Friday, July 29, 2011

Obamanomics may destroy game industry

Nintendo just lowered it’s income forecast by 300 million dollars.-1 Clearly it’s been a rough year, despite selling 80 million Wiis globally and 4.3 million Nintendo 3DS’ since their respective launches the software sales has been mediocre at best. The launch of the 3DS has been a disappointment as well and the forthcoming Wii-U is being met with an unusual amount of skepticism for a Nintendo product, even by hardcore fans. All told, Nintendo’s sales this year have plummeted some 40%, a disastrous number.

The prognosis for the Big N is not good. Games are being delayed or cancelled left and right and many industry analysts are focusing on Nintendo’s many recent “mistakes.” The thing is, Nintendo hasn’t done anything unusual for their business model. The Wii is about five years old now, five years into the N64 and GameCube software sales dropped dramatically, and interest declined as Nintendo prepared the next system.

The 3DS, likewise, has followed in the footsteps of its predecessor launching at a larger price than the DS which launched at a larger price than the GBA, and both the GBA and the DS had lackluster lineups as well and the DS, at least, was facing a more powerful competitor hitting the market shortly after it’s launch. In the end, in the past, Nintendo has not only survived it’s competition, but has managed to thrive, especially in the handheld market. It is true that rapid price cuts, not just for Nintendo, but everyone, is usually a sign that they won’t dominate this generation but there are other factors at play and the focus on Nintendo belays the deeper problem… It’s not just Nintendo in a state of deep hurting, and what may be a surprise is to learn that Sony’s sales have recently tanked as well. Now the PS3’s price tag was very hard to overcome until recently anyway. The PS3’s sales have not been anywhere near as strong as the PS2 was, yet despite this and the recent 12% dip-2 in their sales no one is declaring doom and gloom for Sony, though to be fair it’s software sales have been stronger than Nintendos, but the company’s sales are still in decline. Microsoft too has had reduced sales as has Konami, EA and Capcom’s sales are down an alarming 37%-3, worse yet Square-Enix is on it’s deathbed and countless experts have proclaimed the death of the western localization of JRPGS (my favorite genre.) Seems like if your game isn’t Call of Duty you’re sunk.

There are a lot of factors contributing to this problem, the advancement of the smart phone as a gaming platform, the novelty of motion gaming all but worn off (The Play station Move is all but dead) but the real problem that no one wants to talk about is that people aren’t buying games, all but the absolute must haves are collecting dust on store shelves. Why aren’t they buying games? Well many of us hardcore gamers are now in our thirties and forties, we have families to feed and it’s hard to do that in an environment of perpetual 9.2% unemployment and a real inflation rate estimated to be about 10%-4. These problems are not going away, and are not likely going away anytime soon,

For those enough nerdy enough to follow economics, like myself, we know the real reason this is happening. Government is borrowing and printing money in numbers we have not seen since the Weimar Republic. Obama’s exacerbation of Bush economic policies have taken the bad situation Bush left us in and made things far, far worse. The more money in the system, the less value it has, the less value the less gas, food, utilities and other basic necessities we can afford. The more we have to spend on the basic the less superfluous money we have to blow on games, DVDs, Blu Rays, music and comics, all areas of industry in a state of decline.

And get this, if Obama gets his way and gets a “balanced” approach to raising the debt ceiling, which amounts to increasing the nation’s credit card without paying any of it off, and taxes get raised then there will be even less money to blow on extras. For those who believe he’ll only go after the rich let me remind you his hero Woodrow Wilson promised that only the top income earners would ever have to pay income taxes, and then only 1%. Within a few short years everyone was paying income taxes and the top earners had to pay over 70%. Look at your paycheck, is the government taking money out of it? Now imagine a scenario where they take even more in the name of “balance.”

Smart Phones have a lot of fun little addictive titles like Fruit Ninja and Angry Birds, all of which are great when you’re trying to kill five minutes, none of which parallel a full handheld experience. So why are Smart phones outpacing the handhelds? Well, in today’s market Smart Phones are a necessity, dedicated handheld gaming units are a luxury. When money is tight the luxury items fall to the waste side.

