The video game industry is expected to remain active this year as the pandemic continues to drive growth, but investors and analysts have lowered their growth forecasts for next year as the industry faces three major challenges: a persistent chip shortage, increasing difficulty in developing games and the potential loss of gamers, foreign media reported.
In the first year of the outbreak, global game industry revenues grew by 24% to more than $220 billion, but growth slowed slightly this year, by 11% to more than $250 billion. Lewis Ward, director of gaming research at IDC, said the industry would see a more "dramatic" flattening next year, with growth likely to be just 2%.
Fewer players will play if the epidemic improves
The console market will shrink
The downward revision is based on the assumption that the epidemic will improve. Analysts say the worst of the pandemic may be over, with future lifestyle changes making it difficult for the industry to retain players. IDC expects spending on video games to fall nearly 6% to $62.75 billion in 2022.
"Life will return to normal," he said. "The vast majority of gamers who first played games during the lockdown will go back away, and the majority of gamers will go back to their normal lives and spend more time and money away from games, and the growth of the industry will slow." Ward said.
For makers of video game consoles, the chip shortage is an unspeakable pain. Despite strong consumer demand, a shortage of chips has reportedly left console supplies struggling to keep up. SONY "reduced shipments of its PlayStation console by around one million units," while the current version of Nintendo's popular Switch console is "already old," and the company is reducing shipments in anticipation of a new iteration in 2023.
"In the long term, the demand market for chips is strong, with COVID-19 accelerating digitization in almost every vertical industry, including AI/machine learning, data center/network infrastructure, metasexes, 5G, automotive/industrial, and more." Said Evercore ISI analyst C.J. Muse.
On the other hand, console makers are also facing logistical problems such as parts distribution and assembly amid a global supply chain crisis triggered by COVID-19. Analysts say overall supply remains constrained and expect supply chain problems to ease a bit next year, but not by much, with a turnaround possible in 2023.
New games are harder to develop
Players develop their own meta-universe
Renee Gittins, executive director of the International Game Developers Association, said the pandemic is the biggest "headwind" facing game developers. "A lot of game studios are struggling to work remotely." "Developers are used to working in open office environments where teams can collaborate and communicate effectively," Says Gittins. "Remote work impedes communication."
Game publishers may have to continue to make money from older titles, the report said. "The hottest games of 2022 are the hottest games of 2021, and the hottest games of 2020." Matt Piscatella, an analyst at NPD, a market research group. "Big games like Fortnite and Roblox games will remain very attractive because they have constant content updates and it's very difficult to compete with them."
As old games continue to make money and new ones are harder to make, many see "metasurses" as the future of the industry: virtual worlds where users can create their own games online. The concept is similar to the "virtual world" Roblox platform, allowing users to design their own games, items, T-shirts and clothes, and play a variety of different types of games created by themselves and other developers.
Ward says this could be a new direction for game development -- one that relies less on a single game publisher to develop and release new games. "If the platform is done right, it can be very profitable for a long time to come, comparable to any existing big game. The potential appeal of traditional game developers/publishers is definitely greater than that of game companies in the meta-universe."