The video game industry is on the verge of a turnaround after a tumultuous few years that have seen sales come back down to earth from the lofty heights they reached in the early days of the pandemic. And things should only get better in 2025, when Nintendo ( NTDOY ) prepares to release a sequel to its wildly successful Switch console and Take-Two ( TTWO ) prepares to release its long-awaited “Grand Theft Auto VI.”
“I would say the gaming industry as a whole is poised for an upswing,” former Nintendo of America president and COO Reggie Fils-Aime told Yahoo Finance.
“Just last month, at the end of last month, there were a number of gaming announcements in the industry that consumers responded to very well,” Fils-Aimé said.
“These are new games coming later this year. These are games coming in 2025. There are new platforms, namely from Nintendo, as well as rumors of an adaptation to [PlayStation 5] is coming So there are a lot of positives that signal that we’ve basically passed the bottom of the video game industry and now we’re ready for an upswing.”
The video game market boomed at the start of the pandemic as consumers around the world retreated to their homes with nothing to do but play video games and stream shows and movies.
According to IDC, global mobile gaming revenue jumped 32.8% to $99.9 billion in 2020, while spending on digital PC and Mac games jumped 7.4% to $35.6 billion. Meanwhile, spending on home console games jumped 33.9% to $42.9 billion.
But this growth quickly declined in the following years. Mobile game revenue grew by just 15% in 2021, before declining by 3.3% in 2022 and 3.7% in 2023. PC and Mac game sales rose again in 2021 with 8.7%, but fell by 1.4% in 2022, although the segment experienced a slight growth of 2.1% in 2023.
And after a sharp rise in 2020, spending on console games stalled in 2021 with growth of 0.7%, before revenues declined by 3.4% in 2022. However, they returned to growth in 2023.
Sales of these consoles in 2020 were also boosted by the launch of Sony’s ( SONY ) PlayStation 5 and Microsoft’s ( MSFT ) Xbox Series X and Series S. But sales of the system struggled due to the supply chain crisis at the time, which hampered growth.
“You’ve had significant investment leading up to the launch of new machines from Microsoft and Sony. You basically had free money,” Fils-Eme explained. “So game developers were creating a wealth of content and, frankly, content that probably shouldn’t have been created that was coming to market. And it frankly just didn’t do very well in 2023. So the market contracted.”
Those declines also led to massive layoffs across the industry, with thousands of workers out of a job as companies ranging from Microsoft and Sony to Riot and Unity ( U ) cut positions. And the cuts haven’t stopped in 2024, with EA ( EA ) cutting about 5% of its workforce and Sega cutting 240 jobs.
But the decline must be coming to an end.
“I think we’re past the worst,” explained Matt Piscatella, executive director and video game industry advisor at Circana.
“Mobile is really carrying the load in the first half of the year and is the biggest reason overall content spend remains as strong as it is. By the end of May 2024, US mobile game content spending had grown 12% year-over-year. The PC, Cloud and Non-Console VR segment in the US is also performing well, with spending also up 12% through the end of May compared to last year,” Piscatella added.
The home console market, however, continues to struggle, although it’s expected to get a boost with autumn game releases and Nintendo’s next-gen console next year, not to mention the growing handheld market, led by the Steam Deck portable system on Valve.
And while growth is unlikely to be as wild as it was at the start of the pandemic, it should still provide relief for the industry as a whole.
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.
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