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Feeling the squeeze: video games and the recession

video game, controller, pennies, coins
Ampere Analysis, graph, world games content and services market, recession

It’s widely believed that the video game industry is recession-proof.

This is partly due to the way it made it through the Great Recession. It may have seen its fair share of redundancies and closures like other markets, but the extent to which it felt them was much less. A quote included in a Kotaku article from January 2010 advises that 2008 and 2009 were the highest grossing years in its history at the time.

Recently however, I’ve noticed a lot of articles with the word ‘recession’ in their headlines popping up in my news feed. They describe how factors such as high interest rates, the war in Ukraine, rising fuel prices and disruption to supply chains are dragging down the economy – and claim that the gaming industry won’t escape unscathed.

The basis for these views seems to be a report published by Ampere Analysis on 05 July 2022. While it isn’t entirely negative, it does make for slightly depressing reading. The forecasters at the data and analytics firm are predicting that the world content and services market will decline by 1.2% in 2022 after the landscape became increasingly unsettled during the first six months of the year.

It’s not exactly surprising though. The past several years have been tough on everyone: the situation may be improving but we’re still technically in the grip of the COVID-19 pandemic, and humanity seems to roll itself from one disaster to the next. I’m not a data scientist (yet) and have no expert knowledge about finance or how the economy works, but even I could have predicted that the gaming industry was going to take a hit. The growth seen since 2020 was never going to be sustained.

We stopped gaming as intensely as we had before and started looking forward to a time when we could get outside and be ‘normal’ again.

Video games were an escape for many people during the lockdowns. They were a way to break out of the walls of our houses when we weren’t allowed to leave, as we could distract ourselves with new digital lands to explore. They allowed us to maintain contact with our families and friends through online matches and voice-chats when we couldn’t socialise in the real world. And they were a refuge for our mental health when the situation became overwhelming, giving us somewhere to hide away until we felt stronger.

They provided a sense of much-needed productivity for me back then. My usual routine had been screwed up by the pandemic and working days from home had turned into a never-ending stream of conference calls, where much was said but little was really achieved. Video games made me feel like I’d accomplished something during those months. Their worlds were full of chaos and disorder – and it was up to me to bring them back to peace and under control with either my sword or intelligence.

I think many of us felt ‘digitally drained’ after a period though. We were spending so much of our lives online and most of our contact with the outside world was through a screen. We stopped gaming as intensely as we had before and started looking forward to a time when we could get outside and be ‘normal’ again. On top of this, many of the releases we’d been waiting for were delayed as developers were hit with financial constraints and the realities of working remotely, so there was nothing new we were eager to play.

Now that COVID-19 is gradually easing and we’re no longer confined indoors, the gaming industry is noticing a dip. We’re spending the disposable income we have on the things we’ve missed out on since the first lockdown in March 2020: socialising, being among crowds, seeing friends in the real world rather than online. The events I’ve been going to recently may be video-game-related, but I’m more interested in paying for these kinds of experiences rather than the games themselves right now.

In a Bloomberg article published on 29 July 2022, Kantan Games’ CEO Serkan Toto said he couldn’t remember a recession in the last four decades which had had a significant impact on the industry. Millions of people worldwide may have lost their jobs and security during the most recent one, but it was widely acknowledged that they still consumed plenty of entertainment products. They spent more time at home while searching for new employment and video games helped fill those extra hours on their hands.

The situation right now is very different. The UK’s unemployment rate is still higher than pre-coronavirus levels but it’s gradually decreasing; and the cost-of-living crisis is putting many households under pressure. Energy prices are expected to reach almost £3,500 per year in October and a million adults are going entire days without eating. It’s such a sad state. Everyone is being far more careful with their spending and frivolities like those ‘entertainment products’ mentioned above just aren’t on the agenda.

Purchasing new video games right now is unnecessary anyway. We’ve been complaining for years about our backlogs filled with titles we haven’t played yet, plus subscriptions like Xbox Game Pass which saw us through the lockdowns have expanded our libraries. A article from 06 July 2022 quotes Newzoo’s Tom Wijman: “I expect the least affected [business models] will be those already positioned as live service or those that offer a subscription model, such as Riot Games and Microsoft.”

But as our finances are strained further, we may have to give up our subscriptions too. We’re also starting to realise how much they tie us to a particular company or game and that’s not necessarily something we want any more. Similar to how Elise from Game Praisers feels in this post, I recently cancelled mine for The Elder Scrolls Online because it made me feel obliged to play even when I didn’t want to. And Pete has stopped all but one of his Twitch subscriptions because he’s tired of the content.

Is there a danger of creativity being stifled even further as publishers continue to opt for safe bets?

Is the video game industry really recession-proof? The Ampere Analysis report says that while this is a fallacy, there’s no need to worry just yet. It states: “Games remain very good value for money and if consumers dial back on other discretionary spending but are at home more, the sector will be relatively well insulated from some of the worst effects of a global slowdown. Ampere currently expects the global market to spring back in 2023 as mature markets stabilise and growth markets continue the adoption of gaming.”

It seems other analysts hold similar views. They believe that, although the market is unlikely to see the same growth as the past two years, the outlook is optimistic. In the article referred to earlier, MIDiA co-founder Karol Severin is quoted: “The games industry is not going anywhere. But its dynamics will continue to evolve, away from a title sales dominated approach towards engagement-centric business models, subscriptions and in-game spending.”

I can imagine those last two terms are one many gamers didn’t want to hear. I include myself in that as I’m part of a generation whose members can remember paying for a game and receiving it in its entirety. There was no such thing as downloadable content (DLC), subscriptions or additional purchases back then. Although I understand these models make good business sense nowadays, is there a danger of creativity being stifled even further as publishers continue to opt for safe bets?

As mentioned earlier, I don’t have any expert knowledge about finance or the economy. This post is simply the thoughts of someone whose current studies have given them an interest in subjects like this and how data-driven decisions can affect an entire industry. Let’s see what the next five months of 2022 have in store.

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