Look, no one I know doesn’t want a 3DS or the upcoming Playstation Vita. My fiends who have played my 3DS have all found reports of it being “underpowered” to be a gross exaggeration. Since Launch I have gotten 5 games, and with the exception of Zelda all 5 have given me a near-X-Box 360 like experience for almost half the software cost. Why pay $60 for Dead or Alive when the 3DS version looks and plays almost as good for $40 and has the bonus of being 3D without glasses? I think the 3DS has a great launch lineup, I honestly don’t know why people are complaining… actually I do. They can’t afford one, technically neither could I but I am just that hardcore of a gamer. They can’t afford one and so they need to justify their reasons for not buying one. Never mind the original DS only had two decent games at launch, five solid titles, and a good ten more due out by the end of the year that are must haves becomes a “crappy launch lineup,” even though I had a full year of the original DS before I got my third game for it (Castlevania). Never mind all the awesome downloadable content that has come out in the last few months, and never mind Nintendo’s amazing price drop and the ambassador program to reward early adopters.

If people didn’t have to worry about how their going to pay for their next tank of gas than the 3DS would have been a smashing success. I promise you PS Vita is doomed to the same fate, it’s the reason why I feel the hardware manufacturers aught to delay new hardware as long as they possibly can and focus on cheaper and better games instead.

There is one odd exception to this, and that is, of course, Apple who is thriving. I don’t know why though. The Ipad is just a supersized Iphone yet everyone (self included) wants one, even though it is also not the most practical of gaming devices. It’s likely that the multi-media functionality of the device is the core of it’s appeal, but as a gaming unit it fails to deliver deep and meaningful gaming experiences.

My guess is that saving the gaming industry will require a new president, one who will back away from this tax and spend insanity and reinstate a laissez faire economy. Historically this has worked. Calvin Coolidge did it, and Reagan did it, and in both cases after two years of cleaning up the mess of the progressives before them the economy rebounded and people started buying stuff they wanted but didn’t need again and soon the boom of the 20s and the prosperity of the 1980, 90s and most of the early 21st century followed in the wake of a laissez faire economy. I promise you if we hold the line on spending now, and replace Obama in 2012 with a free market type of president we will prosper again, after 2 years of cleaning up the mess… in total we’re looking at the potential for another 4-5 years worth of this if Obama is replaced and as many as ten years if he is not. Economic polices matter, the spending the government does matter, tax policies matter, but the great tragedy is that by the time we can get around to fixing the economy it may be too late for Nintendo.

-1: Nintendo Loses 25.5 Billion Yen by Richard George accessed 7-29-11

-2: PS3 Sales Dip by Colin Campbell accessed 7-29-11

-3: Capcom Sales Fall 37 Percent
Jim Reily accessed 7-29-11

-4: Inflation Actually Near 10% Using Older Measure, CNBC accessed 7-29-11


  1. The principle target audience for the video game industry is young single males. This is one of the demographics hit hardest by the great recession. Youth from 16 to 24 have an unemployment rate of 18.4% while the national average is 9.2%.

    Nintendo is a Japanese company another country racked by economic recession due to out of control gov't spending and protectionism.

  2. I love how you try to pin a global economic crises on Obama. The American economy crashed under Bush and his Reaganomics on steroids policies. No President in American history cut taxes while fighting a war, hell under Roosevelt the top tax rate was 94% and Eisenhower it was 91%. Bush isn't the only reason our economy is in the crapper, Clinton and his free trade agreements did a number on the American job market. Ross Perot was right when he talked about the giant sucking sound.

    Now on to the 3ds. The 3DS is failing because most gamers don't have a reason to buy one. The DSi has a huge library of games, a better battery life and it is cheaper. On top of that there is no must have game for the 3DS. I already own two copies of Zelda OoT, why should I buy another? I have a superior copy of SFIV on my Xbox, why should I spend money on getting it on the 3ds. There is no value in owning a 3DS at this moment.

