What started with Pong, Pac-Man or Super Mario is today an entertainment colossus. The video game industry is valued at almost 200 billion dollars, but it is seeing a decline in its growth after the boom that the pandemic meant for the consumption of so-called “gaming.”
Behind this gigantic valuation and its growing impact on popular culture, already established and taken for granted in younger generations, there is a crisis that affects the largest developers in the world. Massive cuts, reduced revenues and changes in business models define the years to come.
In January 2024 alone there were more than 6,200 layoffs globally, on track to set a new record for cuts in an industry that has been shrinking since the end of the pandemic.
2022 had the tragic balance of 6,500 employees laid off from companies related to video games. And 2023 marked another negative record with a total of 10,500 layoffs. 2024 does not show a change in trend to be the exception, and it is estimated that it will bring a brand that will surpass the previous ones, enhancing a spiraling crisis
Reasons. The reduction in income in the video game industry comes hand in hand with the drop in hours of use. After the boom experienced during the pandemic, the consumption of video games decreased significantly, as did the time dedicated to them.
The reasons are diverse. Some experts refer to market saturation, the evolution of business models, consumption within the games themselves, as well as changes in user consumption habits.
Contrary to the downward trend in users, hours and income, the video game development budget has been constantly increasing. With the need for increasingly sophisticated and complex schemes, developers consequently need greater investment (translated directly into man hours) to remain relevant in a market where not every product can be a success.
And the resounding growth of the industry during the pandemic led many companies to oversize their workforce, perhaps irresponsibly, planning based on a trend that created a bubble that is bursting.
Course. The future of video games is uncertain, with several strategies being applied by studios and developers.
The latest reports within the industry indicate that the so-called “console war” could come to an end. With Microsoft and Sony launching their exclusive games on competing platforms in a way to recover the million-dollar investment behind AAA titles (games with high budgets not only in development, but also in marketing). These companies are also targeting a subscription system that for a fixed price each month, less than the cost of an individual game, gives access to a wide catalog.
Microsoft is one of the biggest promoters of this measure with its “Xbox Game Pass”, which in addition to having new releases as well as old high-production ones, offers a wide catalog with games of different styles.
Another strategy that marks the path of the industry in the future is “eternal games”, where income is not generated by the sale of the game, but by purchases or microtransactions within it.
Games like Fortnite with its battle pass that, for a purchase of $10, provides cosmetic rewards that are unlocked the more you play, are the greatest exponents of this style.
Cuts. Pruning is not just for medium and small players. In large technology companies they are already customary. Google, Amazon and Microsoft are names that are repeated when talking about massive layoffs in high-profile companies.
Microsoft, with a trillion-dollar valuation, laid off 1,900 employees in its video game divisions, particularly within Activision Blizzard and Xbox. This represents 8% of its total space.
The company created by Bill Gates bought Activision Blizzard, owner of the blockbuster saga “Call of Duty” and “Candy Crush” among other titles, in October of last year for $68.7 billion. This acquisition occurred in the search to have a larger catalog of its own games that would boost the sale of its consoles and systems.
Riot Games, a company that has grown massively in the last 15 years thanks to titles like “League of Legends” and “Valorant,” was the protagonist of another of the big cuts in the industry: it laid off 530 employees, 11% of its total payroll. , in what they called an attempt to focus their efforts.
And Unity, one of the most used graphics engines in the world, laid off 1,800 employees, 25% of the company, in January of this year.
This company’s product is used by developers of all kinds to create games that are extremely popular such as Pokemon Go, Among Us, Fall Guys, and Beat Saber.
Opportunities. Despite the general crisis that the video game industry is experiencing, the opportunities it offers for expansion continue to exist. Its penetration continues to grow, permeating different segments of society. And its income far exceeds other branches of entertainment such as cinema.
The Walt Disney Company precisely made an investment of 1.5 billion dollars in Epic Games, acquiring a part of the company that created the phenomenon game “Fortnite.”
In its statement, the global entertainment giant explained that this action is with the objective of creating new expansive and open games, as well as connecting the entertainment universe to Fortnite.
Fortnite is an example of success that managed to break barriers that were unthinkable for video games. Through collaborations we can play as Darth Vader, Batman, Neymar and Lebron James among other unimaginable combinations that connect fans from different areas on a single platform.
These crossovers are an example of the possibilities that video games offer for the promotion of movies, series, sporting events or more.
by Lucas Benaim
