"This is not the year for silly stuff," said Keith Browning, 50 of Columbus, Ohio. He lost his job at a Honda plant and struck out on his own. "My brother gave me a Wii video game. I'm definitely returning that. We need some new pots and pans for the house. And I need tools to get my company going."

Last year, I bought my parents a Wii for Christmas, then was laid off from a gig in Silicon Valley. Mom demanded that I return the machine, and when I told her the Amazon reseller wouldn't take it, she insisted I sell it and pocket the money, which I did.

So I can understand where this guy is coming from, with the "silly stuff" comment. We've heard plenty about video games being high-value diversions similar to what movie houses provided back in the Depression. But for some people, when you're not working - or not working enough - giving or playing games just doesn't feel right.

Browning's quote is the definition of anecdotal, but I'm wondering if it portends a shopping mindset that means bad things for games this year.

A Tentative Sparkle Enlivens Holiday Shopping [The New York Times]

The company reported $1.04 billion in revenue for the company's second quarter of 2009, ended June 20, 2009. Executives credited sales of franchises World of Warcraft, Guitar Hero and Call of Duty as well as new games Prototype, Transformers and Wolverine.

Testifying to the continued strength of World of Warcraft, company executives said that more than a third of Activision Blizzard's revenue from the past three months came from MMOs.

But the mega-publisher lowered its revenue expectations for the year, from $4.3 billion for 2009 to $4.05 billion. The 2010 delay of StarCraft II and the first-person shooter Singularity were blamed, along with lower retailer orders for upcoming games, a byproduct of a weak economy.

Activision chairman Bobby Kotick said he expects game sales to be "flat to down slightly in America and Europe" for the year. "We are very concerned," he said about the forthcoming holiday market. "There's a lot of reason to be concerned and cautious." Activision's line-up is strong, he said, but the market overall is facing a tough period with shoppers not as eager to buy new games.

Activision's big hopes for the end of the year are Guitar Hero 5, Modern Warfare 2, DJ Hero, Blur, Band Hero, Tony Hawk Ride and Marvel Ultimate Alliance 2.

The recession hasn't been kind to online game developers, with companies like Mythic, Nexon America, Funcom, and NCsoft all experiencing job cuts and studio closings over the past few months, yet EVE Online creator CCP is growing strong. Mike Tinney explains that it's all a matter of self-sufficiency.

While all these other companies are doing layoffs and scaling back, because we're pretty self-contained - we're not a developer beholden to a publisher; we're not a publisher waiting for a developer. We self-publish EVE Online and support it in its entirety, so we have a lot more ability to react as the world economy shifts, and that's allowed us to retool focus on the core drivers for our business, and steadily grow while a lot of other companies are shrinking.

Growing while other companies are shrinking also gives CCP the benefit of a rather large pool of talented individuals who suddenly find themselves looking for work, as well as developers who are employed, but losing confidence in the way their employees are handling the harsh economic times.

It's given us an opportunity to go into a rapidly filling job market and open up new positions at all three of our locations and start looking for the next round of industry like-minded professionals.

Between EVE Online's steady growth and the development of the World of Darkness online title with its built-in audience of dedicated fans of White Wolf's Vampire role-playing game, CCP has all the pieces in place to continue its growth well into the next decade.

Activision Blizzard's top publishing executive Mike Griffith told Bloomberg that the current economic climate is perfect for creating acquisition possibilities, whether they be game companies or intellectual property rights held by companies hungry to make a quick buck.

"The combination of Activision holding a fair amount of cash and presumably prices being depressed, not only for publicly traded companies, but also likely for new intellectual property licensing rights, should certainly create opportunities"

So who is on the menu? Griffith wouldn't say, but don't worry. Activision Blizzard didn't become the world's largest video game publisher by making rash decisions. "We won't rush to judgment just because we have cash. We will be very disciplined."

Activision Looks for Acquisitions Amid Recession, Griffith Says [Bloomberg]

"We're seeing a lot of expensive video game systems, PlayStation 3s and X-Box and others, and a lot of LCDs (flat-screen televisions)," Ace Pawn Shop manager Chris Banul told the Associated Press.

