The video game industry is no longer recession-proof

From the early 90s to now, the video game industry has experienced significant growth. It went from being an arcade for casual fun to a serious business.

The video game industry is respected, with giant corporations, significant revenues, and proven success. However, success and expansion can be a double-edged sword, sometimes backfiring.

Recently, there have been waves of layoffs at several major studios. Unfortunately, Microsoft has made a lot of headlines with its releases, which have severely hurt 343 Studios and Bethesda without sparing the Xbox division.

On the other hand, Riot Games also gave similar news, and in an official post, the company explained the figures. So, undeniably, the video game business is no longer the recession-proof paradise as many thought. However, if you examine the exact causes, you can see that the crucial factor is the same one that is hurting other industries that are not related to video games.

The video game business is no longer recession-proof

We can conclude that since the Covid-19 blockades began, the world economy has changed significantly. The shutdowns were necessary at the time but strongly negatively impacted economies. Workers were forced to stay home while the world came to a complete halt, affecting production lines.

Things have gradually improved, and 2023 is off to a good start. But the beginning of the new year also brought bad news for workers worldwide, as thousands were laid off. This shows the serious problem when a company like Microsoft has to lay off almost 10,000 employees from different divisions.

Although it is not the only problem, the recession plays an important role. In addition, as discussed earlier, the video game business is no longer just getting started, and many studios are major corporate entities.

Naturally, when looking closely at balance sheets, finances inevitably reach a point where they become even more critical. As a result, project performance is also crucial to sustainability in video games.

Some problems in the industry

Let’s see what’s going on with 343 Industries, which seems to have suffered the most dramatic job losses. Halo Infinite was set to be the cornerstone of the franchise’s future, but everything has gone wrong in the year since its launch. First, there has been a disastrous failure with what was expected to be a popular live service.

The effects of the global crisis and economic slowdown will undoubtedly linger. Riot Games, for its part, has also suffered layoffs. Unlike 343 Industries, the popularity of League of Legends and VALORANT has not waned. Both games have improved and reached new heights in e-sports.

Post Pandemic Effects of Covid-19

As a result of people being confined to their homes during the Covid-19 pandemic, the video game industry experienced significant growth as video games were one of the resources for entertainment. In addition, people were desperately looking for entertainment, so game sales and streaming revenue pointed to increased profits.

But three years after the Covid-19 outbreak, things are back to normal. Now people are looking for more entertainment options, as the globe has become more open. But that doesn’t necessarily mean that everything in the video game industry is bleak.

New games have already been released in the first month of 2023, and titles like Tunic and Vampire Survivors have had great success. However, for AAA creators, it hasn’t been the same.

Independent studios have been less affected, thanks to the scale of their operations. These sectors tend to have smaller budgets and staff. However, the situation is entirely different for the big studios, and the problem is exacerbated due to the performance of their expected releases.

The performance of these labels has been lower than expected, and the layoffs could worsen matters. It may mean that ongoing projects will progress slowly, and some promises may not be fulfilled.

Panorama in video games

The forecasts for the video game business have always been optimistic. There is still light in the landscape, which has undergone a tremendous and positive transformation. But things are not perfect, as recent events have shown.

Due to the sharp drop in demand before the crisis, large digital companies such as Google and Meta have been forced to reduce their activity. It would be wrong to say that games are now less popular than before. But there is no doubt that today’s gamers are much more demanding of the titles they play.

The recent downsizing is likely to remind many companies in the video game industry that, in addition to managing the economy, they also have to meet the expectations of their customers.

Header: 343 Industries