There has been a lot of talk lately whether video game industry is really recession proof or not. The debate has been made particularly interesting by conflicting signals emerging in last few days.

First the bad news:

• Electronic Arts Inc. (NASDAQ: ERTS), the second- biggest video-game publisher, announced on Friday that it will eliminate 1,000 jobs or 10% of its workforce in an effort to save $120 million a year. The company will also close at least nine studio and publishing locations, including the Black Box Studio facility in Vancouver, British Columbia. Earlier, the company best known for title like "Madden NFL" an "FIFA Soccer" games had lowered its full-year revenue and profit guidance citing holiday sales in North America and Europe. This is particularly an alarming piece of news since the company generates the bulk of its sales in holiday season. In October, the company reported a much wider second quarter loss of $310 million, or 97 cents a share, compared to a loss of $195 million, or 62 cents per share, in the same quarter a year ago.

• A couple of days back, Take-Two Interactive Software Inc. (NASDAQ: TTWO), publisher of popular "Grand Theft Auto" Series reported that its net loss fourth quarter net loss widened to $15 million, or 20 cents a share, compared to a loss of $7.1 million, or 10 cents a share in the comparable quarter of 2007. Revenue increased nearly 11% to $323.4 million. Consensus estimates were for earnings of 5 cents a share on revenue of $326.7 million.

• Midway Games Inc. (NYSE: MWY), publisher of the "Mortal Kombat" video game series,  announced a couple of days back that it will reduce its head count by 25% of its work force and close a studio in Austin, Texas. The company posted a wider loss in the third quarter and expects another loss for the three months ending in December.

• Early in November, THQ (NASDAQ: THQI) announced that it will lay off 250 employees, or about 17% of its studio staff, after it posted a loss of $115.3 million for the quarter ended Sept. 30.The company also slashed its revenue forecast for the year to between $875 and $900 million, down from a previous estimate of $1.14 billion to $1.18 billion.

• Factor 5 has reportedly laid off half its employees.

• Few analysts feel that deepening recession, mounting layoffs, falling consumer spending and sinking retail sales is bound to have impact upon the sales of video games. Others are also seeing a shift towards online gaming.

On the bright side, few trends have been quite encouraging:

• According to market research firm NPD Group, U.S. retail sales of video games jumped 10% to $2.91 billion in November from a year earlier. Total sales this year through November are more than $16 billion, a gain of 22% from 2007. NPD analyst Anita Frazier attributes the strong sales performance to the industry's wide content variety on newer generation consoles such as Nintendo's Wii, Sony's Playstation 3 and Microsoft's XBOX 360. Frazier also says that video games are a relatively cheap form of entertainment, considering the hours of value they provide.

• In past recessions, as in 2001, video game industry thrived and even flourished. It is being pointed out that recession hardly deters "core gamers" from buying their favorite games.

Thus, so far the picture emerging out is quite mixed. Though the industry has been negatively impacted by the recession, it's still doing better when compared to others. The numbers coming out of holiday season will give more clues about the extent of damage. The real challenge before the industry is to attract new buyers, while retaining core gamers this holiday season.

Disclosure: Author does not own any of the stocks discussed here.