Cash America, the biggest pawnbroking group in the country, pulled in more than $1 billion in revenues for the first time in its 25-year history last year.

Pawning things. That's got to be the worst. But if you had to, where in your list of pawnable items would your console hit?

Recessions boosts pawn shop business [Chicago Tribune]

The cuts will be in R&D, marketing, sales, finance, legal, HR, and IT. These reduction will reduce the company’s annual operating expense by about $1.5 billion and reduce fiscal year 2009 capital expenditures by $700 million.

“While we are not immune to the effects of the economy, I am confident in the strength of our product portfolio and soundness of our approach,” said Steve Ballmer, chief executive officer at Microsoft. “We will continue to manage expenses and invest in long-term opportunities to deliver value to customers and shareholders, and we will emerge an even stronger industry leader than we are today.”

No word yet on if or how this will affect the company's Xbox 360 division, though the earnings report found that the entertainment and devices division had sales growth of 3.5 percent.

The news follows on the heels of Sony's announcement that they are planning "headcount reduction" In game, music and movie divisions.

The economy might be tanking, but we still need our stuff. Without our stuff, what would we be? Stuffless...and no one wants that. Forbes details 10 of the stuffs that people are still willing to hand over their precious, precious money for. Video games were the second item on their list, right after smart phones.

Consumers today desire affordable escapism, and video games fall into that category. Two top-selling games—"Madden NFL '09" and the "Wii Fit"—sold 5 million units combined in the third quarter of 2008, according to NPD.

Other items that made the list include toy building sets, car maintenance items, and personal hygiene items. I never thought I would see video games in the same list as personal hygiene items, but there you go.

Ten Things We're Still Buying [Forbes.com - Thanks Josh!]

Gee, I could have told you that, looking at the list of recent industry layoffs. But Klotz pointed out in a Game Business Law summit at Southern Methodist University’s law school that spending on games hasn’t gone down – one out of every four American dollars is still spent on games. Rather, the rate of growth is decreasing; the 9, 12 and 8% increases in August, October and November should have been way higher, according to Klotz.

"The game industry is growing, but it has been impacted by the recession," he said. "We probably would have seen even more growth if it hadn't been impacted by the current economic climate in the U.S."

Games Already in Recession, says NPD [GameDaily]

“While the environment continues to be as challenging as we expected, consumers are being drawn to brands that they trust, and they are responding to our customer-centric model. In this light, we believe the market share gains we’ve been making will be sustained," said Brad Anderson, vice chairman and chief executive officer of the national retailer.

Best Buy's entertainment software revenue category, which made up a quarter of Best Buy's revenue in December and includes movies, music and games, saw a drop of 12.2 percent. Video gaming sales saw a single digit drop, which the company blamed on a drop in console sales.

While video game sales seem to be doing fairly well in the current economy, they're certainly not recession proof, it seems.

Is the gaming industry recession proof? Maybe not as far as development studios are concerned, but from a retail perspective things are looking just peachy. Retail gaming giant GameStop, in a press release titled "GameStop Rises Above Recession", have announced that the period between November 2nd and January 3rd saw an increase in sales of 22.3% over last year, with same store sales increasing 10.2%. Good for them.

Along with the good financial news, GameStop also informs us that new software sales were up an impressive 23.5%, with Call of Duty: World at War, Guitar Hero World Tour, Gears of War 2, Wrath of the Lich King, and Wii Fit making up the top five sellers of the season. Good for them.

GameStop Rises Above Recession
Holiday Sales Increase 22%

Same Store Sales Increase 10%

GRAPEVINE, Texas—(BUSINESS WIRE)—GameStop Corp. (NYSE: GME), the world’s largest video game and entertainment software retailer, today reported record sales results for the nine-week holiday period, November 2, 2008 thru January 3, 2009.

During the 2008 holiday period, total sales were $2,856.0 million, a 22.3% increase from the prior year of $2,334.6 million. Comparable store sales for the period increased 10.2%.

