The Games Industry's Pandemic Boom and Bust: How Success Turned to Disaster

The video game market was expected to contract after COVID-19 lockdowns ended, but the decline was more severe than anticipated. A combination of global factors and executive overconfidence led to a state of disarray. Despite 2023 being a great year for games, it was one of the worst for game makers. The industry's reliance on mid-generation hardware refreshes and the pursuit of Games-as-a-Service (GAAS) models have created unrealistic expectations. The COVID-19 boom led to a surge in hiring and an arms race among publishers, but the post-lockdown correction was more severe than expected. Publishers over-indexed on service games, which are no longer uniformly profitable. The wave of acquisitions that dominated the news for five years has come to a crashing halt. Investors' demands for growth have led to layoffs, with job losses nearing 30,000 since 2022. The industry is experiencing a brain drain, with talented developers leaving for other industries. However, there are glimmers of hope, with smaller titles dominating player engagement and larger publishers signaling a shift towards more risk-averse investments. The cost of debt is still high, but funding is coming together for teams of all sizes. Deals are taking longer, and valuations are lower, but pre-seed and seed funding are still active. The Middle East and other regions are receiving infusions of cash, with Saudi Arabia using the industry to sportswash its human rights reputation. Emerging regions, such as Poland and Romania, are also opening studios with notable talent and major investors. The industry will eventually stabilize and improve, with players always wanting to play games. Early-stage investment is starting to recover, pointing to a positive turnaround in 2025 that could revitalize the indie startup scene.