With the recent announcement of a drop in mortgage applications, it has been widely reported that the world economy is bracing for a recession. The share prices of publicly traded companies have taken a beating as investors try to withdraw cash from the equity markets and place surplus funds in safer, lower-risk investment portfolios. However, to the surprise of many industry analysts, the rather turbulent online gaming sector appears to be handling the uncertainty and turbulence facing the markets quite well.
This has led many industry experts and investors to boldly declare that this sector is recession-proof. But is this bravado based on false confidence or is there some substance to his rather bold statements?
The online gaming industry has had a rough couple of years following the passage of the UIEGA, which effectively made online gaming illegal overnight in the United States. The share prices of several online gaming companies have been hit hard, but in 2008 several of UFA the publicly traded companies returned to the profitability levels they experienced prior to the passage of UIEGA legislation in October 2006.
There is some substance to analysts’ predictions that the gaming industry is recession-proof. With consumers’ money belts tightening, consumers are likely to spend much more free time at home. Online games, particularly online poker sites like PKR.com Poker, represent leisure activities that can provide hours of entertainment and that many consumers might classify as good value for money. With broadband connectivity becoming cheaper and more accessible, many believe that the recession may provide new opportunities to acquire new players.
This argument has some substance. However, the consumer spending adjustment is likely to immediately affect leisure activities such as online games. Existing online game players are likely to cut their gambling expenses, or even stop altogether.
Therefore, the analysts’ predictions seem too positive. While they may proclaim that the gaming industry is recession-proof, spending on gaming is more likely to be top of the list for most consumers when it comes to reassessing their disposable income. Industry analysts seem to be betting when the odds are against them.