The Global Games Market: Navigating Challenges and Post-Lockdown Realities
The global games market is currently facing a tumultuous period, according to Kando Factory CEO Bobby Wertheim. In a recent panel discussion at the Global Top Round event, industry experts shed light on the issues developers are grappling with in the industry.
The Aftermath of Lockdown
Wertheim highlighted that the sector experienced a dip in 2022 after enjoying a surge in revenue during the lockdown. While things have somewhat stabilized in 2023, many developers are still feeling the impact of that dip. Overinvestment and overreaching have resulted in financial strain for several companies, leading to an unprecedented number of layoffs.
Challenges and Shrinking Opportunities
Greg Banas, a managing partner at Erebor Capital, emphasized that the challenges faced by the industry are causing publishers to reduce their support. With each passing event, the opportunities for developers are becoming smaller and smaller. Additionally, even when games are launched, they often fail to meet the expected performance levels.
A Post-Lockdown Reality Check
Pontus Mähler, Chief Strategy Officer at Global Top Round, echoed the sentiments of the panel, stating that the industry grew too quickly during the COVID-19 pandemic. Salaries soared, deals became inflated, and a large number of games were signed without sufficient publisher support. When new management stepped in, many of these games were ultimately canceled due to the lack of resources to support them. Mähler emphasized the importance of understanding the complexities behind the scenes that are often overlooked in discussions.
The Rubber-Band Effect
There was a discussion about the possibility of a “rubber-band effect” occurring in 2024, where publishers, facing a shortage of new games, would start signing more titles again. Mähler believes this renewed publisher activity will happen sooner than that, as publicly listed companies will be compelled to sign games after the end of their fiscal year, around March and April. Private companies, on the other hand, may take longer to experience an uptick, as they are already overwhelmed with existing projects and hesitant to hire more staff due to rising salaries.
The VC Landscape
Mähler revealed that several venture capital funds are currently in the process of raising funds, but their ability to close deals depends on securing commitments from limited partners. The timing of these closures will determine the pace of their investment activities.
In Conclusion
The global games market is navigating a challenging landscape as it seeks to recover from the impact of the pandemic. While revenue is projected to increase in 2023, the industry is grappling with the consequences of rapid growth, including layoffs and unsustainable financial practices. The shrinking opportunities for developers, coupled with the cautious approach of private companies and the fundraising activities of venture capital funds, add further complexity to the situation. It remains to be seen how the industry will adapt and thrive in the coming years.
Full disclosure: My flights and accommodation for Global Top Round were paid for. Our coverage remains neutral.