Gaming industry under stress by economic downturn

By Nilanjan Dey

All good things must come to an end. Seems like this phrase may apply to the gaming industry now as it is observing a slowdown in demand for video games from that sweet pandemic high questioning the industry’s ability to tackle an economic downturn.

According to data by analytics firm NPD, spending on video games by U.S. consumers fell 11% in June and is expected to fall even more to 8.7% in 2022. The absence of new hit titles and rising prices are creating issues for video game publishers along with supply-chain delays and shifting interest by consumers.

Companies are also reporting poor numbers like Roblox whose revenue growth was recorded at 30% from 83% two quarters ago. Activision Blizzard announced a lower-than-expected quarterly profit, while rivals Electronic Arts and Take-Two Interactive (TTWO.O) warned of lower-than-expected sales in the coming quarter. It isn’t easy for console makers as well with Xbox-maker Microsoft taking a hit due to dropping gaming revenue, PlayStation-maker Sony cutting its forecast while weaker sales were reported by Nintendo.

Jesse Divnich, senior vice president at Interpret, a video game market research firm said “The job market is still hot, there is plenty of froth on the economy causing aggressive inflation and the relaxation of COVID restrictions are leading consumers to consider spending on more experiences outside of the home.”

The crisis of semiconductor is also affecting the gaming market with AMD saying that demand for their graphic cards have cooled down and Nvidia saw a 19% successive drop in its revenue.

However, analysts are fairly certain that the industry will rise to pre-pandemic levels after the launches of delayed titles and the easing of parts shortages. According to data firm Newzoo, the global games market will create $196.8 billion in 2022, showing a 2.1% jump compared to a 7.6% jump in 2021.