When "life gets tough", it is typically the entertainment industry that experiences exacerbation as it is one of the first things people curtail purchasing.
However, notably, the entertainment industry demonstrated sustained growth during the pandemic. This resilience can be attributed primarily to the widespread accessibility of online platforms against the lock-down.
However, the truth might be much more exacerbating.
Is the gaming industry dying?
[Historical Lay-offs]
the average salary of the game developers have only been rising. However, with the sudden increase in the demands and niche market with seemingly high-potential market, many companies overestimated and over-hired people.
"The video game industry is making big money. One of the most popular is Fortnite, the online battle royale game. But that wasn't enough to keep its maker, Epic Games, from laying off 16% of its workforce back in September. Throughout 2023, more than 6,500 jobs have been lost in the video game industry. That's according to the LA Times..."
"... I think a lot of people in leadership perhaps over-invested for that peak and thought that that was going to sustain forever. And of course it did not..."
[Major Game Development Termination]
Numerous games under development have unfortunately been halted indefinitely due to extensive layoffs, thereby extinguishing any prospects of their eventual release.
"Another EA joint ending in a whimper, the publisher confirmed that just as Apex Legends Mobile is going down in flames, so too is the unreleased Battlefield Mobile"
"...earlier this month that Apex Legends Mobile, the free-to-play handheld spin-off that very much resembles its console counterpart, will shut downon May 1."
What is going on?
While it may seem that the gaming sector reaped significant benefits from the pandemic, the actual growth rate tells a different story, revealing a substantial decline.
ⓐ Declining Growth Rate
The growth rate of total video game revenue has been experiencing a gradual decline since reaching its zenith in 2020, coinciding with the onset of the pandemic. It is highly probable that this downward trajectory will persist for several more years.
ⓑ Stagnant User Growth
While it took just two years, from 2019 to 2021, to acquire approximately 300 million new users, projections suggest that achieving a similar user growth of 300 million may extend over a longer period, spanning approximately 5 to 6 years, starting from 2023.
What could it mean?
One of the readily apparent factors may stem from the recent economic downturn.
Nevertheless, another notably compelling and plausible explanation can be found in
[Market Saturation / Normalization of Consumer Habits]
I do not hold the view that the market is in a state of decline. Instead, the pandemic triggered an abnormal growth rate, resulting in the current state of market oversaturation.
Discord is tailored specifically for video game enthusiasts, offering them tools to locate fellow players, organize gameplay, and communicate seamlessly while engaged in gaming activities. As indicated by the Statista graph, Discord users witnessed a substantial surge, experiencing nearly 50% growth from June 2020 to September 2021. However, with the conclusion of lock-downs, this growth rate noticeably decelerated. What piques interest is the fact that this figure did not decline even after the global landscape ostensibly recovered from the impact of the COVID-19 pandemic.
Take a look at the graphs below.
Looks familiar?
Following a significant surge during the pandemic, the growth rate has progressively tapered off. Much like major tech conglomerates grappling with the challenge of acquiring new users after attaining a global user base of 2 to 3 billion, the gaming industry as a whole may encounter analogous hurdles.
Furthermore, as the world gradually reverts to pre-pandemic norms, individuals are spending less time indoors. This transition is anticipated to result in diminished gaming engagement compared to the zenith of the pandemic period.
It is worth noting that there exists a conspicuous exception within the entertainment industry, notably in the realm of cinema. Unlike online games, which are not confined by geographical limitations, the culture of attending theaters may never fully rebound from its pre-pandemic state, owing to consumers finding solace in Over-The-Top (OTT) services such as Netflix, Disney+, and others.
What can be done?
Numerous initiatives are already in progress, exploring diverse strategies to stimulate growth within the gaming industry. These include the adoption of subscription models featuring game passes, the implementation of cross-platform functionality, and various other innovative approaches.
In my quest for fresh perspectives, I endeavored to conceive additional possibilities.
[Introduction of New Method of Consumption]
The way people engage with games remained relatively static until the pivotal introduction of Apple's iPhone in 2007, followed by the launch of the App Store in 2008. This marked a transformative milestone in the landscape of smartphone gaming.
Previously, gaming was predominantly accessible to individuals who had the means to own a personal computer or a home console. However, as depicted in the graph below, it becomes evident that the gaming industry owes much of its evolution and expansion to the rapid growth of the mobile industry.
Indeed, one of the most promising avenues for the future of gaming lies in the realm of Augmented Reality (AR) and Virtual Reality (VR). The recent introduction of Apple's Vision Pro signals that the horizon of this gaming sector may be approaching closer than ever before. However, there remain numerous hurdles to surmount.
For instance, the prolonged use of AR and VR devices necessitates user comfort and adaptability, an area where substantial progress is still required. Many users are not yet accustomed to wearing vision goggles for extended periods, as this technology is still relatively nascent and can cause discomfort or motion sickness in some individuals. Additionally, the cost of these devices and the need for compatible hardware may present barriers to widespread adoption.
Then, what?
Here is one quick and fun idea.
[Smartwatches + Casual Games]
The primary function of smart wristband devices with regard to gaming is to provide players with notifications. Subsequently, players are required to access their games via their smartphones in order to respond to these notifications.
To me, it appears that we are underutilizing the capabilities of this device.
[Penetration rate of the smartwatches market]
Approximately 3% of the global population, roughly totaling 250 million individuals, are smartwatch owners as of 2023. While this percentage may appear modest, it is far more practical to encourage this user base to explore mobile gaming on their existing devices, rather than expecting individuals to invest in a $3,500 device and become proficient in its usage.
Given the limitations of its screen size, the development of casual games appears to be a well-suited approach for this market. Remarkably, this market segment boasts significant proportions, with the Casual Game Market generating approximately 13 billion USD in revenue in 2023. This substantial figure constitutes nearly 7% of the entire global gaming market, which amounts to 184 billion USD.
In Summary
Despite contending with challenges such as oversaturation and economic variables, my optimism regarding the gaming industry's future remains unwavering. This sector demonstrates a consistent capacity to evolve in parallel with technological progress, effectively aligning itself with evolving consumer engagement trends. It is incumbent upon us, as industry professionals, to swiftly ascertain the strategies necessary for this adaptation, recognizing the urgency of the task at hand.
