1
Cover 9 minutes of reading

The video game industry: from breaking records to existential crisis

Article author :

François Genette

News addict, geek culture fan, digital tech aficionado and hardcore gamer, François Genette is passionate about everything related to digital. A journalist for nearly 15 years in the major national and local media, he now uses his pen to share his discoveries from the worlds he loves.

read more

2023 was an unforgettable year for the video game industry. Whether in terms of the number of games released or the units sold throughout the world, no other vintage has done as well. And yet, last year was also the one which beat the all-time record number of job dismissals. A paradox which owes nothing to chance, and which only seems to be growing worse.

If you are even remotely interested in the gaming sector, it is more than likely that you have been thrilled by the year which has just passed. Because as a player, we have been quite simply submerged by an unprecedented wave of releases. In total, no less than 13,500 games came on the market in the last year, just taking into account the sales on the Steam platform (the online video game purchasing store owned by the American company Valve, and considered the most developed on the market). If we include in that figure the sales on other platforms, such as the Epic Game Store, GOG, the PlayStation Network, the Nintendo Store or the Microsoft Store, the number of games released reaches nearly 20,000 units. A downright avalanche.

And that is not all, as 2023 was equally exceptional as far as another aspect is concerned, the quality of the games released. In fact, out of these launches, 76 managed to reach or exceed the symbolic barrier of 80% positive opinions on Metacritic. This website, acknowledged as the benchmark in this sector, catalogues all the rating scores attributed by the world press to audiovisual and digital productions such as music albums, films and, of course, video games. For each of them, it establishes a score which it aggregates in the form of an average percentage.

24 of them even exceeded the score of 90%. Here again, unprecedented. Suffice to say that, for the fans, the embarrassment of choices has never been as gargantuan. And whilst that might appear very thrilling for the industry, there nevertheless exists another side to this coin. And a considerable one.

The bubble called COVID

To explain this, we, first of all, have to go back to 2020, when a certain virus spread across the entire planet, and led to never previously experienced lockdown periods in nearly all of the world’s countries. Stuck at home for months on end for the first time in their lives, hundreds of millions of people had to find things to do to kill the boredom. And numbers of them turned to digital technologies… including video games. The sales of consoles skyrocketed, and the number of games sold during these periods smashed existing records. 

That was all that was required for video game publishers to glimpse in this a unique investment opportunity to inflate the sector’s already exceptional growth. They thus invested massively in studios with a single goal in mind: getting them to develop a large number of games likely to attract increasingly eclectic audiences. Owing to the manna of money being paid into their bank accounts and the development requests which were constantly piling up on their ‘To-do-lists’, the studios started hiring hand over fist. Especially given that the publishers were ambitious, demanding evermore spectacular games, taking longer to complete and richer in terms of their graphic design. In short, projects which require an extremely large workforce. 

But this widespread enthusiasm on the part of the sector’s major investors did not account for a very key factor of this period: the growth linked to the COVID period was abnormal, ‘artificial’. And they would become aware of their error from 2022 onwards, when, gradually, the growth curve, which had been practically exponential up until then, began to change the direction of its gradient. This bubble into which they had gambled astronomical sums was starting to deflate, gently at first, then more markedly. The virus was brought under control, vaccination having played its part, and people could effectively leave their homes without taking risks. The consoles were partly put to one side, purchasing games was no longer a priority. The insanity of what we had been witnessing was coming to an end. 

2023: hype and fear of the future

And yet the investments had been made, and letting everything drop was out of the question. For many, the game projects initiated during the COVID period expired from 2023 onwards. What made last year stand out was that it oversaw, as was mentioned earlier, a completely abnormal number of large and medium productions being rolled out. Blockbusters which have been particularly well-crafted, because the budgets allocated to them cut the mustard in terms of what the studios needed to be able to ‘polish’ them, as the saying goes in the trade, in other words, to work on them sufficiently to meet the quality objectives which they had set for themselves in terms of graphics, gameplay, or storyline. The sales were thus very large, and the publishers were rubbing their hands… yet all the while fearing what was to come. 

