Dec 4, 2023 - Technology

2023 was the perfect storm of excellence and disaster for the game industry

Illustration of a game controller with a downward facing arrow and the number 2023

Illustration: Sarah Grillo/Axios

2023 will go down as a year of much pleasure and much pain, as great games mixed with great upheaval in the industry, both foreseeable byproducts of gaming's explosive success during the height of the COVID-19 pandemic, industry leaders tell Axios.

Why it matters: It's been a dramatic year and one that has experts thinking about the downside of a boom.

What they're saying: "I got wrapped up in it a little bit, truth be told," Mike Rose, head of small game publisher No More Robots, tells Axios.

  • The industry veteran recalls the unexpected sales of 2020, when COVID lockdowns caused a surge in the number of people playing video games. "The pandemic happened," Rose says. "Everyone went home and stayed there. They all discovered video games or rediscovered video games. Game sales exploded for everyone."
  • Investment poured into the industry. "Everyone was either getting bought or they were going public or they were expanding beyond their means," Rose remembers.
  • Worker headcounts surged. EA's jumped 12% from 9,800 to 11,000 from 2020 to 2021. Ubisoft added 2,000 developers in that time. At No More Robots, Rose went from six employees to 12. "We signed more games and we put more money into games and all that kind of stuff, which is what everybody did," he said.

Yes, but when lockdowns ended, people started going outside and found other things to do again.

  • "Once things opened up, people were going to go spend their money on other things," Iron Galaxy co-CEO Chelsea Blasko tells Axios. "And I don't know if that was accounted for as well as it could have been in planning."
  • Industry sales that exploded in 2020 had calmed by 2022, when global gaming revenue shrank, according to Newzoo, which had not previously reported a drop in its 10 years of tracking the industry.
  • The results have been carnage for game industry workers, with more than 9,000 laid off this year and studio closures occurring on a weekly basis, as big companies scramble to show profits to investors and stockholders. Some, like EA, which laid off 800 workers in March, still have billions in cash. Others are cutting to survive.

Between the lines: The year's bittersweet twist has been the  best-reviewed crop of games in 20 years, many of them high-quality titles that were enhanced by pandemic-era investment.

  • Those swollen budgets and the pile of great titles have made it harder to turn a profit on a game.
  • "The more great games you have, the more the prices for user acquisition are going up," Yves Le Yaouanq, chief content officer for Focus Entertainment, tells Axios.

The bottom line: "You could see it coming last year," Rose says, recalling summer of 2022, when he began to notice lower sales figures for games he expected to do better.

  • "At that point, I stopped signing things," he said. No More Robots hasn't taken on a new game to publish since, slowing the release cadence of the games it already signed.
  • "The problem," he adds, "is that for a AAA studio, what are they going to do at that point?"

The challenges of 2023 have some developers rethinking the consequences of getting acquired.

  • Six to Start CEO Adrian Hon finds himself wishing more developers had been able to resist the allure of easy money during the pandemic.
  • "I think if someone comes along to you with a big bag of cash, in terms of investment or advance or whatever, to a game studio, it is just hard for anyone to turn it down," he says. "And I think that a lot of us didn't see that. Maybe I put myself in that."
  • Hon's studio was acquired by a fitness company in 2021. It released a slick interactive superhero running adventure called Marvel Move this summer and announced in October the layoffs of half of its staff, with Hon stepping down as well.

No More Robots' Rose was close to selling the publisher twice during the pandemic gold rush. Surveying the past year, he's grateful it didn't happen.

  • The numbers being thrown around for the acquisition were all based on pandemic levels of sales that he knew weren't sustainable, he recalls. "Whoever may have owned us, they would have closed down, just like sold us off for scraps," he says.
  • "I would have been much richer," had he sold, "but I would have probably been much sadder as well."

What's next: Some experts interviewed by Axios expect 2024 to be worse on game industry workers than 2023. Those who have hope, see glimmers, at best.

Developers are having a tough time getting investors to look at their projects, and interest in original work, as opposed to sequels, is near nil, Iron Galaxy's Blasko says.

  • But she has sensed a slight thaw.
  • "I've seen a little bit of warmth, but, you know, we went from kind of the freezer to the counter, a hard defrost."

What goes down, should come back up, Focus' Le Yaouanq says. He looks back to an industry downturn a decade ago, when big players such as THQ and Midway fell apart.

  • "The industry goes through cycles," he says, foreseeing a new wave of creative conservatism from big companies as they chase more predicable profits.
  • "If you go back to 2010 to 2012, it was kind of the same for bigger games. That's when the indies exploded, because they offered something unique in terms of interaction, gameplay."
  • That could happen again, he says. "That's my positive take."

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