New video game software sales were outstanding, growing 23.5% with many titles selling in record numbers. The top five video games sold during the holiday period were Activision’s Call of Duty: World at War and Guitar Hero World Tour, Microsoft’s Gears of War 2, Blizzard Entertainment’s World of Warcraft: Wrath of the Lich King, and Nintendo’s Wii Fit.

Hardware sales, led by Nintendo’s Wii and Microsoft’s Xbox 360, were also robust, dramatically increasing the installed base of new users that should drive software demand in 2009 and beyond.

Daniel DeMatteo, Chief Executive Officer, commented, “As expected, the consumer saw great entertainment value in video games in one of the most challenging holiday shopping seasons ever. In fact, in the midst of a serious recession, our average transaction was higher this year than last. In addition, our proprietary inventory management systems allowed us to maintain a great in-stock position during the busiest season we have ever experienced. A major highlight of the period was that GameStop’s sales grew in every worldwide territory in which we operate; a clear indication that the GameStop model works everywhere.”

J. Paul Raines, Chief Operating Officer, noted, “Our store associates did a tremendous job of making sure all of our holiday shoppers found the right systems, games, and accessories to fill their wish lists. Their hard work and knowledge of our wide assortment of game products was critical in serving a record number of GameStop customers. Of note this year, gift card sales during the nine-week period rose 15% over last year and the day after Christmas was the third highest sales volume day in GameStop’s history.”

Updated Guidance

In a very challenging retail environment, we successfully managed our business to achieve our forecasted earnings. While sales significantly exceeded forecast, gross margin rates were lower than anticipated as a result of a higher mix of hardware sales and the success of our value messaging and promotions during the holiday period. Therefore, we are increasing our fourth quarter 2008 comparable store sales guidance to +9.0% to +9.5%. We are also raising the low end of our previously announced fourth quarter 2008 diluted earnings per share guidance by $0.02, resulting in a range of $1.31 to $1.34, which represents a +15% to +18% increase over the prior year quarter.

Full year diluted earnings per share are now forecast to range from $2.37 to $2.40, an increase of +32% to +33% over the prior year. Comparable store sales are projected to increase between +12.0% and +12.5% for the full year, with total sales growing between +24% and +25%.

Note that guidance does not include debt retirement costs or merger related expenses.

Full year 2008 sales and earnings results and fiscal 2009 earnings guidance are expected to be released in mid-March 2009.

The Chicago-based developer and publisher convinced the holders of its $75 million convertible senior notes to extend their right to make the company buy them back until Feb. 19. Midway is in talks with other holders to try and work out a similar agreement, Business Week reports.

While Midway both has This is Vegas and Wheelman on their plate as upcoming titles, the massive job cuts and studio closings seems to make it doubtful that Midway will recover from what is increasingly looking like a death spiral.

The only question now might be, who is going to buy the rights to Mortal Kombat?

Midway Games, note holders agree to extension

Forbes points to cuts on titles like Activision's Call of Duty: World at War — currently Amazon.com's deal of the day — and Guitar Hero World Tour as indicators that sales may be slowing on top tier titles. Analysts, such as Lazard Capital Markets Colin Sebastian, say that the reduction on the latest Call of Duty, a best seller in November, "highlights the risk of lower software pricing moving into the new year." That's bad news for publishers, now accustomed to selling games a sixty bucks a pop.

Activision's not the only one cutting prices. Pre-holiday releases form publisher Ubisoft like Prince of Persia, Tom Clancy's EndWar and Far Cry 2 saw significant cuts.

Forbes' Chris Morris theorizes that if publishers keep releasing new games at the new standard of $59.99 USD, "the inability to keep them at that level for a significant period could have some serious implications on revenues." Especially if wiser buyers anticipate that big-budget releases will be inevitably slashed and decide to wait, we'd think.

We'd also think it would be difficult to find anyone on the consumer side losing any sleep over less expensive games.

