The video game industry is a multi-billion-dollar juggernaut. It boasts massive profits, blockbuster releases, and a global audience that spans all age groups.
Yet, despite its success, concerns are growing about the possibility of a second game market implosion akin to the infamous crash of 1983.
While the market today is vastly different from the early 80s gaming scene, certain trends suggest that another similar downturn is not out of the question.
Let’s dig into why it’s possible that there is a second video game crash on the horizon …
What Happened in 1983?
To understand the possibility of a second crash, we need to revisit the cataclysmic events of 1983. The first crash’s primary cause was an oversaturated market filled with low-quality games, a lack of consumer confidence, and failures of major titles.
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Retailers became wary of video games, leading to a massive reduction in shelf space for games and consoles. The industry’s value plummeted, and many companies went out of business.
Market Saturation
One of the main factors that contributed to the 1983 crash was market saturation, and this is a concern today as well. With the advent of digital distribution, the barriers to entry for game development have lowered significantly. Platforms like Steam, the App Store, and Google Play are flooded with thousands of new games every year. While the democratization of game development has brought many positives, it has also indundated customers with too many choices. Many games struggle to stand out, and with such stiff competition, even well-made titles fail to find an audience.
And the rise of games-as-service has resulted in fewer blockbuster releases. While IPs like Fortnite and Call of Duty remain profitable, the industry’s heavy reliance on big franchises could create a bubble. If consumer interest in these games wanes, the bubble bursts, especially if there aren’t enough new popular titles to fill the void.
Rising Development Costs
Another potential cause of a second video game crash could be the ever-increasing costs of development. AAA games now require enormous budgets, often surpassing those of major Hollywood films. So game companies must achieve massive sales just to break even. Having just a few high-profile games underperform could cause an industrywide domino effect.
That’s not to mention the push for cutting-edge graphics and increasingly complex game mechanics leading to the phenomenon of games launching in unfinished or buggy states. Fiascos like Cyberpunk 2077 serve as cautionary tales in squandering customers’ good will. Multiply that kind of backlash across several big releases, and we’re looking at a widespread collapse in market confidence.
The Indie Game Conundrum
While AAA developers face pressure from high costs and higher expectations, indie developers have their own obstacles to overcome. The indie scene is thriving, but it’s also highly competitive. Many independent games struggle to find success due to limited marketing budgets and the aforementioned high volume of new releases. Without a too-big-to-fail parent company providing a safety net, a string of failures could cause a contraction in the indie market, as well.
Economic Pressures
One potential stumbling block everybody misses on this topic is the effect of outside economic factors. Just consider what a global recession would do to already inflation-strapped disposable income. New video games are luxury goods, so expect them to be among the first expenses people cut. And the rising cost of doing business could make companies scale back their operations, lay off workers, or even close for good.
Consumer Fatigue
But there’s still the elephant in the room. The constant push for microtransactions, loot boxes, and other monetization strategies has gamers fed up. While profitable, these tactics have incited a growing backlash.
Don’t believe me? Just look at the Mortal Kombat franchise. There you had a solid gold IP that printed money for decades. According to a good friend in the know, a sizable contingent of the MK install base were such diehard fans, they didn’t play any other fighting games. But ever since Ed Boon was muscled away from the wheel, the series’ new owners have steered it into one iceberg after another. The contant nickel-and-diming of players cost MK its core fanbase.
If this kind of discontent continues to grow, it could damage sales throughout the industry as consumer confidence erodes.
Could it Really Happen?
That’s the question, isn’t it? While current trends raise a host of yellow and even red flags, a full-scale crash like we saw in 1983 seems unlikely at present. Today’s gaming industry is much more diversified, with multiple revenue streams including mobile gaming, esports, and streaming.
But–and this is a big caveat–the same safeguards that protect the industry could also create pockets of instability. A significant downturn in one area; say, AAA game sales or live-service games, could send ripples through the industry in a shock wave t hat hits developers, publishers, and investors alike.
Again, it’s not inevitable. But anyone who thinks the game industry is immune to repeating past mistakes and suffering similar consequences is kidding himself. Market saturation, runaway development costs, dwindling consumer trust, and global economic pressures could create a perfect storm.
A better question might be if the game industry can stave off a second crash. With competent leadership determined to keep customers interested, yes, AAA can navigate the choppy waters ahead.
Then again, the current crop of corporate managers aren’t exactly renowned for their competence, are they?
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