Recession or Transition?

All of that is even before we begin to consider what happened to "full price" game distribution. On the PC, Steam was utterly ubiquitous this year, capping off 2009 with a series of sales which drove massive hype for the service and almost certainly generated vast revenues, taking advantage of the limitless back catalogue stock of an online distribution service. Other services, too, enjoyed a healthy 2009 - while on the 360, Microsoft launched a Games on Demand service selling fully-featured retail games digitally (albeit at controversially high price points, which has probably limited growth severely), a move which Sony also made with its PSP titles and even with selected PS3 games.

In other words, if you were a gamer, 2009 was a year in which a smaller percentage than ever of your videogames spend went through the tills of retailers. Even as online retailers continued to squeeze high-street stores, and supermarkets weighed in to put the squeeze on both, the reality was that gamers had more ways than ever before to spend their money.

Paying too much attention to retail figures in our assessment of the health of the market is a risky business, as a result. More than ever before, there are many companies in the games ecosystem who have never manufactured or sold a physical product, and whose entire existence is ignored by NPD, GfK and all of the other data collection firms. Giant firms like EA are starting to see big percentages of their revenue coming in from online-only transactions, and this, equally, is not included in the figures we pore over.

This isn't a "flaw" with the data firms, as such - they exist to track the retail market - but it's a major flaw in the thinking of any industry analyst or commentator who accepts NPD or GfK figures at face value and declares 2009 to be a year of decline without a single caveat. The reality is that we cannot know that.

Certainly, boxed sales declined, probably only temporarily - but were they cannibalised by emerging markets? I know that speaking personally, I probably spent less on boxed games last year because I had vastly more entertainment content available to me through digital channels. This is an anecdote, not data, but I doubt that I'm the only consumer on Earth who experienced this. There's a real possibility that the games market as a whole actually grew in 2009, but the boxed games market - which we can measure - was perhaps even nibbled around the edges by emerging business models - which we cannot, as yet. This would be a clear sign of an industry in the early stages of a transition much more dramatic than any hardware generation transition could ever be.

What this means, in real terms, is that publishers and developers alike should not be so quick to blame recession for any present woes. Admittedly, blaming recession for making cuts that you'd planned to make anyway is a centuries-old tradition, and one which has been in full swing during the present economic downturn, so that's unlikely to stop any time soon. However, companies need to look more closely at what has actually happened to their revenues in the past 12 months. Have your consumers really started watching their wallets more carefully and buying fewer games? Or have they all discovered that those idle leisure moments can happily, cheaply be filled from Xbox Live Arcade, Steam, an MMO subscription, a package of DLC for a three-month-old game, a jaunt to Facebook for a bit of Farmville - or even a quick download from the iPhone App Store?

Moreover, if the latter is the case, what are you going to do about it in 2010? If, as I suspect, the recession has disguised the beginnings of a fundamental shift in game consumer behaviour, then the answer to that question seems likely to be one which determines the fate of many games companies in the coming years.