The games industry is currently in a rather difficult situation. The past few weeks have been marked by layoffs, ever-increasing costs, and problems with projects. This makes the industry as a whole a significant risk for investors, as PitchBook notes.
Not only smaller studios and projects are affected; at Epic Games, around 900 employees are currently being laid off, at BioWare the quality assurance team has essentially been dissolved, and at SEGA... Hyeans one of the most expensive projects sent to the desert, to name just a few recent examples.
The boom in the games industry is over.
The current situation is partly attributed to the industry boom during the Corona pandemic, which is now subsiding and during which many more people engaged with video games. This boom is now collapsing, leading to a veritable devastation of the industry, as these people are simply no longer needed.
In concrete terms, venture capital groups invested only $700.3 million in video games in the third quarter of 2023, the lowest level since the second quarter of 2020. This follows two years of more than $2 billion invested each quarter, with a record $5.9 billion in a single quarter, illustrating that investors have become particularly cautious.
In a commentary, Pitchbook (via) writes Bloomberg):
"Game development is risky. A small game collection brings enormous returns, but it is very difficult to select these games at an early stage."
The end of the boom is nowhere in sight, as more and more developers are announcing they are laying off employees. Recent reports come from Telltale Games, Crystal Dynamics, Unity, and others.
One problem that arises is that there is far too much content on each platform, and marketing it is incredibly expensive to do justice to everyone equally.
“There is so much content on every platform,” adds Joost van Dreunen, a lecturer at the Stern School of Business at New York University. “This makes marketing very expensive and is killing the middle class of the gaming industry.”
No specific projects are currently at risk, as far as is known. Only Sony seems to be affected by its aggressive live-service game plan. not to open, as has been reported several times in recent days.
If you're always focused on growth, it's no wonder things go wrong. Growth is ultimately irrelevant, whether ecological or economic. Let's say Sony manages to sell a PS5 to everyone in the world, then what? Will it be the pets' turn?
The industry is to blame, or rather, we consumers are. For example, games are made more expensive, so consumers expect a certain length of playtime (open world), and so it all goes in circles. This increases development costs and development time, and when the project flops, there's a huge outcry.