almost certain this is behind a paywall and usually FT is one you can’t get around, so some choice excerpts:
The $200bn video games industry is reckoning with its biggest slowdown in 30 years, as the huge growth driven by smartphone gaming and the latest generation of consoles reaches its limits.
Hardware sales are slowing, with Sony cutting its forecast for PlayStation 5 sales this week. Consumer spending on mobile gaming declined last year, down 2 per cent to $107.3bn according to Data.ai, which forecasts low single-digit growth in 2024.
Many in the gaming industry expected to bounce back quickly after 2022’s post-pandemic decline, last year did not deliver the growth initially hoped.
The latest quarterly numbers from some of the biggest publishers, including Electronic Arts and Take Two, has underwhelmed investors. Meanwhile, games developers have been forced to cut thousands more jobs this year after already slashing as many as 10,000 in 2023.
“There’s a lot of commercial anxiety: about growth, about profitability, about keeping budgets in check and about making an impact in the market when there are so many established products,” said Piers Harding-Rolls, games research director at Ampere Analysis, a market researcher. “We are in a much slower growth era.”
Cutting prices is a double-edged sword. The huge popularity of free-to-play online games such as Fortnite and Roblox consumes hours of playtime that had previously been spent on $70 titles. The strong network effects of multiplayer games, such as Call of Duty, also make it harder for new entrants to succeed. “Thousands of titles are hitting every month and the success rate is very low,” he said. “You’re faced with significant challenges in trying to break new product into the market.”
The rising costs of developing blockbuster games has also raised the stakes. “When you’re talking about a budget that’s $100mn plus, even for a big company, if you miss with two or three of those then commercially you’re on the ropes,” Harding-Rolls said.
That has driven a Hollywood-style dependence on rebooting the same big franchises by Sony, Microsoft, Electronic Arts and other big games companies. At the same time, entertainment giants are showing a renewed interest in gaming — adding new competition for existing players in a shrinking market.
Disney made a $1.5bn investment in Fortnite’s creator Epic Games this month to create what the studio’s chief Bob Iger called “a huge Disney universe that will be for gaming and for play”, while Netflix is also expanding its games offering.
Meh, this is something that is hitting all industries, not just games. The raising of interest rates to combat inflation is making it more expensive to borrow money. The car industry is on the verge of calamity because they’ve priced cars too expensive to go with the new borrowing rates. Dealers (new and used) can’t lower their costs because they bought cars under the old interest rates and now can’t move them because borrowing got more expensive. Lowering prices too much more means taking a loss. It is hitting every industry. At some point the idiots out there have to realize that 3% inflation isn’t the boogeyman they think it is.
