There is a current turmoil in the gaming industry, and experts believe it will likely continue this year, through to 2025.
Gaming industry leaders have claimed continuing high interest rates, cautious investors, and crammed video game stores are likely to result in more layoffs, closures, and restructures.
One CEO said, “If 2023 was the year of layoffs, 2024 will be the year of closures. Not just developers, but publishers, media, service companies… There are just too many unprofitable businesses in video games. We’re looking at up to two years of pain.”
Some investors expect interest rates to lower, which is most likely going to stimulate more investment, however, it’s not expected until later this year. Until then, there are “far safer ways to invest your money than video games. Although it’s not the only industry facing this issue.”
Another added, “Why take a gamble with a games company when you can just stick the money in the bank and earn 5%?”
Interest rates put pressure on costs and wages, insurance, travel, rent, and other business costs. There is also no room to raise prices for games to compensate. “There is simply no tolerance of any further price moves.”
There is, however, a growing concern to the abundance of games released across all platforms.
One publisher said, “Too many games were green lit in 2020 and 2021. We need to get to pre-pandemic levels in terms of the release schedule, and that’s probably going to take two years. You can already see publishers signing fewer games. That’s happening everywhere. The stores are saturated, not just Steam, and the games just aren’t delivering the levels they were. ”
“The expansion and investment over COVID has left engagement-based businesses, not just video games, spread too thin. We’re doing too many things that aren’t delivering.”
“Competition isn’t the biggest factor [in this current situation], but it is a challenge, especially when you consider how much disposable income people have at the moment. It’s also not just the number of new games you’re competing with, but all the old games and live service games that are there and doing huge numbers.”
The solution is to cut business areas that are unprofitable, or distractions from the core offerings.
“Focus isn’t exciting, but getting back to basics, back to those foundations, and building back up is needed in a lot of cases.”
One CEO believes that for some, survival during this period requires bravery, and that global issues have had an impact on the industry.
“It’s all about sustainability. For those who aren’t profitable, and can’t get that funding, it’s a case of being brave… and getting tough.”
“Government over-spending during the pandemic, and on wars, and on things like Brexit in the UK… it’s going to take years before that normalises.”
“COVID did serious damage, and recovery will take some time.”
Reports have been short, however, one major studio head stressed the industry was in a good place.
“If you look at gamers, they’re happy. They’re playing these fantastic games, and they’re playing them in their hundreds of millions. And they’re playing more than they were five years ago… and buying more. The industry graph is trending upwards. The games industry is in an odd place right now. But to those on the outside, it doesn’t look that way.”
“Investment hasn’t stopped entirely. You’re still going to see money coming into games, you’re still going to see established people with a good business plan setting up new teams. There is opportunity. Lots of successful businesses are born during moments like this.
“And the situation is temporary. The games business is built on very solid foundations. And when things do start to grow again, we would hope to see a more sustainable and wiser games industry emerge on the other side.”
