Record-Breaking Sales and Troubling Layoffs: What’s Happening in the GamesIndustry.biz
Record-Breaking Sales
The game industry has witnessed some astounding record-breaking sales on GamesIndustry.biz this year. Hogwarts Legacy managed to sell a whopping 15 million copies in just under two months, while The Legend of Zelda: Tears of the Kingdom broke records by selling ten million games in a single weekend. Diablo 4 generated an astonishing $666 million in just five days, Starfield became Bethesda’s biggest-ever launch, and Spider-Man 2 became the fastest-selling PlayStation Studios title. Super Mario Bros Wonder also became Europe’s biggest Super Mario launch. These sales numbers truly showcase the immense popularity and success of the gaming industry.
Troubling Layoffs, Job Cuts, and Studio Closures
However, amid these impressive sales figures, there is another side to the story. The game industry has been plagued by layoffs, job cuts, and studio closures. Shockingly, there have already been reports of 6,000 jobs lost in 2023 alone. Prominent companies like Ubisoft, Volition, Epic, Bungie, Relic Games, Creative Assembly, BioWare, Embracer, Team17, Media Molecule, Microsoft, Frontier, and Twitch have all faced redundancies and restructurings. The list seems endless, reflecting the challenges faced by the industry.
Moreover, the availability of game industry jobs has also seen a decline. Games Jobs Live has reported that there are 1,000 fewer games jobs advertised in the UK this October compared to the same period last year. This shrinking job market further adds to the concerns surrounding the industry’s current state.
Share Price Declines
Share prices have taken a significant hit within the UK stock market. Companies like Team17, Frontier, Devolver Digital, TinyBuild, and Keywords have seen substantial drops in their stock values. Team17’s stock has fallen by 41%, Frontier’s by 74%, Devolver Digital’s by 59%, TinyBuild’s by 92%, and Keywords’ by 52%. These declining share prices indicate a challenging period for these companies amidst the contrasting backdrop of increased game sales.
The Journey of the Games Industry
To fully comprehend the current situation, it’s essential to take a step back and examine the industry’s journey over the past five years. Drawing from previously reported data from GSD, GfK, Sensor Tower, and Newzoo, we can gain valuable insights into the evolving landscape of the UK game industry.
“Video games companies have been faced with rising costs, lower engagement, and falling sales”
The Quiet Year of 2019
In 2019, the PC and console games business experienced a relatively quiet year. Sales for the PS4 and Xbox One consoles were declining as consoles neared the end of their sixth cycle. However, the Nintendo Switch, which was only two years old at the time, continued to perform well. The UK saw a 30% decline in console sales and a 10% decline in video game sales compared to the previous year. Interestingly, digital sales took the lead for the first time, accounting for 51% of sales, while physical sales made up the remaining 49%. Additionally, 45% of tracked PC and console games sold in 2019 were released that year, with a significant portion of sales focused around the Top Ten games of the year.
The Pandemic Impact in 2020
The year 2020 brought unprecedented disruptions to the market due to the COVID-19 lockdowns. PC and console game sales in the UK rose by an impressive 52%, with console hardware sales increasing by 33%. The mobile games market also witnessed a substantial growth of 26%. Lockdowns led to increased engagement with games as people sought entertainment and connection during these challenging times. The digital market experienced a significant boost, with digital sales accounting for around 70% of the UK market. Furthermore, older games garnered more attention, with only 33% of PC and console games sold in 2020 being released that year. The Top Ten games accounted for 22% of sales, indicating a more diverse market. Overall, publishers and developers benefited from these circumstances, except for those in the physical part of the industry.
Transition into 2021
While PC and console game sales in 2021 experienced a decline compared to the previous year, it was only a 14% drop in the UK, still far higher than 2019. Console hardware continued to grow by 14.4%, and the mobile games market showed steady growth of 7.3%. The market trends were consistent with the previous year, with digital sales accounting for 70% of the UK market. New games gained a larger share of sales, representing 31%, while the Top Ten games accounted for 19% of PC and console game sales. The industry appeared to be moving away from heavy reliance on new releases and focusing more on a broader range of games.
Challenges and Investments
The game industry attracted significant investments even before the pandemic hit. However, the COVID-19 pandemic accelerated the growth further. Several multi-billion dollar deals took place, including EA’s acquisition of Codemasters for $1.2 billion, Embracer’s purchase of Gearbox for $1.3 billion, Xbox’s acquisition of Bethesda for $7.5 billion, and Tencent’s acquisition of Sumo for $1.3 billion. The momentum continued in January 2022, with Take-Two’s acquisition of Zynga for $12.7 billion, Sony’s purchase of Bungie for $3.7 billion, and Microsoft’s massive $68.7 billion deal for Activision Blizzard. Independent publishers like TinyBuild and Devolver Digital also enjoyed successful floats, while other companies expanded their teams and launched new studios with the pandemic funds. The industry experienced tremendous growth and witnessed numerous talented individuals leaving their companies to launch their own studios.
A Challenging Year of 2022
In 2022, the game industry faced a sobering reality. The post-lockdown period saw a decline in PC and console game sales by over 8%. The global mobile market also experienced a drop of nearly 7%. Additionally, console hardware sales declined significantly by 29%, primarily due to supply chain issues affecting Xbox Series X and S and even the slow-down of Nintendo Switch sales. This year demonstrated similarities to 2019, with digital sales accounting for 71% of the market. New games claimed a larger share of sales, reaching 40%, and the Top Ten games represented 26% of all game sales. These trends indicate a decrease in overall game sales, with a shift towards newer and bigger releases.
Costs, Engagement, and Sales Challenges
The game industry is confronting rising costs, lower engagement, and falling sales for some companies, except for those associated with the biggest games. The industry experienced an excessive expansion and investment before 2022, resulting in challenges related to hiring and retention. The scarcity of experienced talent led to studios competing for a limited pool of resources, increasing wages, improving benefits, and offering aggressive incentives. However, the industry had to face the tough reality of correcting itself after a period of excess, leading to a wave of job losses over the past year.
The Future and Beyond
The year 2023 offers hope for a return to growth for the gaming business as a whole. However, the market’s inconsistency for smaller players and reduced investment pose challenges. The release slate for the upcoming year may not be as strong as the previous one, impacting comparisons. Nevertheless, anticipated launches such as Nintendo Switch 2 and Grand Theft Auto 6 promise an exciting end to the year. The game industry continues to see numerous studios working on big and ambitious games. Companies like PlayStation and Xbox are investing heavily in live-service titles and Game Pass subscribers, respectively. However, the industry faces the broader challenge of convincing players to spend their valuable time on these titles in an era where time is precious. As the industry realigns itself and moves forward from the excesses of the lockdown years, it hopes to return to a stronger growth trajectory.