And yes, these same publishers saw the growth curve running out of steam and started to worry about an increasingly significant imminent downturn, despite the more than thrilling figures. Especially as now that numerous projects had been completed and the games which had been developed were now on the market, the studios found themselves with a very large number of workers awaiting new missions. A considerable source of expenditure, then, which the publishers viewed as a genuine danger were the situation to deteriorate further. They thus reacted drastically and demanded that the studios make budget cuts, including and particularly in terms of the workforce.

It was the debut of absolute carnage. In 2023, 10,500 jobs were thereby cut, including a sizeable percentage within genuine behemoths, which had nevertheless widely profited, such as Electronic Arts, CD Projekt Red, Ubisoft, Nuverse, Amazon Games or Epic Games.

Another impact of these decisions was the abandoning of a large number of projects which were nevertheless well advanced in their development. In 2023, no less than 42 games in production were quite simply cancelled. Amongst the studios affected were, once again, major names, such as Ubisoft, Sega, Riot Games (League of Legends) and Naughty Dog (to which we owe the unmissable The Last of Us and Uncharted). And each time, whole teams which found themselves unemployed from one day to the next.

Hard times for the indies

But whilst the large studios were deeply impacted in 2023, it was also the case for very large numbers of independent studios. And for quite a different reason. In fact, let’s return to our figure of 13,500 games released just in the last year. Of these, merely 15% generated an income of scarcely… $5,000. All in all, the very large majority of the games released have quite simply been purely losses for their development studios. These studios being for the most part small independent structures.

And there is a reason for that. With the mass release of blockbusters which are at one and the same time spectacular, long, easy on the eye and benefiting from much (much) more developed marketing campaigns, the gamers quickly made their choices and got their money’s worth, leaving only very little time to take a look at smaller games, as accomplished as they might be.

One example amongst many concerns the game Immortals of Aveum, released in the wake of the thunderous Baldur’s Gate 3. The offspring of Ascendant Studio, established by industry veterans, the game was nevertheless promising, both in terms of its gameplay and in its graphics. But it was quite simply impossible for it to exist and ended up in the most total anonymity. A flop which unfortunately was fatal for the employment of some 80 of the studio’s personnel. 

And this scenario is far from being unique. Especially as the independent studios have also had to endure several other hard blows. Some of these in fact have been brought about by the restructuring of the publishers which fund them. That is true in particular of the American studio Volition, active for 30 years, which was quite simply shut down on the orders of Embracer, the Swedish publishing giant to which it belonged. 

Une image contenant texte, capture d’écran, Police, conception

Description générée automatiquement

Another hard blow for the indies is the very significant toughening of the publishers’ selection procedures concerning any potential funding of projects, as they are no longer prepared to take risks in this truly volatile industry. Result, thousands of teams incapable of finding the means of putting into production the projects they have in the development phase.

Macrophagous groups

And then there are the buyouts. The largest amongst them is obviously Microsoft’s acquisition of the Activision Blizzard group for the extremely eye-watering sum of 68.7 billion dollars. Yet, it should be pointed out that shortly beforehand Activision Blizzard had itself bought up numerous publishers and several studios, including Bethesda, another of the sector’s major actors. And these domino-effect buyouts have led to the appearance of ‘duplicates’ within the new group formed. Specific profiles such as developers, graphic designers, administrative managers have found themselves in surplus numbers for a too limited total of posts. And even more importantly, several studios working on similar types of games now find themselves in direct competition within the same group. 

Despite the lofty promises made by Microsoft executives, the inevitable came to pass. Decisions were taken to ‘skim off’ these ‘surplus units’. Scarcely three months after the takeover was confirmed, it was no less than 1,900 employees of the American group who were fired. An ‘execution plan’ which would reduce the ‘areas of overlap’ between Microsoft and Activision, according to the former. The message both expresses a chilling cynicism and could not be clearer.

