The credit crunch has taken a Godzilla-sized bite out of the world's collective bank account since the recession reared its ugly head early last year. Economic downturn has impacted businesses around the globe, leaving few industries untouched by its depleting influence. As those proverbial dark clouds began to gather on the business horizon, many gaming industry executives paid no mind, believing that their particular sector would be spared a battering by the oncoming storm. Unfortunately, this turned out to be something of an oversight.

Industry Impact

Unlike the movie industry of the 1930s, which proved immune to the Great Depression of its era, the gaming sector has been just as susceptible to the economic crisis as any other business. Several development houses have been crushed under its considerable weight; TimeSplitters studio Free Radical Design was one of the first to succumb, recently followed by Lair developer Factor 5, but it isn't just the smaller firms that have taken a hit.

Midway Games was something of an industry powerhouse, one of the few active studios to have produced games before the rise of the home console. Despite the firm's Mortal Kombat franchise being a household name, its failure to keep its head above water during these trying times led to the company filing for bankruptcy last year, before being bought out by Warner Bros. in a multimillion pound deal. Even market leaders Sony and Microsoft have resorted to layoffs in a bid to aid their monetary endeavors, the latter bringing the curtain down on Aces Game Studio and Halo Wars developer Ensemble Studios.

Perhaps more significantly, the recession has begun to eat away hardware and software sales. As recently as June, figures from NPD Group demonstrated an alarming 31% slump in gaming sales compared to the previous year. This plummet represents the biggest year-to-year downturn since 2000, and the fourth consecutive month of steady decline.

"This is one of the first months where I think the impact of the economy is clearly reflected in the sales numbers," said analyst Anita Frazier. "While the aggregate of content may not be as strong as what we saw in the first half of last year, and while the consumer base willing to spend dollars on hardware at the current price points may be thinning, the size of the decline could also point to consumers deferring limited discretionary spending until a big event (must-have new title, hardware price-cut) compels them to spend."

Looking at this in perspective, things may not be as grim as they appear. The first quarter of last year saw the release of multiplatform blockbuster Grand Theft Auto IV, with the absence of a game of this magnitude in 2009 going some way to explain the discrepancy in year-to-year sales. As Frazier explained, it will likely only take one major release or console cost reduction to kick-start the retail cycle. As it happens, we have Call Of Duty: Modern Warfare 2 in the pipeline, which has racked up impressive presales despite a steep retail cost, and with the long-promised PlayStation 3 price drop on the horizon, the gaming economy could soon receive the shot in the arm it so badly needs.

Software sales may have fallen, but gameplay has emerged unscathed. According to a recent study by Nielsen Media Research, gamers are shunning the allure of costly outdoor activities and investing more time than ever into their home consoles.

"Primarily, we believe mainstream gamers are playing more of the broadly appealing games (i.e Wii Fit, Guitar Hero and Rock Band), pushing their hours of gameplay up," said Nielsen director Michael Flamberg. "The social aspects of these games have engaged them. We don't believe hardcore gamers are driving up the usage averages we've observed. Second, gamers may be looking to stretch their entertainment dollar further through playing games they own more."

The pre-owned games market has reaped the rewards of this. While high street stores' profit margins have taken a nose dive, independent games retailers are experiencing something of a boom, with part-exchange proving to be many customers' favoured form of transaction. Although the second-hand market has its fair share of critics within the business, few can deny that it's a highly effective method of cost-cutting during times when bank statements become a daunting read.

The importance of independent retailers during times of economic hardship is undeniable, but for those who scoff at the notion of cast-offs, another viable option is budget games and free-to-download titles, which have never been in richer supply thanks to the rise of digital distribution.

Budget Buyers Guide

If you don't already own a PS3, now is arguably the worst time to buy one. The system is priced higher than all of its current-generation counterparts and the long-rumoured price cut could come at any time. But for those who do pack the hardware, there are plenty of credit crunch-busting titles available online via the PlayStation Store.

First up, we'd like to recommend Blast Factor, a Robotron clone that delivers endless hours of entertainment for your £3.49. Complete with some inventive motion controls and a downloadable expansion that enables online multiplayer action, this is one shooter that provides plenty of bang for no more than a few bucks.

Anyone seeking a little more substance might consider some of the PSOne classics currently on offer. Signs that Sony has begun to deliver on its promise to make more games from its back catalogue available via PSN are beginning to emerge. Square Enix's Final Fantasy VII provides around 40 hours’ gameplay for £7.99, while Resident Evil: Director's Cut allows gamers to experience the iconic zombie survival thriller as the developers originally intended.

If you're not one for nostalgia but have no more than a tenner to spend, then the recently-released Battlefield 1943 will bring endless hours of authentic frontline multiplayer escapades, despite being somewhat light on content.

Xbox Live Arcade might carry a vexing subscription cost, but there can be no better way to save a few pennies and simultaneously support the industry from the ground up than investing in Xbox Live Indie Games. Formerly known as Xbox Live Community Games, these independent titles were recently given a pricing overhaul, enabling budding developers to sell their wares for less. For a comprehensive guide on some of the best DIY gems on the market, check out our Must-Play Community Games feature.

For PC owners, the internet is jam-packed with high quality free-to-download titles. Point-and-click adventure games have made a comeback of late, so why not try AGD Interactive's exceptional remakes of Sierra golden age titles? Innovatively reimagined versions of King's Quest and Quest For Glory are currently available completely free of charge on via the homebrew developer's official website. In addition to these, cyberspace also plays host to a wealth of abandonware, forgotten classics no longer protected under copyright law. Log onto abandonia.com for access to over a thousand of these titles.

Nintendo's Virtual Console service may not host as much quality homebrew content as the likes of XBLA, but nostalgic gamers can enjoy a trip down memory lane on a shoestring budget. It's impossible not to recommend such NES classics as Super Mario Bros, The Legend Of Zelda and Metroid, all available for a few of your English pounds. SNES and Genesis titles offer more substance at a steadily increasing cost, but the jewel in the online storefront's crown is arguably N64 milestone The Legend of Zelda: Ocarina of Time, which is surely the bargain of the decade at just 1,000 Nintendo Points.

Future Forecast

While the recession's impact on the gaming industry is incontrovertible, there's no reason to panic just yet. First and foremost, recent sales figures must be viewed in context. We are currently in the midst of a summer games drought, with many developers preparing to fire their big guns in the coming months. Evidently, the economic crisis has not deterred studios from investing in blockbuster titles, with the likes of Modern Warfare 2, Halo ODST, Assassin's Creed II and FIFA 2010 all due before the end of the year. Releases of this calibre will go some way to boosting the retail cycle, and in the meantime, the used games market's record profits are enough to carry the industry.

In the future, we can expect the exponential growth in online gaming to continue to surge. In a time when gamers are constantly searching for cheaper options, online play has never been more popular. According to data compiled by ComScore, online gaming is growing "at ten times the rate of the total US internet population".

With this in mind, many gaming companies could opt to invest in downloadable material to a greater extent. Not only does this compensate for losses in physical sales, it also provides customers with greater longevity, eliminating the urgency to shell out money on new games.

No matter how deep the recession digs its claws into the industry, customers will always have means of obtaining affordable games, whether through digital distribution, the second-hand market or budget releases. If the current climate has proven anything, it's that no amount of economic turmoil can dampen our appetite for a good gaming fest.