Why is the video game industry in crisis?
Why is the video game industry in crisis?
I keep hearing about layoffs, studios being closed and how the industry is troubled. Are companies losing money and sales are poor, or is it the same as Google and other companies laying off people just to pump their stock price and make money despite profitability?
The video game industry is not in crisis, big game publishers are because their goals of infinite growth and profit are in jeopardy, therefore they make more and more unsustainable moves, cuts and cuts and.....more cuts. Indie devs are more and more often breaking into the spotlight because AAA game publishers are failing the industry
I think it is also related to the economy as a whole. While the pandemic was dragging on and on, inflation got much higher and central banks responded by increasing the interest rates. As a result, investors no longer had access to infinite free money.
Turns out, there are lots of companies that relied on constant funding instead of actual revenue. Those companies are undergoing some major changes at the moment.
Just finished "Stray" and it was an amazing game. It was made by two French dudes.
Which honestly is awesome. I've played very few AAA games in the last 5 years
According to this article from Feb 11, https://theconversation.com/the-video-game-industry-is-booming-why-are-there-so-many-layoffs-222685, the videogame industry is booming, and thus it seems like it's more an issue with companies wanting to show profitability for shareholders by reducing labor. I assume it's being justified with AI being hyped up and/or forcing out older/more expensive workers and bringing in younger/cheaper talent.
It does kind of make me wonder if the videogame market is oversaturated, as I look over my ridiculous Steam Library and see over a thousand games, many of which are unplayed. And there's another Humble Bundle that just launched with even more games I've never heard of that I can buy cheap as shit. And Epic will give me another free game or two on Thursday. And I just purchased two itch.io bundles with hundreds of titles in each of those. And I have shelves full of tabletop boardgames to go through. I have access to more videogames/boardgames than I probably have hours left in my life to play them, even if I were to be able to retire today and just play games non-stop. I rarely if ever buy new games anymore, there's just too fucking much out there now. Obviously, the industry as a whole is making billions of dollars, so people are still buying them, but it feels like there's just so much out there and too little time to play any of them.
I think your library is a good example of what's going on and the key is probably what you're buying. You have lots of games but I bet many of those are smaller games from indie studios; even if you're not playing those games the studios are benefiting from you low price impulse purchases.
I'm guessing you're not impulse buying £60 and £75 games from big studios and leaving them unplayed. And I doubt you'd even buy those games if they're not scoring well; certainly not at full price anyway.
That is the story of the games industry right now - smaller studios are doing well, some very well when they produce very good games, while the big Publishing houses are producing overpriced games, which are poorly quality controlled or even just fundamentally bad.
Can you saturate a market when a £5 impulse buy on a discounted indie game or a discounted AAA game with good review scores from 3+ years ago is about the same as a coffee? Whose going to buy a £70 poorly reviewed new release when you could have bought 100 good games on discount. Even if you don't play them all, it's just too good a proposition.
Capitalism. This is the answer.
It appears to me that most of the layoffs are from publishers of AAA games. Perhaps it is too hard for AAA game development to be sustainable. Too high costs and not always good return on investments.
Starfield showed us that bigger is not better.
Yeah I feel like it's similar to movies in a way. You can only push so much money and development into something before you start seeing diminishing returns.
It isn't just AAA by a longshot. Indie devs are also going through hell.
Part of it is that a lot of companies overstaffed over the pandemic, finished up those projects they were behind on (there is a reason Winter 23/24 has been INSANE), and are now laying people off.
But mostly it is because of economic uncertainty and inflation. Investors are a lot less willing to throw dump trucks of cash at people. That leads to wary investors/shareholders for the large companies and a "need" to punish labor for management's mistakes. And for indie devs that means an inability to get funding.
Danny O'Dwyer and NoClip have been making a game for the past few years to better understand what development is. And they put up a REALLY good video where Danny talks about what goes into a pitch for a publisher and just how incredibly bleak it is. Lots of "Well, at least this one person told me they weren't interested rather than just ghosting us" vibes.
I really like smaller, focused games. I don't need a game to be every genre, and I don't need to sink over 100 hours into it. I'd rather play something like Celeste than yet another open world collectathon with observation towers to climb, crafting, shitty combat, boring story, bad minigames, and running back and forth again and again on mindless escort treks that exist solely to pad the game runtime. I'd rather spend $5-20 on a 4-10 hour game than $70 on a game that overstays its welcome in order to justify the pricetag.
Quality > quantity.
AAA devs are spending too much money making games people don't like.
AAA
devspublishers are spending too much money making gamespeople don't likeand then making devs design them to get every penny out of customers that they can, then fire the devs if the project doesn't turn into a fire hose of infinite money. If it does, the sequel better earn infinite^2 money because unlimited growth is the only acceptable success.
