Game over? Industry suffers slowdown after decades-long winning streak

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The $200bn video games industry is reckoning with its biggest slowdown in 30 years, as the huge growth driven by smartphone gaming and the latest generation of consoles reaches its limits.

Hardware sales are slowing, with Sony cutting its forecast for PlayStation 5 sales this week. Consumer spending on mobile gaming declined last year, down 2 per cent to $107.3bn according to Data.ai, which forecasts low single-digit growth in 2024.

The sense of crisis across the games sector is in sharp contrast to growth achieved during the Covid-19 pandemic, which allowed many locked-down consumers to spend their excess time and money on games. That peak marked the culmination of a winning streak for the digital entertainment business that began with the original PlayStation in the mid-1990s and was accelerated further by Apple’s iPhone.

Many in the gaming industry expected to bounce back quickly after 2022’s post-pandemic decline, last year did not deliver the growth initially hoped.

The latest quarterly numbers from some of the biggest publishers, including Electronic Arts and Take Two, has underwhelmed investors. Meanwhile, games developers have been forced to cut thousands more jobs this year after already slashing as many as 10,000 in 2023.

“There’s a lot of commercial anxiety: about growth, about profitability, about keeping budgets in check and about making an impact in the market when there are so many established products,” said Piers Harding-Rolls, games research director at Ampere Analysis, a market researcher. “We are in a much slower growth era.”

Concern surrounds the lack of new gaming devices being sold to expand the market. The uplift from the latest generation of PlayStation and Xbox consoles that were released in 2020 has waned and the global fall in smartphone sales means there are fewer new players coming online in what…