Gaming Industry Feeling Economic Pressure
We're not quite in a full-blown global recession yet, but there are signs that it's already hitting the tech and gaming industries, as well as the entertainment industry as a whole. Now, a new report from Ampere Analytics predicts that after two years of massive growth, the global gaming industry may shrink by 1.2% this year to $188 billion.
2022 is going to be a tough year for gaming. Several factors have come together to make this an especially tough year for game makers of all kinds, from hardware sellers to platform owners to publishers and developers large and small.
- comes after a very promising start with the release of games like Elden Ring, Horizon Forbidden West, and Pokemon Legends. Arceus, the pace of 2022 has slowed significantly, in part due to delays in major first-party games for Microsoft, Sony, and Nintendo. Piers Harding Rolls, head of research at Ampere, wrote: "After two years of huge expansion, the gaming market is poised to return a bit of growth in 2022 as a number of factors combine to weaken industry performance."
- These factors include not only a lack of new version, also including supply constraints on console hardware, increased food and gas spending due to inflation, and increased experiential spending as COVID-era restrictions ease.
- Ampere's report reads: "As we progress through a period of severe inflation, the cost of living becomes increasingly squeezed, and a recession becomes more likely, the gaming market is negatively impacted in some ways. inevitable".
The gaming industry is beginning to react to the economic slowdown. The gaming industry boomed in 2020 as consumers spent more time indoors and spent their disposable income on home entertainment. But gaming isn't recession-proof, and many companies are finding that they may be growing too fast while consumer spending isn't keeping pace.
- Niantic and Unity both laid off employees last week, with Niantic laying off 8% (or about 90 people) and Unity 4% (or about 200 people).
- Niantic CEO John Hanke said the layoffs and project cancellations, including its Transformers game, will "position the company to best weather any economic storms that may arise in the future."
- A number of gaming and entertainment-focused tech companies have frozen hiring and lowered their financial forecasts, including Electronic Arts, Meta, Microsoft, Netflix and Nvidia.
- NPD analyst Mat Piscatella said the "return to experience" is now "impacting time and wallet share spent gaming," as well as "increased prices for food, gas, and other everyday consumer categories impacting the size of wallets available for gaming."
- But Piscatella is quick to point out that forecasting now is particularly tricky given the unpredictability of the market; just two months ago, market research firm Newzoo said the gaming industry would grow to $200 billion this year.
The gaming industry will survive and may soon be booming. While some companies have been hit harder than others, the recession may only cause the gaming industry to slow temporarily before returning to growth in 2023.
- The gaming industry may not see a growth period like 2020 for a long time. But the industry's steady expansion over the past decade -- from about $90 billion in 2015 to more than $190 billion last year -- suggests the decline isn't too concerning.
- 2023 could be another boom year for gaming, with staggering major release schedules across the industry (waiting for future delays) and forecasts from Microsoft and Sony suggesting that hardware supply constraints may be under control.
- Harding Rolls wrote: "Even so, the year will end well beyond pre-COVID-19 performance, and the outlook for the industry as a whole remains positive, with a return to growth expected in 2023."
