The video game industry has faced unprecedented challenges over the past 12 months, marked by project cancellations, studio closures, and widespread layoffs, leaving numerous skilled professionals without viable job opportunities. This grim situation is expected to persist throughout the current year and into 2025.
The reasons behind this downturn have been extensively discussed, with the industry grappling with excessive spending during the pandemic, soaring costs, dwindling revenue, intense competition, and a significant drop in investment. This confluence of issues has triggered a ‘great correction,’ prompting companies to implement substantial measures to alter their production and expenditure strategies.
Despite the gloomy headlines, the quality of games being developed remains high, and the gaming community has grown steadily over the past five years.
However, investors and business leaders are now pondering the crucial question of how to reignite growth in the video game industry. Even companies not solely reliant on annual numerical growth are exploring potential opportunities to propel their businesses forward.
Seven developments offer a glimmer of hope for the immediate future of games:
1. The Next Nintendo Console: Nintendo’s upcoming console, expected to replace the popular Nintendo Switch, could provide a boost to the market, especially if it offers improved engagement and software sales.
2. Epic’s Fortnite Plan: Epic Games’ efforts to transform Fortnite into a platform for third-party studios through Unreal Editor for Fortnite tools present a compelling opportunity to reach a vast audience across various platforms.
3. Developing Markets and Global Opportunities: Emerging markets in Southeast Asia, Latin America, and the Middle East, and Africa are delivering significant revenue growth, offering opportunities for traditional AAA developers to expand their reach.
4. Powerful Mobile Hardware and App Store Changes: Despite challenges in the mobile games market due to privacy changes, the increasing capabilities of smartphones and potential shifts in app store regulations could drive the next phase of growth.
5. Convergence with Movies and TV: The intersection of video games with TV and film continues to be a lucrative avenue for developers to establish and maintain brand presence, with potential benefits for both industries.
6. New Tools and AI: Advancements in game development tools and the integration of AI, particularly generative AI, hold the promise of accelerating game development and potentially reducing costs.
7. The New (and Old) Generation of Gamers: The continually expanding audience of ‘digital natives’ and efforts to cater to older players through flexible gaming devices and retro game services contribute to the industry’s potential for sustained growth.
While subscriptions and streaming hold potential, there are uncertainties about their impact on overall game revenues. The industry is navigating changes in business models, and while there are challenges, the inherent quality of video games and the unwavering support from millions of engaged fans serve as a solid foundation for future growth.