  3. Obama's policies are directly responsible for the state of the economy. Like it or not Obama has made things significantly worse. The only out we have is to cut spending, and Obama simply won't do that. I have written quite a bit on the economic legacies of previous Progressive presidents, if you'd like to check those out. Also I recommend reading "New Deal or Raw Deal" by Burton W. Jr. Folsom. It's not Reaganomics that's the problem, its Roosevelanomics. There's a reason FDR presided over the great depression, and his predecessor was only a small portion of the problem. There's a reason Reagan presided over the greatest period of economic growth since the Roaring 20s. There's a reason our economy has been in decline since Bush I and every other president since moved away from Reagan style policies. Bush I raised taxes, remember? And the Reagan formula involves more than the minor tax cuts everyone got under Bush II. Bush II didn't make anywhere near as deep of cuts. There's a reason the economy was failing under Carter, and it's failing now. The argument isn't a Republican Vs Democrats argument, there are progressive Republicans too, the problem is John Maynard Keynes (Progressives) vs FA Hayek (Sane people). History has shown us those who follow Hayek's model lead us into prosperity.

  4. @ Michelle82 continued...

    On to the 3DS. The 3DS only faces one challenge that is unique from the situation the DS faced at launch, the economy. The DS did not have anywhere close to the quality or quantity of launch titled the 3DS has had. The battery life came under fire, people said the GBA had a better and cheaper line up, that the dual screens were just a gimmick, and that the DS was doomed once the PSP came out, remember?

    We've been here before with Nintendo. The problem is that Nintendo is indeed suffering economically where before they were able to turn things around. That means we have to look past Nintendo's "mistakes" and analyze what else could be happening here. The simple truth is that the DS launched at a time of economic growth and stability, and like it or not that was under Bush. Bush actually had 6 prosperous years in spite of the wars and the economy only began to destabilize in 2007 a full year after the Democrats took the house and Senate as a repudiation of the wars as well as the Katrina matter. There's a lot that went into the collapse of the economy. But as you can see here:,r:4,s:0&biw=1920&bih=989
    the spending Obama has done has been far more significant than Bush, so to lay the blame at Bush's feet, especially 3 years into an Obama presidency, and especially when the economy collapsed after the Democrats took 3/4ths of the power in Washington away from the Republicans seems a bit odd to me, because it's the new Obama economy Nintendo is now facing, and Bush has been out of the picture for a very long time now, and it's the Obama economy which may be the nail in Nintendo's coffin, where as lackluster launch line ups, poor battery life and gimicky new features have not stopped Nintendo from thriving in the past under better economic circumstances. Great post though! I hope you keep them coming, it is a great debate that needs to be had especially among younger people.

  5. @ the politicalthesis my friend you hit the nail right on the head. That is an excellent observation. So in the end Japan too must adapt a laissez faire economy as well or Nintendo may be doomed no matter what happens here. It's spo sad to see a staple of my childhood on the brink like this...

  6. You, sir, are an idiot. I came to that conclusion when I read you were a libertarian
    (a.k.a. an emotionally stunted greed head who sleeps with a copy of Atlas Shrugged
    under their pillow and thinks of the world in terms of parasites and producers).
    Unfortunately I continued to read your screed which, admittedly, is well written,
    but factually incorrect. I really can't abide people that use economics as a
    political bludgeon instead of as a tool to understand the workings of the worlds
    financial markets and how people interact in them. You try to sound like an educated
    person and perhaps you are, but you have committed the first sin of true research
    and commentary. You imposed your set of beliefs on an issue instead of trying to
    define the issue.

    First, you stated this:

    The only out we have is to cut spending, and Obama simply won't do that.

    That is complete and total nonsense. It is a spectacularly stupid idea and I suppose
    that is why our government has just embraced austerity as sound economic policy.
    Unfortunately, it is going to lead to a deeper recession or depression.

    Why? Well, it is quite simple. The Federal reserve has set historically low interest
    rates and no one is borrowing so the Fed can not stimulate the economy. Businesses
    are currently sitting on large piles of cash and they aren't expanding or hiring
    because their is no demand in the market so they can't stimulate the economy. Why is
    there no demand? Because unemployment is high and people are tapped out from the housing bubble. In a situation like this, the federal government is the only way possible to stimulate
    the economy through infrastructure projects, R&D, etc....

