Video Games Buck Slowdown Trend in UK

As investors search for "recession-proof" investments, they may find buying opportunities in video games, once a realm dominated almost exclusively by teenage boys.

The video game market is expected to grow to $7.18 billion globally in 2008. And the LondonExpo, one of the largest gaming, sci-fi and comics conventions in the UK, recorded a 140% rise in attendance from the same time last year.

Lianna Brinded

“We’ve seen a dramatic increase over the years, especially this year”, said Bryan Coney, co-founder of the LondonExpo.

“The industry is not in a downturn where our market is concerned”, Coney added.

While the last report from the British Retailers Consortium revealed consumer spending in the UK has fallen sharply since May 2005, spending on the gaming industry is up 42 percent this year.

“Historically, the video game sector, dare I say, is quite recession proof," Ben Lerougetel, spokesman for Capcom Europe said. "Hopefully that will still prove to be the case as we go through the next few months."

“The classic argument that is often applied to the growing games industry is that games offer excellent value for money," Ed Barton, analyst at Screen Digest said. "In addition, when people are strapped for cash they tend to stay in more and video games are one of the leading options people look to for entertainment at home."

In the past five years the gaming industry’s revenue is up 113 percent. Market specialists said there are a range of factors for why companies like Ubisoft defy the ever tightening credit crunch.

“A lot to do with it is escapism," Korina Abbott, spokeswoman for Ubisoft, said. "The fact that you can buy one disc that will survive you for two, 10, 20 hours and more if you are playing with friends."

Still Looking to Grow

Even with the encouraging numbers, console producers like Nintendo, Microsoft and Sony have had to widen their target audience.

The Nintendo Wii console successfully reeled in a new market by reformatting its game play, while also releasing games that involve families and the older generation. Nintendo has sold 34 million consoles worldwide since the Wii's launch.

For the Investor:

What the Pros Say: Oil at $300; Gold at $2,000
Options Action: Volatility Rises for GE
Oil Drop: Bad or Boon?
Cramer: One Pharm Stock is a Buy
Stock Picker: Buy Small Caps NOW
Is Cheaper Gasoline a Rip-Off?
Options Master: Clues to Best Buy's Fate

And software companies like Capcom and Ubisoft are ramping up the ways they can beat the credit crunch.

“We’ve been looking at how we can use our intellectual property and generate additional revenue streams, other than just the games,” Lereougetel said.

This has included selling advertising space in-game, producing blockbusting movie franchises and creating an expansive range of merchandise.

"Despite year-on-year revenue growth many commentators have tempered once bullish attitudes with a little more circumspection in the last few months as it has become apparent that we are not facing just a recession but a banking and financing crisis as well, the longevity of which remains unknown,” Barton said.

“It will be some time yet before we have fully digested what’s currently happening in wider economic cycle and how precisely this will impact the games sector”, he added.

(CNBC's Ross Westgate investigates the gaming industry, watch the video above).