Video game bulimia: should the industry slow down and lower its ambitions to survive?

There are some worrying signs that the video game industry could soon face a crisis.

During the pandemic, the video game market experienced almost unprecedented growth, according to a report from theInternational Data Corporation published at the end of 2020. This leisure activity has in fact established itself as a real lifeline for many confined people, whether they have already indulged in it before or not.

Studios that worked during this period of crisis, however, saw their production severely slowed down. A real rain of games has therefore fallen on a truly crazy year 2023, and to a certain extent this year.

Looking back, however, we see that one of the world’s most profitable entertainment industries is now showing signs of ill health. Here we will try to report on the situation, and the measures taken by its stakeholders to avoid an economic crisis in video games which appears, as it stands, almost inevitable.

A double-edged global pandemic for video games

The symptoms of the video game crisis that seems to be looming on the horizon date back to 2020, when the entire world was at a standstill due to the coronavirus pandemic. Many states have implemented emergency measures to stem the infection, including long periods of confinement.

Stuck at home, many have found refuge in video games, even if until now they were not involved in this hobby. An unexpected windfall for publishers and studios, such as Nintendo which, with its Switch, recorded record sales figures: 27.4 million consoles sold in 2020, and 31.18 million copies ofAnimal Crossing: New Horizons elapsed as of December 31, 2020, according to expert analyst Oscar Lemaire.

The other side of the coin is that the creators of tomorrow’s games have also been affected by the containment measures. Their production has therefore been severely impacted, with myriads of postponements between 2020 and 2022. According to two studies from the Game Developers Conference conducted in 2020 and 2021, respectively a third and 44% of the studios surveyed in those years deplored postponements. Result: delayed titles literally flooded in, first to a certain extent in 2022, but especially in 2023, with a truly relentless video game calendar.

The observation is simple: we have not seen a year so rich in exceptional games in more than two decades. And even then, it was only the visible side, largely aided by significant marketing spending, of an absolutely gargantuan iceberg, which now seems to be disintegrating under its own weight.

A supply of studios much greater than demand

As Benoit Clerc, director of Nacon, recently pointed out in an interview with our colleagues Gamesindustry.biz : “ There are way too many games on the market right now “. On Steam alone, you can sometimes see more than fifty games released in the same day… and we’re only talking about one isolated platform here.

In this proverbial video game ocean, only a select few are sticking their heads above water. Whether it’s excellent independent games that have become known through word of mouth, or AAA productions that benefit from colossal marketing resources through publishers. For the majority of other games, unfortunately only anonymity remains, and therefore laughable profits for their creators.

The inflation that followed the pandemic has also severely impacted the purchasing power of players. They must therefore tighten their belts and prioritize other, much more vital expenses. An observation that is all the more telling when we look at the prices of PlayStation 5 or Xbox Series X|S consoles, games and gaming equipment, which have generally seen a sharp increase. To justify in particular the increase in the price of the Series X, Microsoft representatives declared last June:
“ We have tried to maintain the prices of our consoles for years and adjust them in response to competitive conditions in each market “.

However, given that money flowed freely during the pandemic, the biggest fish in the industry felt themselves growing wings and therefore redoubled their efforts to continue riding the wave of success. With the evolution of technologies and an exponential demand for ever more beautiful, bigger, stronger games, colossal sums have been invested in the race for innovation… for better or for worse.

Productions with staggering costs, without necessarily being profitable

“ I personally think the price of the games is too low. Development costs are about 100 times higher than during the Famicom era, but software prices have increased only slightly », indicated last September Haruhiro Tsujimoto, President of Capcom, in an interview with the Japanese newspaper Nikkei. This is due in particular to the evolution of the technical capabilities of the machines and the many years that the production of an ambitious game now requires. Faced with such budgetary constraints, studios and publishers must ask themselves the following question: is the game worth it?

This situation explains in particular the proliferation of remakes/remasters, inexpensive projects, but whose commercial success is almost guaranteed. The same goes for the development of well-established licenses, which already have a solid base of fans. More than ever, the creation of new licenses is a risk that can both revive a studio and lead it straight to its doom.

A particularly telling example in this regard is Marvel’s Spider-Man 2, released exclusively on PS5 last October. The game cost PlayStation a whopping $300 million. Much more than some blockbuster films. And we’re not even talking about the astronomical sums spent on marketing, which can go so far as to exceed the development budget of the game itself. Fortunately for Insomniac Games, success was there and Spider-Man 2 was largely profitable. So much so that PlayStation ordered other projects from the studio Spiderman, as we discovered following the ransomware attack against it. This is unfortunately not the case for all such expensive video game projects.

The game that holds the prize for the largest investment ever made in the industry is today Star Citizen. Largely financed by donations, the Cloud Imperium Games title was already worth more than 500 million dollars in 2022, reaching today around 650 million… and its development is still far from finished. In the current trend, some analysts estimate that such enormous sums could, with the next generation of consoles, represent the average development cost of an AAA game (who talked about AAAA?).

For the record, the development cost of Shenmue II, released in 2001 and one of the most acclaimed games of all time, is estimated to be worth $132 million. Almost unheard of at the time. However, as ambitious and brilliant as it was, SEGA did not recoup its costs, which precipitated the death of the Dreamcast, a console that was nevertheless iconic in more than one way.

Thousands of jobs sacrificed on the altar of austerity

23 years later, history unfortunately seems to be repeating itself. The year 2023, in addition to a truly crazy release schedule, was especially marked for more than 10,000 people in the industry by the loss of their jobs. Likewise, many studios have unfortunately had to close, either for lack of resources or at the initiative of their publishers in order to reduce “unnecessary costs”. Among the most notable recent examples are the layoffs at Naughty Dog, one of the most esteemed studios in the industry.

However, here again, this is only the visible face of a gigantic iceberg. In the shadows, many much more modest studios regularly disappear, and single developers find it difficult to make a living from their passion, due to lack of visibility, and therefore funds. 2024 unfortunately risks also being dark for the people who work to create this media that we love. Who says reduced workforce in order to stem the disease therefore logically means less costly production.

In 2020, the boss of Take-Two estimated that: “ games could be photorealistic within ten years “. While we have until now been accustomed to games featuring gigantic playing fields and ever more impressive graphics, we should perhaps prepare ourselves for a certain form of regression. To avoid exploding, the industry as a whole should put its feet on the ground and return to projects that are certainly less ambitious, but whose failure does not at least risk destroying hundreds, if not thousands, of jobs.

Shawn Layden, boss of PlayStation between 2014 and 2019, under whose leadership the firm experienced some success, believes that “ AAA game development is not sustainable “. According to him, players in the video game industry could, by continuing on the path that marks the current trend, hit a wall, unless they lower their ambitions. The ball is now in their court, but are they ready to make the necessary sacrifices to avoid plunging video games as a whole into the threatening economic crisis that is coming?

And you, what do you think of the current situation within the video game industry? Do not hesitate to fuel the debate in the comments, we will be very pleased to read your opinion.

Sources: Game Developers Conference ; Gamesindustry.biz ; Nikkei ; Shawn Layden on X.com