    But, you are wrong on the policy and you were wrong on the facts. Obama has been very supportive of cutting government spending. Over the last few months he has tried to cut Social Security and Medicare as part of a "Grand Bargain". Over the weekend Congress lifted the debt ceiling and promised over a trillion dollars in cuts to discretionary spending. Today the EPI estimated that this is going to cost 1.8 million jobs. In other words, the policy you advocated and that Obama and Congress supports is taking the country in the wrong direction.

    I could go on and on about other things you wrote - Regan didn't preside over the greatest period of economic growth, that was the Gilded Age (1870 - 1880), George W. Bush ran a larger debt than all the previous presidents of the U.S. combined, and FDR brought the country out of the Great Depression after Republican Herbert Hoover drove the nation into the ground using policies strangely similar to the ones that are popular in Washington right now.

    If you have a political axe to grind, so be it, but don't act like you are some towering intellect while you do it.

  7. Sorry about the formatting at the top of my response, not sure what happened there.

  8. Mr Bingo-It is regrettable that you open your argument with personal insults. It is also regrettable that you do not have the facts straight. Obama has spent more in three years than all presidents past combined and even announced today his intentions for more stimulus spending. Also if you read the "grand bargain" it raises the debt ceiling with 900 billion dollars in cuts over ten years and the organization of a panel that is to find a little over a trillion dollars more in cuts, while at the same time adding a total of ten trillion over that same time frame to the deficit. If we assume that the promised cuts occur (and they won't) then we have a deficit that in ten years will be 7-8 trillion dollars bigger. When we have a 14 trillion dollar deficit cutting 900 billion now an d "promising" more cuts later is a joke. This isn't a win for fiscal conservatives. Also FDR did not bring the country out of the Great Depression, he took Herbert's recession and CAUSED the great depression. George W. Bush too 8 years to add a trillion to the deficit, Obama has added 4 trillion in 3 years. You also misstated what I said about Reagan, I said he caused the economy to rebound, and we thrived, after a two year recovery from Carter period, we thrived. The better example is Calvin Coolidge who rolled back the mess Woodrow Wilson made and with cuts to the size, scale and scope of government lead us to the roaring 20s. Also, you might not know this, but FDR's policies are an exacerbation (look the word up) of Herbert Hoovers. Hoover grew government and increased spending, FDR grew government and increased spending. Bush grew government and increased spending, Obama grew government and increased spending. By spending more time crafting your personal insults you completely missed the point I was trying to make. In order to fix the problem we need dramatic cuts to the size, scale and scope of government, and that means dramatic cuts to spending, cuts that will be greater than our increases is spending, which the "grand compromise" does NOT do. In the future I am happy to debate you, but I recommend you spend time trying to create a reasoned argument rather than uncleaver personal attacks. How do we come together and form a deeper understanding of each other as a people if we start every conversation with a personal attack? It doesn't change hearts or minds, it just makes people angry... And you wouldn't like me when I'm angry.
    As far as acting like I have a towering intellect, you can judge all you like but the reality is what I have stated. That is the history as it happened minus the emotional progressive spin and feel good do goodery of government propaganda. One only needs to really look hard at the numbers of the great depression era, Spending went up, unemployment got worse, the economy never recovered while FDR was alive and only in the wake of the Harry S Truman post war era did we enter a state of modest growth followed by stagflation. We didn't have a real recovery until Kennedy cut taxes, and the scale and scope of government. But that recovery was cut short by LBJ's "great society" and "war on poverty" which incidentally didn't end poverty. Libertarians, for the record, advocate for maximum individual liberty. People should be free economically as well as socially. Do you, as a progressive, then support confiscating the fruits of a person's labors? If so how are you not advocating making people work for another's benefit, and more importantly, and think about this don't let your emotions react to this question, I want a thought out answer, how is that not slavery? To make someone work to confiscate the products of their efforts... How is that different from what the Democrats were doing to the Blacks 100 years ago?

  9. @Micheal82. In the article, he says it is Obama AND Bush's fault.

    It is obvious that supply side economics w/ out fiscal discipline and perpetual Keynesian stimulus policy would drown any country is massive debt.