Why the Video Game Industry Is in Trouble

Although the video game industry appears to be huge on the surface, the numbers show that it’s actually in trouble, according to a recent Business Insider report.

The industry is seen to be thriving through the media, and in terms of revenue, it’s shown to even exceed the multi-billion-dollar Hollywood business. However, when taking a closer look into the gaming business, it hit a rough patch over the past few years. Sales and usage have taken a downturn, and layoffs are on the rise — it doesn’t seem like there is a clear way to solve this problem now or in the near future.

In a detailed and lengthy industry deep dive, this more gloomy picture of the industry was brought to light by investor and analyst Matthew Ball.

His account showed the steady rise of job losses in the industry. For those who worked in games, last year was an uphill battle. As many as 10,500 game developers, artists, testers, and other gaming staff lost their jobs last year, which exceeds the 8,500 layoffs in 2022. And the news doesn’t seem to be getting better, as just one month into 2024, we’ve already seen 6,200 cuts in the industry.

Ball’s analysis also shows sales taking a significant dip. Games sales were on the rise during the pandemic, but since then, taking inflation into consideration, “game revenues have been falling off.” In 2023, gaming revenue decreased by 2.3% year-over-year.

The report by Ball also shone a light on gaming usage being down. In 2021, the average gamer spent 16.5 hours per week on games. A year later, that number dropped by 3.5 hours to 13 hours per week. The share of the population that plays the games has also decreased.

Ball suggests that there are a few reasons for this downturn in the gaming industry. For one, there has been a post-pandemic slump, as the industry saw a spike during the lockdown days — as did other online activities such as e-commerce — and now the rates are normalizing.

Another reason Ball highlights in his deep dive is that Apple exploded in the mobile ad industry, and games did too along with it. In 2021, Apple brought in new rules for its phones that made it hard for app creators to track user behavior on the web. This shift has affected the mobile ad business. Meta said it lost $10 billion in revenue because of the change in 2022. This filters through to the mobile games business, as “game-makers use mobile ads to distribute their apps, and to advertise to players once they’ve downloaded the apps.”

According to Ball, game ads are now more expensive and less concisely targeted, which makes it more difficult to find new customers and make money from existing customers.

Ball also discussed how expensive it’s becoming to make games, which in turn is making it hard for new games to come to the scene. Per Business Insider, “We’re used to the idea that in a digital world, costs decline as technology improves. But Ball argues that as games get more complex and sophisticated, costs are ballooning.”