Maintaining Stability in Uncertain Times: A Lesson for the Gaming Industry

A quote from Reggie Fils-Aime, a games executive, stands out: "When you're doing well, don't get excited about your high-flying performance. When you're doing poorly, don't be sad. Always maintain a steady approach and focus on the next big opportunity." This advice, drawn from his experience at Nintendo, a company that has navigated numerous successes and failures, is universally applicable to the video game industry, especially during times of uncertainty. The recent market data has left some feeling anxious, and this sentiment was echoed by investors and publishers at GI Live: London in September, where they discussed the shift in mood over the past three months, characterized by declining sales figures and engagement numbers, alongside rising costs. The anxiety is understandable, given the post-pandemic decline in users, coupled with a cost-of-living crisis and an increase in the number of video games released, particularly indie games. This has resulted in the games industry having fewer gamers with less disposable income, yet more games to choose from than ever before. Game developers are also struggling to adapt to hybrid and remote working models, which has led to longer development cycles and delayed game releases. The need to develop games for both last and current gen platforms, due to the stock shortages of PS5, has further exacerbated development costs. Rising inflation has forced numerous studios to freeze hiring. The lack of AAA releases has also had a significant impact, with games media outlets experiencing a sharp decline in traffic numbers over the spring and summer, worsened by the absence of a major E3 event to drive interest. Some publications have already begun cutting back their writing teams. The absence of big blockbuster releases can also harm the indie scene, as AAA titles drive players to digital and physical stores, as well as games media sites, where they might discover other games. Although there have been some indie successes, many publicly-owned indie publishers have not cited many new games in their trading updates. As the industry potentially enters a recession, it is viewed as recession-resilient, with the idea being that when money is tight, people are more likely to spend on a big video game than on dining out. However, it is dangerous to assume that the industry will respond the same way it did during the last financial crisis, given the significant changes in consumer behavior and the rise of affordable on-demand TV services like Netflix and Disney Plus. There are emerging disruptions, including the impact of Game Pass, which has led publishers to believe that unless their game is part of the subscription service, they are unlikely to achieve strong numbers on Xbox platforms. A similar trend is occurring on PC. The rise of subscription platforms and their impact on traditional sales is a short-term challenge that the industry must adapt to. Despite the bleak outlook, it is essential to consider Reggie's quote. It is possible that some in the games industry became too excited during the booming pandemic months and are now worrying unnecessarily. Many of the issues cited are temporary, and the upcoming Christmas season will see high-profile launches, including Pokémon, Modern Warfare, and God of War. The improving stock levels of PlayStation 5 are also a positive sign, with Sony predicting a strong end to the year. A recession may be looming, but employment remains high, and consumers have money, albeit less to spend. If the games industry can deliver big, high-quality games that offer good value, there is reason to be optimistic. The 2023 release slate, featuring big brands like Assassin's Creed, Zelda, Spider-Man, Starfield, Resident Evil, Final Fantasy, and Harry Potter, looks promising. The summer lull was expected, given that people were taking family holidays for the first time in years. The industry is navigating disruption, as it always has, with subscriptions changing behaviors, coupled with hybrid working, game streaming, live services, cross-play, and new platforms like Netflix and Amazon. There is a fundamental shift in how games are made, sold, distributed, and played. As big games arrive, new consoles become more available, and gamers return from their summer break, the industry should maintain a steady approach and focus on the upcoming adventure. If video game sales and engagement figures remain sluggish, it may be time to start worrying. Until then, games companies should strive to maintain stability and look towards the future.