The video game industry is on the cusp of a turnaround after a tumultuous few years that saw sales come back down to earth from the lofty heights they reached during the early days of the pandemic. And things should only get better in 2025, as Nintendo (NTDOY) prepares to launch a follow-up to its outrageously successful Switch console and Take-Two (TTWO) readies for the release of its highly anticipated “Grand Theft Auto VI.”
“I would say that the games industry overall is poised for an upswing,” former Nintendo of America president and COO Reggie Fils-Aimé told Yahoo Finance.
“Just this past month, late last month, there were a number of game announcements across the industry that consumers reacted really well to,” said Fils-Aimé.
“These are new games coming later this year. It’s games that are coming in 2025. There’s new platforms coming, namely from Nintendo, as well as rumors of an adaptation to the [PlayStation 5] coming. So there are a lot of positive things that signal that we’ve essentially gone through the trough for the video game industry, and now we’re poised for an upswing.”
The video game market experienced a boom during the beginning of the pandemic, as consumers around the world retreated to their homes with little to do but play video games and stream shows and movies.
According to IDC, global mobile game revenue shot up 32.8% to $99.9 billion in 2020, while digital PC and Mac game spending jumped 7.4% to $35.6 billion. Home console game spending, meanwhile, soared 33.9% to $42.9 billion.
But that growth declined quickly in the following years. Mobile gaming revenue grew just 15% in 2021 before declining 3.3% in 2022 and 3.7% in 2023. PC and Mac game sales climbed again in 2021 by 8.7% but fell 1.4% in 2022, though the segment experienced a slight uptick of 2.1% in 2023.
And after rocketing in 2020, console game spending stalled out in 2021, with growth sitting at 0.7%, before revenue declined 3.4% in 2022. It did, however, return to growth in 2023.
Those 2020 console sales were also buoyed by the launches of Sony’s (SONY) PlayStation 5 and Microsoft’s (MSFT) Xbox Series X and Series S consoles. But system sales struggled due to the supply chain crisis at the time, hindering growth.
“You had significant investment leading into the launch of new machines by Microsoft and by Sony. You had essentially free money,” Fils-Aimé explained. “So game developers were creating a plethora of content and, candidly, some content that probably shouldn’t have been created that hit the marketplace. And it, candidly, just didn’t do very well in 2023. So the market contracted.”
Those declines also led to industrywide mass layoffs, with thousands of workers losing their jobs as companies ranging from Microsoft and Sony to Riot and Unity (U) cut positions. And the layoffs haven’t stopped in 2024, with EA (EA) laying off some 5% of its workforce and Sega cutting 240 jobs.
But the downturn should be coming to an end.
“I think we’re through the worst of it,” explained Mat Piscatella, executive director and video game industry adviser at Circana.
“Mobile has really been carrying the load the first half of the year and is the biggest reason why the overall content spending numbers have remained as strong as they have. Through the end of May, 2024 content spending on mobile gaming in the U.S. has grown 12% compared to a year ago. The PC, Cloud and Non-Console VR segment in the U.S. has also performed well, with spending also gaining 12% through the end of May compared to last year,” Piscatella added.
The home console market, however, has continued to struggle, though it’s expected to get reinforcements with fall game releases and the next-generation Nintendo console next year, not to mention a burgeoning handheld market led by Valve’s Steam Deck portable system.
And while growth is unlikely to be as wild as it was at the onset of the pandemic, it should still provide relief for the industry overall.
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.
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