Is The Gaming Industry Heading For Another Crash?

Video game crashes are nothing new in America. However, we haven’t seen a crash in this industry since 1983. Are we heading for another crash, and how possible is it? 

The gaming industry experienced massive growth between 2019-2021, with the pandemic fueling sales of consoles and games, according to The Washington Post. People couldn’t or wouldn’t leave their homes, so they entertained themselves with games such as Animal Crossing, selling an astonishing 13.41 million copies. But since the second financial quarter (Q2) of this year, sales for hardware and accessories fell to $12.35 billion, with a 13% year-over-year decline, according to an NPD Group report. What does this mean for the future of the gaming industry? The answer seems to point to uncertainty. 

Why Is The Video Game Industry Declining?

Inflation, low wages, supply chain issues, higher costs of living, and people emerging from their homes in a post-vaccine world attribute to this decline. According to Tech Spot, a lack of releases, such as on the PS5, and the return of experiential spending on travel and attending live events, are other factors affecting the industry. However, NPD notes that consumer spending is still above pre-pandemic levels. 

How Much Are Video Game Sales Declining?

Overall video game content spending, including physical and digital sales, DLCs, microtransactions, and subscriptions across consoles, cloud, mobile, portables, PC, and Virtual Reality (VR), fell 13 percent last quarter by $10.97 billion. Subscription content was the only segment to post positive gains, while mobile game spending dropped 12 percent, according to Tech Spot.

Is The Video Game Industry Recession Proof?

Analysts believe the video game industry is a sort of recession-proof business. According to The Washington Post, while the video game industry might be partially recession-proof, it is not impervious to the effects of the recession. Many lower-class people are living check to check, and spending what little money they have on video games becomes a low priority.

This time, it’s much more uncertain,” said Cassia Curran, founder of games business consulting firm Curran Games Agency. 

Employment is remaining high and demand for outdoor entertainment is jumping after two years of the pandemic, and game sales in the last quarter finally saw a slight decline after the pandemic-driven couple of bumper years.”

However, even though we have an impending recession, video games which are often free-to-play (usually with microtransactions or DLC) or $60, can seem like a deal compared to other activities such as going to the theater or amusement parks and concerts. These games can often provide tens if not hundreds or thousands of hours. During economic downturns, people often look for bargain entertainment, where they can get more bang for their buck. 

How Will The Game Industry Handle A Recession?

Mark Zuckerberg, CEO of Meta, formerly known as Facebook, the economic slowdown is here, with Meta missing its earnings and revenue targets, according to Venture Beat. He has been willing to lose $2.8 billion a quarter in the Meta Reality Labs (metaverse and VR) division. But this week, Meta raised prices by $100 for their VR headsets, which will likely slow down the VR games industry in a pretty big way.

Typically, the industry uses (recessions) as a time to demonstrate responsibility to shareholders by cutting a few projects, closing a studio, or laying people off,” said Caroline Stokes, a human resources expert and CEO of Forward. “2008 and 2009 were brutal as the mobile industry was shaken up considerably. My eyes are on the VR and NFT companies taking the hit and reforming.


Massive Staff Layoffs And Cancelled Projects

Unity and Niantic, major game publishers, laid off a good portion of their staff and even canceled current and future projects to lower costs, according to Kotaku. These layoffs and canceled projects were to mitigate the risk of the oncoming economic recession. Mark Van Lommel, a spokesperson for Niantic, gave a statement regarding the layoffs and canceled projects. 

 “In June, we decided to stop production on some projects and reduce our workforce by about eight percent to focus on our key priorities,” said Lommel. “We are grateful for the contributions of those leaving Niantic, and we are supporting them through this difficult transition. Whether the broader economic uncertainty.”

Will The Gaming Industry Survive?

Most likely, the industry will survive, but there will be some slow down as more staff and projects get laid off, with companies focusing on quality instead of quantity, according to Protocol, an online gaming and tech news site. The video game industry will continue to move forward but could look a bit different than what we are used to seeing.