The “recession-proof” video game industry is in decline

Video games are constantly progressing. The graphics are getting more realistic and fantastic day by day, the gameplay is getting smoother, and the plots have become so heart-touching that there is hardly a franchise that doesn’t have a movie adaptation or of television series in preparation.

Today, the video game industry is worth more than the music and film industries combined. So why are people suddenly worried that he’s heading towards the endgame?

The reason is that they have reason to be alarmed. Although people have embraced video games during the pandemic to shield themselves from the monotony of shutdowns, the industry once hailed as “recession-proof” is showing some hesitation.

Leaving the social restrictions of the Covid-19 years behind has left people eager to open up to real experiences. At the same time, the video game industry is hampered by supply chain issues and constant delays in the release of titles.

Vladimir Putin is also to blame for the industry’s woes. When Russia invaded Ukraine, Moscow halted any financial recovery the world might have enjoyed from the coronavirus crisis. Instead, national banks around the world issued warnings of soaring inflation. There are even whispers of a recession on the doorstep.

The cost of living crisis means consumers are likely to spend significantly less on gaming hardware, software and accessories this year, according to Mat Piscatella, executive director of research firm NPD Group.

Together, these factors are expected to cause video game sales to decline in 2022 for the first time in years. For a sector that has gone from strength to strength over the past decade, this could be a serious confidence breaker.

The 2010s propelled the video game industry into the stratosphere

The gaming industry is a very different beast than it was 10 years ago. As technology develops, the accessibility and interactivity of gaming software and hardware also increases.

The 2010s saw the introduction of some key gaming moments that pushed the video game industry into the stratosphere. The future relies heavily on four major trends: game subscriptions, mobile games, esports and cloud gaming.

Let’s start with game subscriptions. It’s hard to imagine games without subscription services in 2022, but before 2010 they weren’t nearly as widespread. Playstation Now, Xbox Game Pass, and EA Access are just a few of the paid monthly/annual services that offer content to gamers. Google Stadia also falls into this category, but Alphabet has scaled back the project over the past year.

Mobile gaming is another key area for the industry. Mobile gaming in the 2010s moved away from just playing Snake on your Nokia brick phone. Tencent Games’ PUBG Mobile battle royale scored 100 million downloads in the first four months of its life. Pokemon Go has taken the world from its homes and traveled the world to find AR Pokemon and raised over $400 billion in lifetime revenue.

“Mobiles now have a very strong affinity with gaming, giving users the ability to play games wherever they are,” said Arunabh Madhur, regional vice president and head of EMEA business at the internet technology company. SHAREit Group. Verdict.

“It has also become more accessible for consumers to use mobile for gaming instead of purchasing additional hard copies of games and video game consoles.”

Esports is a third area of ​​fierce competition, both between the players participating in the games and the companies that develop them.

Competitive gaming is now at the forefront of mainstream culture. Games like Fortnite and CS GO hold global competitions with multi-million dollar prizes. American YouTuber Kyle Giersdorf caused a media frenzy when he pocketed $3 million at a Fortnite World Cup aged just 16.

Cloud gaming is the fourth area for gaming aficionados to follow. The 2010s saw more tech heavyweights enter the industry and drive cloud gaming forward. Google discontinued its cloud gaming service in late 2019, which allowed gamers to stream titles directly through the cloud without the need for hardware with powerful specs.

So why is the industry faltering now?

The gaming industry has grown over the past decade, culminating in an explosive boom during the pandemic. Combined sales of games, consoles and subscriptions totaled $191 billion worldwide in 2021. According to Ampere Analysis, that is expected to drop 1.2% to $188 billion this year.

[There] was a distinct shift during Covid where more people from more diverse groups played games,” said Simonetta Lulli, CEO of mobile game publisher GameHouse. Verdict.

However, things are changing. People are spending less money on games than they were last year. Some analysts attributed the decrease to the company coming out of lockdowns and getting out more.

Gaming was a vital entertainment channel for many people during the Covid-19 shutdowns,” said GlobalData analyst Rupantar Guha. Verdict.

“The industry has seen a rapid influx of new users in 2020, which has led to revenue growth. While the trend has continued into 2021, it’s no surprise that the momentum is slowing in 2022 as the impact of the pandemic subsides.

It certainly makes sense for console gamers who were cooped up indoors and playing at home. But mobile gaming, which generated around $119 billion in revenue in 2021, actually suffered the biggest setback, according to NPD Group.

A number of factors can be seen for the decline of the whole industry. Global inflation is the most obvious. With the rising cost of living, the purse strings are getting tighter and tighter.

Another is the gaming hardware supply issues that heavily impacted Sony’s Playstation 5 launch. The manufacturing speed needed to keep up with demand was impossible to achieve due to the shortage of chips, making the console an extremely difficult piece of kit for gamers. hands on it.

The shortages also hit PC gamers who wanted to upgrade their machines, as graphics cards and CPUs were also in short supply.

“Covid-19 has impacted gaming supply chains, which need to be stabilized as the pandemic is brought under control,” Guhar says.

“For example, game companies need to address the shortage of chips that power gaming devices and speed up critical game art design units to launch delayed games.”

It’s true that 2021 saw one of the most delay-filled years in gaming history will have had a ripple effect on 2022. A survey of over 3,000 industry professionals revealed that 44% of them had to delay a game during the pandemic. .

Can players keep hope for the future?

Despite all these obstacles and setbacks for the industry, many analysts expect the industry to continue to grow. If some notably put the controller down after the pandemic, some should have stayed.

The global gaming market is expected to be worth $321 billion by 2026, according to PwC’s Global Entertainment and Media Outlook.

“The games’ widespread popularity and potentially lucrative revenue opportunities will drive the industry forward,” Guhar said.

But to keep the future bright for games, Guhar believes companies need to “invest in disruptive themes to ensure long-term growth.”

This comes as companies like Meta and its subsidiary Oculus as well as Sony continue to innovate and release virtual reality (VR) headsets, which are becoming an increasingly popular way to play.

VR gaming was worth a respectable $1.1 billion in 2020, but analysts have predicted the market will reach $2.4 billion by 2024, Plarium reports. It’s despite the skepticism that VR gaming has been hailed as the next step in entertainment since the 1980s, but the revolution has yet to materialize.

Disruptive themes like virtual reality and the metaverse present their own challenges for the video game industry. Safety being one of the most urgent.

“Gaming companies also need to invest in cybersecurity,” Guhar said, “gaming is increasingly digital, which by default attracts hackers to access user data and money.”

As the challenges continue to mount in the industry, gamers continue to flock in their millions to the latest release. Whether on console, mobile, PC or VR, it’s safe to say that the gaming industry isn’t going anywhere anytime soon.

GlobalData is the parent company of Verdict and its sister publications.

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