COVID-19 - Catalyst for the 2020 Classic Video Game Price Spike
How and why COVID-19 impacted video game prices
Welcome to Game Spec! In this inaugural edition of the newsletter, I will look at how and why COVID-19 impacted video game prices.
On average, older video games prices went up over 25% between 2020 and 2021. Old games rising in price is old news, but such a large jump in one year is a record.
The rapid increase is very clearly correlated with societal actions addressing COVID. Unprecedented changes were made in an attempt to mitigate its effects starting in March 2020. This newsletter outlines my understanding of how it started and snowballed.
March 2020
In early March, a few weeks preceding forced business closures, some people were already taking COVID fairly seriously. Masks had been sold out since February, despite the authorities actively telling people to not wear them. Fear was growing. There were many unknowns, but with incoming data and information, the magnitude of the potential impact of COVID became clearer to more people every day.
Google search interest for Gamecube peaked in late March 2020, and SNES & N64 interest peaked in mid-April. Typically the peak interest precedes Christmas. This was a leading indicator of where people would be spending their money.
Towards the end of March, with the prospect of being stuck at home there was unprecedented demand for video games. The hottest items were current generation consoles - it was the perfect time for people to finally spend money on that PS4, Xbox One, or Switch they had been wanting. Before closing for safety concerns, net sales at the game store where I worked were on par with the best days before Christmas. We basically sold out of all current generation consoles. This was the first time we had seen such a sudden spike in demand. The possibility of being unemployed didn’t stop people from spending money. Everything was in higher demand, but the demand for current generation items stood out above the rest. This began signalling to people that prices were on their way up.
April 2020
Most people had started isolating at home. The Federal government was sending out stimulus checks and states were increasing unemployment benefits while catching up on massive backlogs of new unemployment claims. Demand for current generation consoles was still high, but to make things worse, supply was continually shrinking. Game stores that had not sold out of everything were now closed indefinitely. Chains able to sell online didn’t have any remaining inventory. To make things even worse, COVID induced manufacturing and logistical bottlenecks meant supply would take months to catch up with demand. Current generation console prices continued rising beyond MSRP.
This chart of the Switch system price on Amazon shows what was happening. The general trends for Playstation 4 and Xbox One hardware are similar.
The store where I worked semi-reopened the last week of April, offering curbside pickup on the weekends. By this point it was clear that demand for classic games had definitely picked up. While demand for all games had increased at the start, it’s possible a combination of unavailability and high prices (relative to MSRP) on current generation hardware pushed even more people to consider older platforms as an alternative.
While this was happening, millions of Americans got a $1200 check in the mail, and an increasing number of people were on steady unemployment. While unemployment represented a burden for many people, for many low wage workers it meant an increase in weekly income since benefits were raised in response to the pandemic.
At this point, millions of people had extra money available to spend on whatever they wanted, especially things to keep them occupied while trapped at home.
May 2020
The pressure was on local governments to allow businesses to reopen, but many stores remained closed by government orders. This kept limiting supply while demand was increasing from continued government benefits and growing boredom.
I remember noticing a large spike in Wii system demand at the start of the month. That was one of the first prices we raised at the store. I know I wasn’t alone, everyone began realizing all game prices had risen. Anyone looking at Ebay, Amazon or Price Charting would have seen whatever they wanted had increased in price over the past month. This was bad news for collectors. Noticing rising prices leads to discussion, which can lead people into thinking that it will continue and become a trend. This plays into how collectors are especially prone to have a fear of missing out (FOMO).1
From this point onward, I think some portion of the 2020 game price spike became a self-fulfilling prophecy.
FOMO
Classic game prices undoubtedly spiked because of COVID factors - unprecedented demand, restricted supply, and increased buying power. However, I do think FOMO played a role in the inflation of some games. It’s easy to imagine many collectors saw the momentum of games having risen in price and decided to immediately pay more than the last sale because they didn’t want to risk waiting and paying even more later. This behavior is more likely to impact the harder to find and niche items that collectors prize as their centerpieces.
I stress this point because I get the sense that, currently, the average game collector is looking at what other people are paying to use as the primary basis for their own valuations and decisions. I mention this point to hopefully raise peoples’ awareness of this phenomenon.
Visualizing the COVID Spike (and Dip)
The price for most games peaked in the summer and dropped until prices started increasing prior to the holidays. This chart of Gravity Rush (Vita) does a good job at showing the spike and decline that followed:
Between February and July 2020, the price doubled. It then proceeded to lose 25% from peak by winter. Mario Kart Double Dash is another good example showing a similar steady 25% drop from peak:
The Simpsons Hit & Run on PS2 shows a similar pattern:
I chose these games because they are some of the most common and popular games on their platforms. Their prices are mostly driven by gamers, not collectors. Being high volume titles also means their prices are among the fastest moving. These are the best data points for showing how COVID factors impacted prices.
The 2020 classic game price spike comes into focus when looking at these games. A few months of unprecedented increase, followed by a steady drop. The decline was interrupted by the yearly holiday spike, with the distinct possibility that a surge in COVID cases after the onset of winter could have made for another mini-spike.
Some Stuff Isn’t Dropping
The story isn’t that simple. Lots of games are shooting to the moon or staying level. What about them?
I wish I had a certain answer as to why many games are still rising. I can only offer some possibilities. I bet a different combination of these applies to each rising game.
More uncommon/desirable games didn’t see enough volume before the holiday spike to noticeably depreciate
Games bought by collectors (rather than gamers) may be less likely to be resold in the short term
The $600 January stimulus is keeping prices high; also, the stimulus money could be disproportionately spent on a certain class of games
COVID factors accelerated growth. If a game was going up anyway, the COVID factors may not have visibly overtaken other factors.
FOMO on high profile games
Looking Ahead
Predicting where prices will go from here is difficult. I simultaneously believe a lot of games are overvalued and the more high profile games are likely to continue rising this year before moving downwards. It looks like people may get $1,400 additional stimulus in the near future, which should act to support game prices, or raise them even further. On the other hand, if the herd immunity everyone has been eagerly anticipating ever materializes, everyone could collectively put down their controllers for months. Would that be enough trigger the reverse trend?
This chart of Super Mario 64 is an interesting one to end on. It’s a high volume game, so the data solid. There is a sharp COVID peak in April 2020 for the loose cartridge, with a steady decline likely accelerated by Super Mario 3D All Stars. However, the complete price took longer to rise, and rapidly declined to pre-COVID levels in December before rising again. I wonder if that December dip is foreshadowing what is to come for many games, when the dust settles a year or two in the future.
I would be cautious spending money on anything that is near its high. Make sure you value it at whatever you pay, and don’t expect to get that amount when you decide to sell in the future. That said, some of these record prices won’t be going down anytime soon.2
To close, I’ll suggest an alternative perspective of the 2020 spike. For games less mature in their life cycle as a collectible, the rapid increase in prices could be modeled as an acceleration of valuation changes that usually happen over a much longer period of time. Maybe the evolution NES collecting experienced from 2010 to 2016 just happened to Gamecube collecting over the course of a single year. Only time will tell how true this may be.
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I hate to admit it, but sometimes I still find myself guilty of FOMO despite awareness of it
Finding these is an exercise left to the reader ;-)