The video game industry in crisis and how it may recover
, by Quentin
The last few months have been bleak for the video game industry to say the least. Thousands of layoffs and studio closures have tarnished the image of something that is supposed to entertain us, provide us with emotions and allow us to escape from the comfort of our sofa.
While this industry is the stuff of dreams for millions of gamers, some of whom even want to make a living out of it and, in turn, put stars in other people's eyes, the reality behind the scenes is far less cheerful, and sometimes even depressing.
An industry that's grown accustomed to crises
We could mention, for example, the video game crash of 1983-1984, which led to a collapse of the market and a chain of bankruptcies, the fault of an offer too plentiful, often of poor quality, and too many consoles.
Then there was the global economic crisis of 2008, which hit video games hard, with a sharp rise in development costs linked to the arrival of HD on consoles such as the Xbox 360 and PlayStation 3.
That's not to mention the crisis of 2012, marked by the meteoric rise of mobile games. This upheaval left many smaller studios in trouble, unable or unwilling to make the transition to this new market for lack of desire or expertise.
More recently, the Covid-19 crisis has had a major impact on the industry. The confinements brought many titles to a standstill or, at best, greatly slowed their development. Studios had to adapt to working remotely, not without their fair share of trouble.
However, the home-bound public largely contributed to the explosion in demand for video games, boosting sales for giants such as Nintendo, Sony and Microsoft.
Buoyed by these exceptional results, investors rushed into the industry, injecting colossal sums... probably too much.
2022-2025: The post-Covid hangover
We have now entered a new phase: post-Covid. Since 2022, inflation has been hitting the world hard. The video game industry, for its part, is suffering from a new surge in costs, repeated commercial failures - particularly in the games-as-a-service sector - and market saturation, with too many projects being launched simultaneously.
At the same time, investors realized that the exceptional growth of 2020 was just a one-hit wonder, directly linked to the exceptional context of confinement and the explosion of free time. The cold shower was immediate: massive layoffs, project halts, studio closures... even giants like Microsoft and Sony were not spared.
How the industry can bounce back
First and foremost, the industry will have to learn from its mistakes and return to a more sober approach. Many studios will now seek to reduce the size and number of their parallel projects, concentrating on better-targeted games with controlled budgets, and designed for more realistic profitability.
Buyouts and mergers will also continue: some studios will survive thanks to the support of financially stronger giants. This consolidation trend, already well underway, is set to intensify over the next few years.
With a view to reducing costs, some companies are also turning to new technologies such as artificial intelligence, which could automate certain repetitive tasks in game creation.
Diversification is also becoming essential. Adaptations into series or films, sales of derivative products, subscriptions or even shorter but denser games: studios are looking to multiply their sources of revenue to avoid relying solely on traditional sales.
Another important trend is the decline of games-as-a-service, which are often costly to maintain and risky in the long term. More and more studios are considering a return to more classic, complete experiences, without a business model spread over years.
In addition, the industry is also counting on the emergence of new markets, notably in Southeast Asia, Africa and Latin America, where mobile and cloud gaming could open up new growth opportunities.
A young industry that needs to learn from its mistakes
Even so, patience will be required. As always in this kind of cycle, the market will naturally rebalance itself: the strongest studios will adapt, and caution will become the norm.
Unfortunately, as with cinema and music, the video game industry will face other crises and changes in the decades to come. Consumer habits are changing too.
The video game industry is still in its infancy compared with other media, which explains some of the problems and a lack of maturity in its management. It will undoubtedly need a few more decades to better prepare itself for the many challenges the future holds in store.