A slightly different scenario has just played out at the Embracer group, which we have already spoken about. In recent years this group has constantly been active in purchasing other groups, studios and publishers. But, confronted with a decline in the industry’s growth, its financial stability suddenly began to teeter. A decision was therefore taken to lay off numerous workers, and to shut down several entire studios.

But these decisions, taken in the wake of buyouts, are starting to seriously get people’s backs up. Whether it is the Federal Trade Commission (FTC), the American finance watchdog, or even the European Union, a very dim view is being taken of these social bloodbaths resulting from the far too ferocious appetite of the major groups. The American institution has, moreover, taken out proceedings against Microsoft, considering that the firm benefits from its monopolistic position in the market to carry out savage restructurings. 

The second wave is already on us

In the meantime, the slaughter is continuing into 2024. In January, the Unity group announced the firing of 1,800 people. Microsoft, as was written earlier, followed with 1,900 forced departures within its branch dedicated to gaming. Next it was the turn of Riot Games, with 530 posts abolished; Sony, with 900 people sacked, some of whom were active in the biggest development studios (Naughty Dog and Insomniac Games); Electronic Arts, with 670 people shown the door. In March, Saga announced the abolishing of 240 jobs within several of its studios, and very recently, Take-Two, the publisher of ‘GTA’, announced the reduction of 5% of its staff, amounting to around 600 people.

In total, since January 1, that means 8,800 people have lost their jobs. And we are only in April. We are thus heading in the direction of an all-time record. An especially realistic perspective given that the sector is evolving to very controversial annual subscription and ‘game-services’ models. The first, concretised in the form of the infamous Microsoft ‘Game Pass’ and Sony’s ‘PlayStation Plus’, consists of establishing platforms resembling Netflix, where the players no longer buy games but have access to a catalogue of several hundreds of video game productions which are available indefinitely. This model allows the major groups to create even more demanding selection processes focused on the productions which work and which will be pushed to the fore, to the detriment of the studios which do not belong to them, who will be systematically excluded from these platforms and thus distanced from a large proportion of their target audience.

The second consists of games which are constantly receiving additional content whilst retaining an unchanged base. This means that the players can be made to pay several times over to access this new content and ‘extend the adventure’, whilst severely restricting the need for development, and thus the need for a team dedicated to it. More money, less production, all profit for the major groups. 

Towards a wake-up call? 

The picture is a dark one, and the future of the industry seems to be equally so. In that case, what reasons for optimism can be sketched out in the face of these realities? The first is the growing awareness amongst the sector’s workers. For these employees, up until now driven by a passion for gaming and often consenting to be exploited, the changes which are taking place now seem to be dawning on them and they are taking steps to get organised in order to deal with them. Trade unions are very slowly being formed, even if these initiatives are meeting stern resistance on the part of the studios and publishers. The potential for strike action is being raised in the context of certain decisions. But these various initiatives are still timid, up against powerful groups which still have a complete stranglehold over the survival of the studios. 

Along the same lines, developers are working on establishing legally recognised protections for their jobs and their working conditions. And they are doing so with the backing of political institutions which are starting, in countries such as Canada, where video games are a vital economic component, to genuinely take up the cause of the developers and other workers in the sector.

Finally, studios are very gently starting to implement charters of ethics in terms of the way they operate, such as the Belgians of Larian Studio, whose CEO Swen Vincke is constantly repeating that the industry will not survive unless it opts for a less ultra-capitalist approach. 

And he is not the only person to raise this concept of the death of the sector. Many observers are also evoking it, arguing that the industry is today faced with a major turning point. Without significant change, it risks no more, no less, seeing its appeal diminish and its sales falling. And that will irrevocably lead the major groups to lose interest in the sector, and to cease investing in it. With, ultimately, a disappearance of the offer, and thus possibly the death of a sector which only yesterday resembled an infinite gold mine.

Call for projects

A story, projects or an idea to share?

Suggest your content on kingkong.

Share this article on

also discover