2022: A Year of Resilient Growth in the Video Game Industry

The global economy faced significant challenges in 2022, including the war in Ukraine and a costly pandemic recovery. This led to supply chain disruptions, energy shortages, and inflation, which central banks struggled to control. As a result, interest rates rose, putting pressure on both the financial and real economy, forcing consumers to make tough choices about their spending. Despite these economic headwinds, the video game industry performed well, with many publishers experiencing growth in revenue and profit. To understand this phenomenon, it's essential to examine the industry's performance from the supply side, focusing on top-line revenue and operating income. This analysis will provide insights into how the industry will perform in 2023, with a more favorable economic outlook. From a general perspective, 2022 seemed like a disappointing year for video games, with a strong start followed by a dry spell of new releases. However, when analyzing the financial statements of major publishers, this perception is not supported by the numbers. To ensure consistency, the investigation adjusted fiscal statements to the seasonal calendar and used average foreign exchange rates. The analysis also excluded Microsoft's Xbox finances due to a lack of accurate data. The results show that eight out of thirteen publishers experienced revenue growth, with total revenue increasing by 9% compared to 2021. This translates to an additional $8 billion in consumer spending. The growth was driven by the release of strong new games and the consolidation of live service games and DLC strategies. For example, the Embracer Group more than doubled its revenue, while Take-Two saw a 42% increase in revenue, primarily due to the expansion of its 'Recurrent Consumer Spending'. When examining the revenue increases, it becomes clear that Sony's PlayStation division contributed the most, with a $3.8 billion increase, almost twice that of the Embracer Group. The analysis also reveals that the industry's growth is sustainable, even during economic uncertainties, thanks to the combination of healthy new game sales and growth in live services microtransaction spending. Looking at the three-year perspective, the pace of revenue growth for some publishers has been exceptional, with Sony's PlayStation division boosting gross sales from $18.4 billion in 2020 to $24.6 billion. While not every publisher performed well, with Nintendo and Activision Blizzard experiencing declines, the overall picture is one of resilient growth. The net position of most companies was profitable, with Nintendo being the most profitable publisher, and the Embracer Group experiencing a significant turnaround in fortune. However, the picture is not entirely rosy, with profits down by 7% between 2021 and 2022, primarily due to rising game development costs. In conclusion, the video game industry's performance in 2022 was marked by confidence, with a 9% increase in spending and most companies declaring a profit. The industry's ability to grow despite economic challenges is a testament to its resilience and adaptability.