wiis and Weddings; they must have been wrong, looking at that graph…

    360's are accellerating; I'm noticing more advertising for the "Arcade" package; a cheap 360 with rather poor capabilities compared to the true "pro" package. The arcade bundle sells (at least in Australia) cheaper than the wii; now all that wii has going for it is of coarse it's loyal fans, but it's famous Wii Sports and Wii Fit. Hopefully the motion plus and Wii Sports Resort will take the market by storm; attracting NIntendo fans who love the idea of 1:1 wiimote capabilities aswell as the non-gamers who loved Wii Fit.

    The reason wii stumbled last Christmas was possibly due to their poor lineup; while people bought consoles such as the 360 for games such as Gears of War 2 and Fable 2 (damn I hate all these sequels, make a NEW game >.>). The DS sold well with the DSi in Japan seeing its first season of giving, perhaps GTA: Chinatown wars may have contributed…

    I have little idea of how economics works, so I have little more to say than what I believe.

  • 1up (continued

    do I think Nintendo will survive? Sure as anything! These may be disastrous times, but I don't see nintendo falling; though a much smaller company than their enemies; nintendo is still riding this horse faster than microsoft and sony, even if they are all slowing down.

  • CyberBlade

    …Rivaling the great depression? You do realize that we had a worse recession in the '80s than this one, right? Besides, it has to BE a depression before it can rival the GREAT Depression. There's a difference between recession and depression.

  • People are going to fork out money for Windows when 1) they have no idea how to use a computer and 2) all their programs won't run on linux and 3) every major computer manufacturer that ships cheap PC's has windows preinstalled. If they aren't going to pay for it, they'll pirate it. There's more people pirating Windows right now than there are total Linux users.

    Also, a $250 game console plus $50 games is not cheaper than a ten-dollar movie ticket or DVD. I don't know what backwards dimension you live in where 250 < 10, but that certainly isn't the case in the real world.

    • I think what he was referring to was that for $10 you get around 2-3 hours of entertainment at the movies. Even more if you buy food. Buy a videogame for $50 and your looking at at least 10-20 hours of entertainment which can be enjoyed by many people. If you look at entertainment cost per hour videogames are a far better bang for your buck than a movie.

      Excellent article by the way.

  • Business Shrub

    I hate Microsoft, actually I predict that Microsoft is going to have problems in this depression. You can get an OS for free on ubuntu, or elsewhere and my experience is that linux has less bugs than windows, which usually crashes for no good reason. So if the XBox360 is as bad as everything else that Microsoft produces, then I wouldn't worry about their competition. And PS3 is just too expensive. I think people are going to continue playing games, it's cheaper than going to the movies, or whatever non gamers do, so maybe people are going to play even more in the future. The Wii doesn't have huge computational capacity though, so it takes good artwork to make good graphics, but look at OoT, it looked good even when I go back and play it today. I think that Nintendo is going to win the market and Microsoft and Sony is going to die. Nobody is going to fork out money for Windows, that makes your computer run slowly and also takes lots of memory, when you can get linux for free.

  • Gabe

    Dang. Im still hoping that 2 of the 3 big companies get hit hard by the economy, cause then it would be all the great software in 1 console. that would be awesome.

    • I'm hoping everybody gets hit hard by the economy so people are finally forced to go outside.

      • Rappy0

        yea really I feel sorry for kids these days. When iwas little we were all outside and stuff. (even though we were playing pokemon.) But if you go outside today theres no one around. There all playing games (Halo3 dumb kids).

      • Business Shrub

        I think people do get outside, in Wind Waker for instance you're outside pretty much all the time, just a few minutes in the dungeon and then back out on the sea.

  • Allison Hill

    oh i love to invest on the stock market but it is really risky these days,:’

  • sotck market investments are great specially if you know what you are doing and not just speculating about the stocks~.-

  • It has some mild language and if you are offended by that, please stay away from this video. But other than that, enjoy the glitches!