Are We Headed for a Second Video Game Crash?

[this article is cross-posted from the Untold Entertainment blog, which is awesome]

Who doesn't remember 1983? It was the year that Thomas Sankara became the president of the Republic of Upper Volta. It was the year McDonald's debuted the "chicken" McNugget. And it's the year that video games, once a viable and promising business, went (in economic terms) completely tits-up.

Quoth Wikipedia:

Confession: i actually loved this game when i was a kid.

Because i hail from the copy/paste school of online research, i'll allow Wikipedia to elaborate:

Think you might want to add some - you know - *stuff* to this one, fellas?

Essentially, when Activison cracked the nut that allowed them to make games for the proprietary Atari 2600 system, that opened the floodgates for inferior knock-offs and low-quality carts. If there's an Atari or Activision game on the shelf selling for $60, and a bin full of carts selling for $1 apiece right next to them, Joe Uneducated Mom is probably walking out with an armful of shovelware than a copy of Pitfall II.

Doomed to Repeat It?

Can you think of another period in history when there was a "supersaturation of the market with hundreds of mostly low-quality games?" Can you name a time when we have $60 games competing with a bin full of titles selling for $1? i can. It's called "NOW".

We've transcended figures of speech: at some points the selection becomes, quite literally, shitty.

i'm no economist, but i have heard the phrase "supply and demand" bandied about. What we have now is an oversupply and an under-demand. There are too many people making games, and not enough people to play them - and more importantly, not enough people willing to pay fair market value for them. When the president of Nintendo takes to the stage at GDC 2011 and implores people not to sell their games for a buck, something alarming is happening. And when you get a trend of people reducing the cost of their games from $1 to FREE because $1 was too expensive, it's time to consider jumping ship. And then setting that ship on fire.

When you have every community college boasting a over-subscribed video game program of one kind or another, but recent reports suggest that graduates' success at landing an industry job is 12%, there's a problem. Something ain't right. The dam's got to burst.

Am i out to lunch here, or are we headed for another catastrophic, landfill-full-of-E.T.-carts crash of the industry? And if we do crash, what will that crash look like? If you are an economist and you think i'm out to lunch, please tell me why.