The Video Game Industry and the Recession of 2008

Essay by mihai2011romCollege, UndergraduateA+, April 2013

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The Video Game Industry and the Recession of 2008

In our days, videogames are starting to be more recognized as a powerful entertainment outlet. Because of this, there are more people playing games every day. Since 1971, the game industry evolved economically. In June 2011, the global video game market was valued at US$65 billion. But, even this great industry has had its share of economic troubles. One of them has been the 2008 recession. So, what were the effects of the recession on the videogame industry? In order to fully understand this problem, I'll first define what a recession is then. Then I'll explain the other reason that affected videogame sales. And finally, I'll talk about the direct consequences of the recession: like studios shutting down and lower sales.

Firstly, "in economics, a recession is a business cycle contraction, a general slowdown in economic activity. Macroeconomic indicators such as GDP, employment, investment spending, capacity utilization, household income, business profits, and inflation fall, while bankruptcies and the unemployment rate rise.

Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be triggered by various events, such as a financial crisis, an external trade shock, an adverse supply shock or the bursting of an economic bubble. Governments usually respond to recessions by adopting expansionary macroeconomic policies, such as increasing money supply, increasing government spending and decreasing taxation"�.

Secondly, videogames sales depend highly on hype and presentation. These results in a huge part of the budget dedicated to advertisement and to access new technologies. Because of new needs to succeed, the development costs of videogames have gone up. For example: in 2008, the expensive game ever made was Grand Theft Auto 4. It cost 100 million dollars�. Because of this, they needed at least...