The Economy of Video Games

There is no worse opinion than those formed by people who have not tried out the subject at hand. While I won’t say that no economists or analysts play video games, the general consensus is that video games are more of a new generation thing. There certainly are more younger gamers than older ones.

I grew up playing video games since I was five. I went through my teenage fan boy years, spouting why so and so console was so much better than the other. Now that I’m smarter and actually have the slightest inkling of economics, I’m willing to say that most economists can only say the obvious when it comes to this portion of the market.

Now, don’t get me wrong. I’m sure that there were at least some economists who saw the Nintendo Wii when it was first unveiled and knew that it was going to be a hit. The same could be said about Nintendo’s handheld, the DS.

But let’s start chronologically. The Nintendo DS was put together under haste to compete with Sony’s Playstation Portable (PSP). In all aspects Nintendo’s product looked inferior to its long-time competitor. The PSP was sleek and more powerful while the DS was fat, weaker, and a bit clunky. When I first saw the product, however, I knew that Nintendo was going to win. Having played video games in the same way for years, gamers would want something new and the DS offered it. In the end, the DS clearly dominated the handheld market.

Now the Wii enters. It suffers the same big issue that plagued the DS when it first debuted: weaker than its opponents. At the time, power was everything. Sleeker graphics, more dynamic action and angles, and bigger worlds were the norm. When the product hit shelves, though, people went for the Wii instead of Microsoft’s Xbox 360 or Sony’s Playstation 3.

At this point in time, I knew that the Wii would, if not come out on top, closely compete with the other two. I believed that because it offered innovation that neither of the other two provided it would succeed. I was wrong, however. The Wii succeeded not because of this innovation, but because of the audience it reached out to. Nintendo took a look at Microsoft and Sony and said to them “You two can share this pool. I’m going to find a new, bigger one.” In the end, Nintendo created and profited greatly from the casual gamer market, comprised mostly of young children, women, and the elderly.

This is common knowledge by now, though. Or so we’d hope. One look at the end of this article would seem to imply otherwise. Starcraft II was one of the most anticipated releases of the summer. This only came up as a blip on the radar shortly before its release. Gamers (real gamers) knew that the moment it was announced, Blizzard had hit the jackpot.

I feel bad bashing analysts. It’s a legitimate job, the pay is quite nice, and most of the material they analyze are recent trends that are ongoing or have just passed. The fact remains, however, that there is still a barrier of generational separation. If you’re going to look for an opinion on video games, ask a gamer that is knowledgeable about their hobby. Chances are we know more than the average Wall Street worker. Or, at the very least, ask one that also plays video games.

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