Why video game sales are still strong

360 controllerDespite the grim reality facing the consumer electronics industry, which saw a decrease in spending of close to 14%, the largest drop since the category has been tracked; video games continue to rake in the cash!

In fact back in June, when people thought we were well into a recession, my colleague Zac Bissonnette took the stance that things couldn't be all that bad since we spent 37% more on games than the previous year.

Personally I feel that strong home entertainment sales such as video games or movie rentals signal a shift in consumer spending, which reflects the current financial situation: Consumers are looking for high value diversions.

While the September sales numbers haven't been released yet, I did have the chance to overhear a sales conversation at my local game store this week in which a manager proclaimed that same store sales were way up over last year and the past two days of same store sales were also significantly higher. It turns out he saw the same connection to a poor economy as I do, telling another employee that the rise in sales is linked to people looking for a better way to spend their entertainment dollars. My wife and I are a prime example, we haven't gone to a movie theater in at least two months but we did spend $50 on Boom Blox last week, which should provide us with weeks of entertainment.

A common misconception about the cost of video games is that the initial expenditures outweigh your savings, even if you get a lot of use out of the game. In fact, the cost of the console is negligible for anyone who already owns a video game system because it is now a sunk cost; you've already bought the most expensive part back when times were good so when a game is bought you only need to take the $50-$60 price tag into account.

From here it is only a matter of looking at how much time you spend playing a game to see where the value lies. While a movie in the theater ranges from $5-15 per hour of entertainment depending on length and concessions the cost per hour of entertainment from video games is much less. For example, according to Halo3.Junk.ws, I have played 82 hours of Halo 3 just in multiplayer. If you figure in the single player mode I've easily spent 90 hours inside the Halo universe since it was released. This means my cost per hour of entertainment was only 67 cents!

I'm confident that for most of my other games the cost per hour is also strikingly low due to the amount of entertainment my wife and I get from them. Due to the low cost per hour of entertainment that games enjoy, I can see the industry remaining strong through the holiday season as shoppers want to get the most for their money.

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