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There are some who say that video games will be just fine during the economic crisis. Of course, you have to consider who's spouting this idea when evaluating it. According to this article, gaming giants Microsoft (NASDAQ: MSFT) and Sony (NYSE: SNE) believe that the upcoming holiday season won't be so tough on their PlayStation 3 and Xbox 360 consoles. They agree with some pundits who think that people will look to drop several hundred dollars on a system as opposed to spending even more on bigger-ticket items such as a vacation. If people cocoon in their homes during this terrible time period to save cash, then they may want to play video games. That's one dimension of the argument.

The other is that consumers may turn to escapist fantasies and casual diversions to take their minds off their problems. In this sense, video games are no different than the movie industry, which is supposed to be resistant to recessions. Again, companies like Disney (NYSE: DIS) and Time Warner (NYSE: TWX) make content that can immerse you in worlds that are different (and more fun) than the one you currently exist in.

Both arguments make sense. Many video games are like movies these days, so comparing them to the film industry is important. And video games definitely are cheaper than a trip to Walt Disney World. However, there are a few things to keep in mind when thinking about these concepts and making an investment decision. First, we are arguably in an environment that we've never seen before. The variables are so different these days. Who's to say how recession-proof movies are going to be, let alone video games? An Xbox 360 can be had for $200. So what if it's less than a trip to Mickey Mouse's castle? Consumers will still be aching. At the very least, if parents don't cut back in terms of buying Johnny a system for Christmas (and they may not, since parents oftentimes refuse to disappoint their kids during the season of Santa), then surely the households who already have one system installed will think twice about installing a second system (yes, many households have multiple systems).

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Are video games a defensive industry at this point? originally appeared on BloggingStocks on Fri, 10 Oct 2008 15:39:00 EST. Please see our terms for use of feeds.

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