Gaming sector in trouble: Video game production becoming increasingly expensive, new ‘players’ stifled by large companies

Even if you are not in the gaming world and do not play video games, you probably know that the video game sector is quite large and lucrative, and it could be said that it has overshadowed Hollywood in terms of revenue. However, the video game sector has fallen into a difficult situation in recent years: sales are declining, usage has dropped, and layoffs are increasing.

Recently, investor and analyst Matthew Ball spoke on this topic, providing an in-depth analysis of the sector. According to Ball, although game sales increased during the pandemic, revenues have now fallen after accounting for inflation, with a recorded decline of 2.3 percent in 2023 compared to the previous year.

Usage, or playtime, has also decreased; in 2021, the average gamer spent 16.5 hours per week playing games, while a year later, that number fell to 13 hours. Additionally, the share of the population that plays has also decreased.

Another major problem is mass layoffs. The video game sector laid off 8,500 jobs in 2022 and 10,500 in 2023, with layoffs spilling over into 2024, where more than 6,200 layoffs were recorded in January alone.

The easiest answer to the question of why all this is happening is certainly the recovery from the pandemic. Video games, like many other online activities such as e-commerce, experienced significant growth during the pandemic and are now returning to some pre-pandemic, normal levels.

Regarding mobile games, the problem was also caused by Apple, which introduced new rules for its phones in 2021 that made it extremely difficult for app developers to track user behavior online. Since game manufacturers use mobile ads for distribution and advertising of their applications, the new Apple policy makes ads more expensive and less precise, making it harder for manufacturers to find new customers.

The lists are always the same

Additionally, video game production is becoming increasingly expensive, making it difficult for new ‘players’ to break into the market. Although many have become accustomed to the idea that in the digital world, costs decrease as technology improves, Ball argues that as games become more complex and sophisticated, costs are rising.

For example, the production of the original Spider-Man game for PlayStation, released in 2018, cost $100 million. The sequel from 2020 cost $156 million. The latest version of the game, released last year, cost $315 million, and the next one has a budget of $385 million. Meanwhile, the costs of producing ‘live’ games like Fortnite, which require a massive staff for construction and maintenance, are so high that many developers abandon games they created themselves or decide not to make them at all.

All of this means that a handful of high-budget titles and sequels dominate the sales charts year after year, making it incredibly difficult for new players to break through. The list of the most successful games in 2023 closely resembles the list from the previous year and the year before that.

Given that new players find it hard to break into the market, it is no surprise that Microsoft has topped the list of the most valuable companies in the gaming sector with a market value of three trillion dollars. It is followed by Chinese Tencent with a value of $346.99 billion, and in third place is Japanese Sony with a value of $121.35 billion. Fourth place is held by Nintendo ($68.81 billion), and fifth by NetEase ($67.86 billion). Sixth place is occupied by Electronic Arts ($37.16 billion), seventh by Roblox ($26.39 billion), and eighth by American Take 2 Interactive ($26.18 billion). The ninth most valuable company in the gaming sector is Singaporean company Sea ($23.88 billion), while the tenth on the list is Australian Aristocrat.

Globally, the market was estimated at $406.2 billion last year, and this year it is expected to grow to $455.27 billion. It is projected that by 2028, the global video game market will reach a value of $625.64 billion.