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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Razorfist has argued that we’ve been in one for awhile, and there’s something to that. Video games are really more lifestyle brands to pay licensing fees to instead of entertainment products treated like events like they used to be.
I’ve speculated much of the reason is HD, and I stand by my assertion that it was a mistake to pursue as it completely derailed the industry and turned it into little more than an arms race to outdo the bike cutscene from Final Fantasy VII for the last 20 years. Make it bigger, make it more expensive, and hire twenty times the people, too make a product that has a quarter of what used to be expected back in the ’90s.
That’s the reason indie is growing. Smaller teams, smaller budgets, tighter focus, and far less bloat. How long it’s going to take the mainstream to catch up is anyone’s guess.
One of my Twitter mutuals pointed out that despite all the talk of massive layoffs at AAA publishers, they still have more employees than they did pre-Corona Chan. I’m with David Stewart on this one: At least 30% of the staff they kept are doing makework jobs that add zero value to the product.
I am reminded of that clip that went around a year ago of Vinny from Vinesauce figuring out how to mute dialogue in a game within 10 seconds of hearing the sidekick say something like “wait, did you seriously use magic? That was a thing that happened?”
He got criticized for it and responded that the dialogue dragged down the game in every way, and since the game was otherwise great he had no regrets in muting the dialogue.
The people were mad mainly took the position that he was erasing the contributions of the people who wrote the dialogue, but since the dialogue was detrimental they weren’t really contributions in the first place.
I’ve seen people who work in the industry attest that Razorfist’s video was dead on. The crash already happened, is still ongoing, and everyone is just trying to pretend things are fine.
I recently played through the Llamasoft collection that Digital Eclipse released and it was kind of funny/sad to see Jeff Minter bemoaning the increasing influence of big corporate greed as early as like 1984, making it harder for indies like him to get distribution or coverage anywhere.
Speaking of microtransactions. I just learned the other day that WoW’s Sparklepony(or TRH, as Totalbiscuit – may he rest in peace – called it) made more money than Starcraft 2. The whole game.
If I wasn’t convinced before that that the only reason we still exist as a species is God’s infinite grace, I certainly am now.
Todd Howard reported that Oblivion’s Horse Armour DLC made enough money to put his kids through college..
I don’t follow any live service games myself, but my brother plays Bungie’s Destiny 2 on the regular. They recently botched things massively and are in the process of having Sony, once a partner, essentially absorb them. From what I’ve heard, it comes down to colossal mismanagement – they had only one serious revenue stream and multiple other big projects in the oven. Then, the second-to-last expansion in their big, decade-long MCU-style storyline (the Lightfall expansion) was botched and received very poor reception. They scrambled and threw everything into making the finale (“The Final Shape”) DLC successful, which it was…but not successful enough. Despite making a lot of money, they were simply too deep in the hole, and Final Shape did well but not gangbusters well.
They fell into the same hole as Sega did in the 90s. The Genesis was a monster success, even outselling Nintendo for a couple of years. Then SOJ bungled the Saturn launch. Sega tried to recover with the Dreamcast, and to their credit, they learned all the right lessons from their mistakes, but in the end it was a case of too little, too late.
That AAA outfits are repeating the same blunders is another point for the crash bros.
I personally think if there’s one title that could possibly send things over the edge (atleast with AAA), it would be Grand Theft Auto VI. I say this because Rockstar Games (to me at least) seems like the last remaining AAA developer who still has a somewhat respectable reputation, mostly because their biggest disasters were either related to broken remasters and/or poorly maintained online modes. They haven’t yet had a mainline release in their franchise that was a completely buggy mess at launch à la Cyberpunk.
As others like Cowan have said, I certainly agree that the industry’s situation has largely come about due to mindless technology worship (i.e. ‘graphics over gameplay’). The last time you could sell a console purely on graphics alone was probably during the PS2/PS3 transition. That was certainly the last time graphical improvements were actually relevant in the eyes of consumers. Most normal people have absolutely no issue with either 2D or 3D beyond merely personal preference. All they’ve been doing is mindlessly pushing hardware for reasons of graphical fidelty, so they can cater to an audience that consists of only a fraction of those who play games.
Perhaps ironically, I think Nintendo might once again come on top once a crash occured. GameCube was the last time Nintendo was still in somewhat of a graphical competition with Sony & Microsoft, and they’ve spent the nearly two decades since then pivoting toward a more gameplay-focused approach, all of which has resulted in the Switch. I don’t even see a future ahead for Sony & Microsoft in the console business if they don’t change their current way of doing things.
I do think you can expect a far more fragmented, less corporated industry in the future, though that applies to virtually every entertainment industry. For know, we’ll just have to see what the future holds…
Microsoft is 100% pivoting to Game Pass and Games as Service. It’s inevitable. If there is ever another new Xbox console at all I will be absolutely shocked.
Sony is locked in with the Californian death cult who owns the company now. They are going to ride and die and probably end up obliterating themselves because nothing in the company makes money anymore. They’re going to push DIE and meaningless graphics until they bleed out their eyes. What else do they have? It’s certainly not exclusive games.
The only survivors in the industry at this rate will be PC and Nintendo.
“The only survivors in the industry at this rate will be PC and Nintendo.”
Honestly, I believe the industry would be better for it if that was all that was left in the gaming space. Microsoft/Xbox becoming third party (following Sega’s footsteps), and Sony disappearing entirely would be a huge boon for gaming.
I hope you’re right about people getting sick of bad games. My fear is that they won’t, that they’ve become so habituated to slop that they consider it acceptable. Certainly Bethesda fans have gotten used to the idea that the game will require extensive modding to even be stable, let alone enjoyable.
I pray for that to happen, but if Cultural Ground Zero has taught us something, it is Keynes’ famous quote, “The market can remain irrational longer than you can remain solvent.”
The Soycorps are still churning slop, and the audience is still lapping it up, I believe, because the latter’s tastes have been slowly and deliberately debased at the same rate as the quality of the games themselves.
Have you noticed how old games, which used to come in cheap compilations or virtual stores by the boatload in the 2000s, are rarer and rarer, and the few ones that are available are subscription-based, Disney-vaulted, or priced like full games? (looking at you, Nintendo)
That, and the economy still runs on monopoly money and grifting, so Soydevs can be kept afloat ad infinitum.