You need to understand, the people managing these companies don't make their money from profits, they make it from not paying people.
The profit is the baseline. It's the status quo. It pays for things you already have. Money coming in already knows where it's going and getting more of it is a fight with people higher up then you are.
But money you've freed up from not paying people? Layoffs? Closing departments? That's big earnings that show you're a savvy business man you can cut the fat. Numbeys go ups.
Up and to the right!
Big biz: "we like money"
...
Big biz: "actually we need it, so bad, we are going into withdrawals, Steve only bought 3 yachts this week and he's about to go ape shit, we need it, WE NEED ITTTTTTTTTTTTT"
Also because of this, they are only pumping cash into big titles that are good bets for return, so nobody wants to spend money on a gamble. We need to let the big studios burn and collapse, they are way beyond their expiration date and only a few haven't gone bad. Let the shareholders burn too, they are the driving force behind most of this shit.
E: also you can only 'innovate' the wheel so much. New games become an obvious cash cow. I'd have to go back a decade+ for Battlefield, Call of Duty, Need for Speed, etc to see an actual change in the game, not just new assets and skins in a new place that looks like the old place but 'we swear it's different'
Also because of this, they are only pumping cash into big titles that are good bets for return, so nobody wants to spend money on a gamble.
Sounds a lot like the movie industry
late stage capitalism
Growth, public companies, shareholders, profits.
I think the writing is on the wall. Indie devs are more capable than ever, it just doesn't require a big studio to make a high quality game anymore.
I think making movies and making videogames are art forms that have historically been dominated by large conglomeration a of owners of the means of production. It used to be hard to do a green screen. Now 12 year olds do it to stream.
It's like music. Producing music used to be a whole thing. Like going to a brick and mortar studio, with like... A parking lot. Employees. The whole 9. Nows it's a dude on Craigslist or Fiverr. That's where movie making and videogame production are headed.
So big studios have big investments in a market with an ever lower barrier to entry. Their investments don't significantly position them beyond the likes of a passionate kid in the middle of a manic episode.
So they're closing up shop.
It's less about profit and more about sustained growth. During the COVID lockdowns publishers saw a big bump in cash flow due to increased sales and subsidies. That caused them to hire new employees en masse among other investments because in the corporate world there is no such thing as leaving money unspent. Money needs to earn more money because capitalism and shareholders.
After the lockdowns, that extra cash flow receded quickly. The response from publishers to keep their growth rate from also falling is to lay off employees and reduce risks.
The videogame industry has been lurching from crisis to crisis for as long as I've been paying attention. I'm starting to think that's their business model.
Workers that can't relax are workers that struggle to organize
I would say its an economy thing. Google and those other large companies are letting people go mainly because interests rates are so high at the moment. With high interests rates that means lending is more expensive which also means expansions are harder to make financially work. This also applies to AAA game companies.
The lay offs will continue until there's an equilibrium of revenue and expenses (because right now, expenses are too high), or until interests rates decrease again. Since the inflation rate is still above the (Fed)Federal Reserve's desired 2% (it was at 3.5 for March, up from 3.2% in February), its very unlikely that the Fed will lower interests rates soon.
We're basically waiting on companies to reach equilibrium, cut back their spending, for inflation to go down and hoping a full on recession doesn't come about before then.
Interest rates are not high.
They are still edit slightly below average compared to what they were pre 2008.
https://www150.statcan.gc.ca/n1/pub/11-210-x/2010000/t098-eng.htm
You're right they're not high historically speaking, but they high compared to the last almost 15ish years. And this is after coming out of a time of low interest rates, and increased demand from Covid. The shock from covid wore off, and now the shock from increased interest rates is hitting hard as well.
Are expenses exceeding revenues? I feel like a lot of the big companies that have laid people off are nowhere even remotely close to going into the red in absolute terms, and if they were, there would have been a five alarm panic. I mean, I can't even imagine the kind of epic shit storm that would sweep wall St if Microsoft or Google only made, say, a million dollars in profit (not revenue, mind) in the last quarter.
I don't mean that expenses are higher than revenue, just that expenses are higher relative to revenue than these companies would like. This is a bear market, they need to prepare to withstand the bear market until things look better.
Simple. Large game studios have become more about releasing IP content and less about actually creating art. If you look at all those yearly carbon copies EA releases, 2K has to follow suit. Any title that is not aggressively marketed will die a silent death because every genre is oversaturated.
The game industry now consists of just a couple of very big names and thousands of small games that aren't profitable. It's becoming more and more like the music industry.
Line must go up
A lot of it can be traced back to when the easy money from Silicon Valley Bank dried up after it's collapse.
To sum it up in two words:
Capitalistic Squeeze