The video game industry is on the brink of recovery after a tumultuous few years in which sales have fallen back from the highs they reached early in the pandemic. And Nintendo (NTDOY) is preparing to launch a successor to its hugely successful Switch console, and has announced plans to partner with Take-Two (Two) is gearing up for the release of the highly anticipated Grand Theft Auto VI.
“I would say the gaming industry as a whole is on an upward trend,” Reggie Fils-Aime, president and COO of Nintendo of America, told Yahoo Finance.
“Just last month, we had several game announcements that were met with extremely positive consumer response across the industry,” Fils-Aime said.
“These are new games coming later this year. These are games coming in 2025. There will be new platforms coming from Nintendo, and [PlayStation 5] “We’re on the brink. There are a lot of positive signs that the video game industry is essentially coming out of the downturn and poised to start picking up.”
The video game market boomed in the early days of the pandemic as consumers around the world were stuck at home with little to do other than play video games and stream shows and movies.
According to IDC, worldwide mobile gaming revenue grew 32.8% to $99.9 billion in 2020, while digital gaming spending on PC and Mac increased 7.4% to $35.6 billion, while console gaming spending increased 33.9% to $42.9 billion.
But that growth has slowed sharply in the following years. Mobile gaming revenue grew just 15% in 2021, then fell 3.3% in 2022 and 3.7% in 2023. PC and Mac gaming sales grew again 8.7% in 2021, but fell 1.4% in 2022. However, this segment experienced a slight uptick of 2.1% in 2023.
After surging in 2020, console gaming spending is expected to grow at just 0.7% in 2021, with revenue declining 3.4% in 2022, before growing again in 2023.
Game console sales in 2020 were Sony’s (Sony) PlayStation 5 and Microsoft’s (MSFT) Xbox Series X and Series S consoles, but a supply chain crisis at the time caused sales of the systems to struggle, hampering growth.
“There was a lot of investment going into the launch of the new consoles by Microsoft and Sony. They essentially had money at their disposal,” Fils-Aime explains. “So game developers were creating a ton of content, and there was a lot of content on the market that, frankly, they probably shouldn’t have created. And then, frankly, it didn’t do very well in 2023. So the market shrank.”
These declines have also led to mass layoffs across industries, with thousands of workers losing their jobs at companies ranging from Microsoft and Sony to Riot and Unity.you) has implemented staff reductions. The staff reductions will not stop in 2024, and EA (EA) laid off about 5% of its workforce, while Sega cut 240 jobs.
But the recession should be coming to an end.
“I think the worst is over,” explained Matt Piscatella, executive director of Circana and video game industry adviser.
“Mobile has been a big driver in the first half of the year and is the biggest reason why overall content spending numbers have been so strong. Through the end of May 2024, content spending on mobile games in the US was up 12% year-over-year. The US PC, cloud and non-console VR segments were also performing well, with spending also up 12% year-over-year through the end of May,” Piscatella added.
But the home console market continues to struggle, with hopes of bolstering it with fall game releases and the next generation of Nintendo consoles next year, not to mention the booming handheld market led by Valve’s Steam Deck portable system.
While we’re not expecting the same exponential growth we saw at the start of the pandemic, it should still provide some relief to the industry as a whole.
Contact Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter. Daniel Howley.
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