The gaming industry is often referred to as recession proof, but the general inclination of people to purchase goods that can
entertain them at home in tough times is not enough to fuel the gaming
sector right now. The $1.83 billion console industry fell 18% in March and 8% in

However, those numbers have less to do with the flailing economy than
the state of the gaming console business right now. All three of the
leaders in the space —  Microsoft’s Xbox 360, Sony Playstation 3, and
the Nintendo Wii — have not launched new consoles in about three years.
Rather than start selling new products, they’re looking to marketing tactics and repositioning what they already have on the shelf to increase sales.

Moving into “middle age” (consoles tend to outlive their utility in about six to ten years) console makers are having to change their marketing strategy. According to AdAge:

“Whereas once early adopters and hard-core gamers could be counted on to fuel the category, that “installed base” is pretty much saturated, said John Koller, director-hardware marketing for Sony Computers and Entertainment of America. That leaves marketers to change strategies and reach out to other potential buyers by flogging features beyond gaming. “It’s when the … hard-core push shifts to a broader one,” he said, that “the tipping point happens.”

Game manufacturers are not ready to launch new console products – they still need to recoup the investment on research and marketing for the games and services they currently sell. Right now they’re trying to educate consumers on the benefits of their consoles, dropping prices, and coming out with special editions.

But they’re also finding new uses for their current technology, through partnership and new services. These products are not simply gaming consoles, so they can now be marketed as content providers.

29% of U.S. 25-to-34-year-olds with game consoles use the devices to watch streaming video off the Internet, according to In-Stat.

Microsoft’s Xbox 360 has Netflix streaming through its console, and more than 1 million subscribers are streaming Netflix content through their Xbox’s. This week the company announced that it wiill bring satellite TV to Xbox users in the UK.

Meanwhile, the Wii has online polls and avatar-designing competitions, and now Sony is planning to stream free music video in its Playstation 3.

While quickly outdated consoles will remain a problem for the gaming industry until games get out of the console business altogether, connecting to the internet and creating new partnerships gives them a way to extend their shelf life.

By adding new services and features not normally associated with games, these companies are both extending the life of their devices and increasing sales with new demographics

Eric Lempel, director of PlayStation Network operations, said of his product last week:

“It’s still very game heavy, as a lot of people bought this console as a game device, but the [straight] video side is going strong. We’re getting people in the households who hadn’t yet interacted with their PS3 in the past. This is the girlfriend, wife and mother.”