Gamers Prep For New Gaming Consoles

Gamers power up to buy new consoles despite glitchy economy

By Claes Bell — November 22, 2013

Forget the hemming and hawing about price, forget the crummy economy and high unemployment rate — lots of people are going to buy the new gaming consoles coming out this month.

The 2013 Video Game Console Survey commissioned by shows that 9 percent of Americans are "very likely" to buy a next generation video game console in the next three months, with another 6 percent saying they’re somewhat likely to buy one, compared to 84 percent who said they were unlikely to do so. Of current console owners, 17 percent said they were likely to upgrade to a next-gen console, with 11 percent saying they were somewhat likely to upgrade.

These numbers may not seem that high at first glance, but they would mean a huge debut for both the PlayStation 4 and the Xbox One, says Jesse Divnich, vice president of insights and analysis at EEDAR, a research firm specializing in the video games industry.

Divnich says that given the vast numbers of consoles already in homes, if anything even close to the numbers suggested by our poll actually show up to buy a console, it could mean a shortage of the machines for the holiday season.

"If that actually did occur, that would be record-breaking," Divnich says. "There certainly wouldn’t be enough hardware in the channel to support that."

High prices faze some, but not hardcore gamers

Interestingly, those committed enough to gaming to buy a next-gen console in the next three months don’t seem to give a damn about whether they can afford it or not. The percentage of people looking to spend $400 or more on a next generation console was remarkably consistent across different levels of income, with an identical 9 percent of those making less than $30,000 a year and those making $75,000 a year or more saying they planned to buy one.

Michael Inouye

"You’re going to see a good-sized group that’s just going to wait for the price to come down anyway, the hardcore gamers who are really into it, this is what they want to spend their money on. Those who are more casual will just wait."

"It’s actually kind of disappointing," says Mary Ellen Nicol, a credit counselor with CredAbility, a nonprofit credit counseling firm. "I think there are things on the priority list that are higher needs and not where I would put this type of purchase, which is definitely in the ‘wants’ category."

Nicol has a point. For a person making $30,000 a year, the price of the new Xbox One plus one $60 game would represent a week’s worth of wages.

Annual salary Weekly pay Price of Xbox One
and 1 game
Weeks of salary
$25,000 $480.77 $559 1.16
$30,000 $576.92 $559 0.97
$50,000 $961.54 $559 0.58
$75,000 $1,442.31 $559 0.39

And even for those with higher incomes, purchases of this size should be planned for a few months in advance, and money put aside, so that buyers don’t end up having to put it on a credit card.

"Basically, you’re talking about an extra car payment with this one purchase," Nicol says. "The consequence can be that you fall behind on a different financial commitment."

Among less hardcore gamers, the high price of the Xbox One and the PlayStation 4 did get some notice. When we asked current console owners who weren’t planning to switch why not, the most common reason they gave was the high price (21 percent). The other big answers were that they don’t use the game console they have now (17 percent), and that the current generation isn’t a clear upgrade on their current console (15 percent).

Some reluctance to shell out that high asking price is expected, says Michael Inouye, a senior analyst with ABI Research.

"You’re going to see a good-sized group that’s just going to wait for the price to come down anyway," Inouye says. "The hardcore gamers who are really into it, this is what they want to spend their money on. Those who are more casual will just wait."

That price cut could be a ways off, though, says Masakazu Ishihara, a professor of marketing at New York University’s Stern School of Business.

Ishihara says he expects sales of the new systems to go well through the holidays. If sales drop off after that, "we would probably see a price-cut in 2014, by targeting some kind of seasonal demand, such as spring break or summer holidays. A high initial price also partly makes it easier to price cut subsequently."

Bad economy?
What bad economy?

EEDAR’s Divnich says he’s not surprised that plenty of people are planning to buy the new consoles despite the lackluster economy and stubbornly high unemployment.

"Video games have long been recession-proof," Divnich says. "Whether we’re in a downturn or an upturn, we’ve never seen any significant impact on gaming revenues."

In fact, during the 2008 financial crisis, video game sales actually rose; 2008 to 2010 ended up being record years for industry sales, Divnich says.

That may be because video games are actually a pretty economical form of entertainment, he says.

"People are playing games like ‘Call of Duty’ and ‘Grand Theft Auto,’ on average, 30 hours. There are some people are playing upwards of hundreds or even thousands of hours, but on average it’s about 30 hours, and they’re paying $60 for it, so they’re paying $2 for every hour of experience," Divnich says.

And unlike many forms of entertainment, you can sell your used video games to recover some of your costs, he says.

NYU’s Ishihara isn’t so sure gamers are going to ignore what’s going on in the economy when making their buying decisions. He points out that there were some major changes going on that may have boosted video game sales during the financial crisis, and that the recession made gamers more likely to seek out used games than before.

But Ishihara also thinks it’s possible that gamers confronted with hard times may cut out other more expensive ways of having fun instead.

"People might have found that video gaming is a more cost-effective way of spending leisure time," Ishihara says.

Type of entertainment Cost Hours of entertainment Cost per hour
Concert ticket $88 4 $22
NFL game $82 4 $20
Bar hopping* $32 3 $11
Buying a Blu-ray movie** $20 4.35 $5
Going to a movie in the theatre $8 2.175 $4
Video game $60 30 $2
Cable TV $86 157.5 $1
Taking a walk outside $0 Unlimited $0
*$5.29 per well drink at 2 per hour for 3 hours
**Assumes buyers watch movie twice on average
Sources: Team Marketing Report, Restaurant Sciences, Nielsen, NPD Group, National Association of Theater Owners, Pollstar, Business Insider

Methodology: The poll was conducted via telephone interviews conducted by landline (501) and cell phone (502, including 271 without a landline phone). Interviews were done in English from Nov. 7 to Nov. 10, 2013. Statistical results are weighted to correct known demographic discrepancies. The margin of sampling error for the complete set of weighted data is ± 3.6 percentage points.

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One comment

  1. Meagan says:

    Love the new look! I will not be buying a new console but I’m not a hard core gamer at all. I love using the xbox to stream netflix though!

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