Video games are supposed to do well in a recession. But that hasn’t stopped Goldman Sachs analyst Robert Higginbotham from downgrading GameStop (GME), which serves as a proxy for the game market.
“While the much anticipated release of Grand Theft Auto IV at the end of April is expected to produce record sales, and Wii Fit, slated for May, is also expected to be a blockbuster, the remainder of the year lacks any big releases, and comparisons get tougher throughout the year.”
Comparisons get tougher because Halo 3, Guitar Hero 3, and Super Mario Galaxy all released in the latter part of 2007, and there is nothing on the horizon that looks like it will come close this year. This is somewhat of a high-class problem — the industry has put out such huge blockbuster hits that there’s really no way it could keep it going non-stop.
And keep in mind that the video game industry, like any other, is cyclical: First gamers buy new machines, then they buy new games for them. Eventually, they start hoarding their pennies for the new machines and new games. But the Xbox 360 (MSFT), the oldest of the new consoles, isn’t even three years old yet, and each generation of video game consoles lasts about 5-8 years. So we don’t expect a serious slowdown for a while.
And when it does come? We don’t expect a total bust, like in 1983, when Atari buried millions of “E.T” games in a landfill in New Mexico.
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