Games industry leaders braced 'for up to two years of pain'

gamesindustry.biz:

The current turmoil in the video games industry will continue all year and likely into 2025, games industry leaders have told GamesIndustry.biz.

Speaking to us privately, publishing, development and investment heads have said that continued high interest rates, oversaturated video game stores and cautious investors will result in more restructures, layoffs and closures.

One CEO of a public company told us: "If 2023 was the year of layoffs, 2024 will be the year of closures. Not just developers, but publishers, media, service companies... There are just too many unprofitable businesses in video games. We're looking at up to two years of pain."

Some investors we spoke to expect interest rates to come down, which will likely stimulate more investment, but not until later this year. Until then, there are simply "far safer ways to invest your money than video games. Although it's not the only industry facing this issue," said one angel investor.

A leading VC added: "Why take a gamble with a games company when you can just stick the money in the bank and earn 5%?"

Interest rates put pressure on costs, and not just wages, but also insurance, travel, rent and other business costs. Meanwhile, there is no room to raise video game prices to compensate. "There is simply no tolerance of any further price moves," said one MD.

"If 2023 was the year of layoffs, 2024 will be the year of closures"

But a growing concern for the publishers we spoke to is the abundance of games being released across all platforms.

"Too many games were green lit in 2020 and 2021," one publisher boss said. "We need to get to pre-pandemic levels in terms of the release schedule, and that's probably going to take two years. You can already see publishers signing fewer games. That's happening everywhere. The stores are saturated, not just Steam, and the games just aren't delivering the levels they were. "

Another said: "The expansion and investment over COVID has left engagement-based businesses, not just video