Experts say the gaming industry saw a huge windfall during the pandemic and lockdowns, and for obvious reasons: Can't do anything? Just play video games.
But now, experts say what goes up, must come down.
What You Need To Know
- Experts say that with 2 billion gamers around the world, the video game sector is larger than the movie and music industries combined
- They say the pandemic caused the industry to balloon in size and revenue
- The industry previously thought itself recession proof, but the affects of the lagging economy are starting to catch up
Gaming got an enormous boost from COVID-19 shutdowns in 2020 as people spent more of their time indoors.
Graphics cards which allow gaming on high-end computers also saw a huge increase in price as silicon shortages and supply chain issues exacerbated prices. Now, those infamous “scalping” prices have finally gone back to MSRP, further reducing profits of key players in the industry.
Experts say the industry expanded 26% from 2019 to 2021, reaching a record $191 billion in revenue. Sales of video games have consistently grown since at least 2015, according to Ampere Analytics.
However, the arrival of Microsoft’s Xbox Series X and S machines and Sony’s PlayStation 5 proved something of a double-edged sword — logistics disruptions and shortages of vital components have meant that shoppers are facing great difficulty finding any of the new consoles on store shelves or online.
Russia’s invasion of Ukraine compounded supply chain bottlenecks and rising inflation. Many gaming software and hardware makers suspended operations in Russia.
Russia was among the world’s 10 largest games markets in 2021, according to statista.com. But it is set to drop to No. 14 in the global rankings this year and lose $1.2 billion in value, the Ampere said.
According to trade.gov, the global video game industry was valued at $159.3 billion in 2020, with 2.7 billion gamers worldwide. 75% of US households have at least one gamer. At the time, the impact from the pandemic drove sales, with the U.S. seeing a record 31% increase in consumer spending on video gaming and subscription services.
Mark Elfenbein, CEO of X1 esports said the games and the microtransactions they contain are getting more expensive. Prices on virtual reality hardware are going up, and as the U.S. economy contracts and people re-examine their financial budgets, analysts say video game spending may be on the decline.
Experts say that the video game sector is larger than the movie and music industries combined. There are more than 2 billion gamers across the world, or about 26% of the world’s total population.
Those experts believe that a significant drop in revenue in this sector will have major and widespread repercussions throughout the wider global economy.
Elfbein said the drop in revenue isn’t a sign of some wider issue, but is more of a correction of the hyper-growth experienced during the pandemic. In fact, he said to expect a “very modest 1-2% drop.” But by 2025, he said the industry will be hitting revenues of more than $250 billion.
Data shows that the exponential growth that has been seen and will continue is due in large part to the increase in the demographics playing and watching video games — for example, more women and a wider age bracket are adopting the male 10- to 30-year-old’s favorite pastime. Another contributing factor to this trend is the younger generations treating multiplayer games as a sort of social network akin to Instagram or TikTok.
Esports are set to eclipse major sports leagues such as the NHL in the next few years, according to Elfbein. Students can already receive scholarships to college or turn pro and make a living playing in tournaments with cash prizes of millions of dollars, he said, thanks to sponsors like Nike, Amazon and others.
Accenture’s report on the gaming industry said the gaming industry hit the $300 billion mark. It analyzes data from around 4,000 gamers across the world’s largest gaming markets.
Gamers from China, Japan, the United Kingdom, and the United States were all included it the report.
The survey resulted in some interesting data. It showed that gamers, on average, spend 16 hours a week playing games, around eight hours a week watching or participating in game streams, and around six hours a week interacting in various game forums or communities.
In the near term, profits and revenue will decrease, but the long-term potential for the gaming industry remains bright. If the statistics and industry experts are to be believed.