The game industry is feeling the economic squeeze

The game industry feels the squeeze

We’re not quite in a full-blown recession yet, but signs are already pointing to the economic downturn hitting the tech and gaming sectors and entertainment at large. Now, a new report from Ampere Analysis forecasts that the game industry might shrink 1.2% this year to $188 billion globally, after two years of massive growth.

2022 has been a tough year for gaming. A number of factors have coalesced to make this year an especially rough one for game makers of all varieties, from hardware sellers to platform owners to publishers and developers big and small.

• After a very promising start with releases like Elden Ring, Horizon Forbidden West and Pokémon Legends: Arceus, the 2022 calendar has slowed considerably due in part to delays of major first-party games from Microsoft, Sony and Nintendo.
• "After two years of huge expansion, the games market is poised to hand back a bit of that growth in 2022 as multiple factors combine to undermine performance," wrote Piers Harding Rolls, a research director with Ampere.
• These factors include not just the lack of new releases but also supply constraints on hardware like consoles and controllers, inflation leading to higher spending on food and gas, and a rise in experiential spending as pandemic-era restrictions loosen.
• “As we progress through a period of heavy inflation, with an increasing cost-of-living squeeze, and a higher potential for a recession, it is inevitable that the games market will be negatively impacted in certain areas,” Ampere’s report reads.

The game industry is starting to respond to the slowdown. It boomed in 2020 as consumers spent more time indoors and directed their discretionary income toward home entertainment. But gaming isn’t recession-proof, and many companies are finding out the hard way that they may have grown too fast while consumer spending hasn’t kept pace.

• Both Niantic and Unity laid off employees last week, with Niantic letting go of 8% (or about 90 people) and Unity letting go of 4% (or about 200 people).
• Niantic CEO John Hanke said the layoffs and project cancellations, including its Transformers game, would “best position the company to weather any economic storms that may lie ahead.”
• A number of gaming and entertainment-focused tech companies have frozen hiring or lowered their financial forecasts , including Electronic Arts, Meta, Microsoft, Netflix and Nvidia.
• NPD analyst Mat Piscatella said a “return of experiences” is now “impacting share of time and wallet going to gaming,” as well as “higher prices in food, gas and other everyday spending categories hitting size of wallet available for gaming.”
• But Piscatella was quick to point out that forecasting is particularly tricky right now given the unpredictability of the market; just two months ago, market research firm Newzoo said the game industry would grow this year to $200 billion.

The game industry will survive and likely thrive soon enough. While some companies are being hit harder than others, the economic downturn may only cause a temporary slowdown for the game industry before it returns to growth in 2023.

• Gaming might not see a growth period as dramatic as 2020 for a very long time. But the steady expansion of the industry over the last decade — from around $90 billion in 2015 to more than $190 billion last year — suggests this dip is not too worrisome.
• 2023 might be another boom year for gaming, with a staggering schedule of major releases across the board (pending future delays), and forecasts from Microsoft and Sony suggest hardware supply constraints may be brought under control.
• "Even so, the year will end well ahead of pre-pandemic performance, and the outlook for the sector as a whole remains positive, with growth forecast to return in 2023,” Harding Rolls wrote.

— Nick Statt

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Overheard

“All payment processors collect a fee on payments they process, but Apple is flaunting Korean law by collecting a 26% fee on payments they DON'T process. What kind of payment processor could possibly do that? Only a monopoly.” — Epic Games CEO Tim Sweeney took another swipe at Apple last week over its high fees for South Korea apps that opt to use an alternative payment system.

“It is realistically difficult to develop new titles and remakes, including sequels, for every Nintendo game that people request, but we are very grateful and appreciate the expectations our fans have for our games.” — Nintendo President Shuntaro Furukawa was surprisingly candid when asked by a shareholder last week why the company didn’t revive more of its classic franchises like F-Zero.

In other news

EA tries to meme and it backfires, hard. The FIFA publisher tried its own take on the “They’re a 10, but …” meme by mocking people who only play single-player games. The results have been brutal, with gaming fans, a former employee and even current exec Vince Zampella criticizing the tweet.

Samsung leans into cloud gaming. Samsung’s newest smart TVs now have a gaming hub that will support cloud services from across the industry, including Amazon’s Luna, Nvidia’s GeForce Now, Google Stadia and Microsoft’s Xbox Cloud Gaming.

Meta warns of “serious times” ahead. After years of aggressive spending to establish its foothold in the metaverse, Mark Zuckerberg told employees last week the company would slow hiring and demand higher performance to trim head count, while product chief Chris Cox warned staff of the slowdown by saying, “We are in serious times here.”

Ubisoft’s health travel benefit has strings attached. The French publisher said it would cover out-of-state health care costs for workers, but only “if permitted by state law,” suggesting it might not extend the option to employees living in states that ban such benefits.

Twitch’s new feature is for the Just Chatting scene. The streaming platform wants to help expand its non-gaming content, and Guest Star , a new feature for integrating co-hosts on a live stream, is designed to facilitate more talk show-style content.

Deezer starts trading, shares immediately plunge 35%. The IPO of French music-streaming service Deezer didn’t exactly go as planned: The company’s share price was down 35% on the first day of trading.

HBO Max stops producing Originals in parts of Europe. Looking to save as much as $3 billion, HBO is pulling the plug on originals from Denmark, Sweden, Norway, Finland, the Netherlands, Turkey and Central Europe.

Mickey Mouse will enter public domain in 2024. Disney is set to lose the exclusive rights to its most famous character in 18 months .

New Monkey Island, same old toxic gamers

Just as God of War developer Santa Monica Studio told fans to stop harassing employees over a release date, a separate but familiar gamer entitlement debate has been erupting — this one all about Monkey Island.

The beloved LucasArts adventure series is being resurrected by creator Ron Gilbert for a sixth and final installment called Return to Monkey Island, with a new look revealed last week that is reminiscent of games with cartoony, hand-drawn art styles like Guacamelee and Tearaway. But some fans apparently don’t like the tiny sliver of the game they’ve seen, so much so that they harassed Gilbert until he shut down his personal blog and vowed not to talk about the title again until release.

The common theme between the God of War and Monkey Island sagas is a level of profoundly toxic fan entitlement to every facet of a creative work. It’s not unique to gaming, but it’s definitely more pronounced within gaming culture than in other media, and it manifests in the form of demanding changes and voicing critiques in ways that often step over the line and form a tidal wave of negativity that ultimately harms the developer-player relationship in severe ways.

It’s a good reminder that game developers, like all artists, owe us nothing except the creative vision they pledge to deliver, and Gilbert gave the final word when he wrote, “Return to Monkey Island may not be the art style you wanted or were expecting, but it’s the art style I wanted.”

— Nick Statt

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