Game Prices Tumble [Forbes]

In a budget proposal that can be read in its entirety online, Patterson calls for state worker layoffs, cuts in education and health care spending, expansion to the state's lottery program, and taxation on all digitally delivered property. From the official document:

Close Digital Property Taxation Loophole. Imposes state and local sales tax on purchases of prewritten software, digital audio, audio-visual and text files, digital photographs, games, and other electronically delivered entertainment services to achieve tax parity. For example, with the passage of this bill, a book, song, album, or movie would be subject to sales tax no matter if it was bought at a brick and mortar store or downloaded online.

I wouldn't worry too much just yet. The budget still needs legislative approval, and I can't see much of a chance of that happening, especially with New York City Mayor Michael Bloomberg firmly opposed.

Gov. David Paterson unveils dire New York State budget that includes new taxes, layoffs and cuts [NY Daily News via Game Politics]

The problem is in the 'Casual' bit. The scores of newly minted gamers attracted to shorter, shallower games are more likely to ditch them when the going gets expensive, says Piers Harding-Rolls of Screen Digest, "We are not sure how the recession will affect the buying habits of these new, more casual mainstream consumers. [They] are more likely to view gaming as a discretionary luxury."

Equally, though, once they are hooked on videogames might we expect the casual crowd to seek out games with a bit more depth and longevity, just in terms of bangs per buck? Maybe a shift from Solitaire to Final Fantasy will be the downturn's lasting legacy for gaming.

Analysts Fear For Nintendo [Escapist]

"I don't think anyone anticipated the current economic situation," Aaron Greenberg, group product manager for Xbox 360 said. "We are fortunate to be able to lower our price on our products, offer a great value at a time when consumers are being much more picky. People are staying home more, people are making more family purchases than the past, devices that can deliver a variety of entertainment.

"I think that's benefited us tremendously, the fact that the Arcade (Xbox 360) is even cheaper than the Wii has helped us. We will continue to take our great price and add more value to it."

Unfortunately, it doesn't sound like that increased value could come from a drop in the price of Xbox Live, one of the few mainstays of the console that hasn't been reduced in price since its launch.

Greenberg calls Xbox Live Gold, which costs about $8 a month, an "upsale experience" and doesn't seem to think that gamers will be seeing a drop in its price anytime soon. (Live costs $50 if you pay for a year's membership up front)

"I think we have seen people are willing to pay for the premium experience," he said. "When they compare Live, even to Home, there is still a huge gap."

And Greenberg isn't a big fan of Sony's Home service, set to launch it's open beta tomorrow.

"What Home to me feels like is Second Life for hardcore gamers," he said, "it doesn’t feel like it broadens the experience and invites people in. When they unveiled it, it seemed innovative. I think what's happened is now here we are a couple of years later and we feel beyond that.

"It feels like 2005 tech in 2008. I'm not sure that’s what people want."

This morning the stock opened up with a value of $16.66 a share, down from last night's closing bell value of $19.35, according to Yahoo Finance and their fancy charts. Today the stock seems to be on a bit of a roller coaster ride, one with it's share of ups and downs, but none of those ups getting them anywhere near that $19 share value.

The video game industry may be recession proof, but if it is, it's only by comparison to all of those other industries out there tanking right now.

While no longer the cheapest gaming console, the Wii is still seemingly more family friendly, more attractive to non-gamers and maybe, I believe, more interesting to new-comers to this form of entertainment who haven't yet bought a high definition television.

Schappert, though not a big fan of the recession proof concept, still thinks that the 360 will be the console of choice for those looking for a way to forget their troubles through gaming.

"I don't know about the whole recession proof moniker," he said. "I'm not going to subscribe to that myself. I've heard others bandy that about.

"I think what the world and the U.S. Is going through now is certainly unprecedented and it's startling and it effects all of us. And it's certainly worrisome. That being said. I think when people are walking in and they want to buy a game platform and they're interested in entertainment, you know gaming is the largest form of entertainment, I think we are pretty fortunate to have the lowest priced, best value, next-gen machine on the market."