Video Game Stock Shocker!

Games company stocks are recession-proof huh? Try telling that to the millions of us with Electronic Arts, Activision Blizzard and Ubisoft holdings (to name but a few).

Yes there was a time when the games industry rode out recessions. In fact, some of the larger publishers positively flourished as staying in became the new going out for credit-crunched consumers.

I can personally vouch for this as, along with my colleagues at Electronic Arts, I watched my stock options soar by almost 400% in the four years after the bubble burst.

The reasoning was simple: consumers had reviewed their entertainment spending habits and decided that sitting on the sofa with one hand in the pizza box and the other around a PS2 controller was the best way to tighten their belts (metaphorically at least!).

So what’s happening now? Admittedly we’re in a more precarious economic situation than we were back then, but surely that can’t account for annual falls of between 50% and 85% for some of the industry’s biggest players, especially when many other – apparently weaker – stocks haven’t taken so much damage?

Each of the companies mentioned above has, admittedly, had to deal with a number of internal issues over the last couple of years (the formation of Activision Blizzard and EA’s lack of foresight regarding the massive popularity of the Wii, to name but two) but surely such big beasts should be able to cope without shedding over half their market value?

I guess those of us whose portfolios are relying on the gaming industry getting itself off the floor should be heartened, then, by the news coming from the hardware manufacturers over the last few months.

The Xbox 360 price cut and booming PS3 Slim sales both bode well for the future of software sales, allowing us to dream of brighter times ahead.

One thing’s for sure though: any remaining assumptions about the gaming industry’s economic invulnerability can be put to bed!