The state of the gaming industry

After the recent good showing at all of the showcases at the not-E3 Summer Games Fest Keighley Fest, there has been the usual good news bad news rotation. Xbox had a really good showcase with some really good showings of upcoming first party and third party games. Included was the decision to return to exclusives again with Gears of War and Clockwork Revolution and the promise of more to be added. Personally, not my idea of a sensible decision, but it has been one of the most requested changes that XBOX should make directly from the fans, and Asha Sharma provided. People were happy with PlayStations showing and apart from the expected backlash to the new God of War game not including Kratos, overall people were pleased with the showing. Some had called the Nintendo showcase the best of the whole lot. As someone who is not a Nintendo gamer I cannot really comment, but I am happy for people who were waiting for the Zelda remake. Persona 6 flash showing, the new Ninja Turtle Ronin game and a few other sneak teases were a little disappointing and really seemed to be padding and more of a proof of life than anything worthwhile, although there were some distinctly noticed omissions from the showcases. A side not: what is actually happening with Beyond Good and Evil 2?

This was swiftly followed by the news that XBOX was seriously considering reducing its games division and the likelihood that there would be layoffs and possibly studio closures with Compulsion Games, Double Fine and Ninja Theory first and foremost on the chopping block. These three are some of my favourite small studios. Each has created unique, interesting, thoughtful, creative and unequivocally artful games in their extensive history. Many times they had to fight to get these games made. Many of these games have won awards for their creativity and their excellent contribution to the industry. These are not billion or trillion dollar studios. They are not Call of Duty level game studios. They make what are often seen as niche games with smaller budgets and smaller audiences and by that token smaller profits. They will not make their parent company trillions of dollars. What they do offer is added value, depth and breadth to their parent company. Yes they often make Game Pass games and yes this has hampered their visible value from the outside to Microsoft. But if you look at their intrinsic value and the creation of good if not great smaller budget, tighter focused games you can see why they have a not insubstantial and generally happy following. For the record I really liked South of Midnight. 

There were also comments from both the CEO of XBOX and the CEO of Microsoft hinting that the gaming division is just not making enough money. They want results. They did not comment that XBOX was not profitable but rather that they were not profitable enough. Satya Nadella said they do not monetise their IPs enough as they make less money through monetisation of their IPs than other parties do online. This to me is an insight into why Phil Spencer left, but that is another difficult conversation for a different time. 

Of course Playstation will not be outdone and have in the same timeframe decided to shutter Destiny 2 and more recently there have been rumblings that they will let 400+ Bungie devs go. People were spamming ‘Destiny 3’ in the chats of all the showcases (including the XBOX one which makes no sense at all) and even after the free week, Marathon’s numbers have not been significant. There are said to be more layoffs and restructuring as well. It seems no one is safe from the lumbering changes that are continuing in the industry. EA is also restructuring before the Saudi sale and Tencent are thinking of selling off their stakes in development studios. This is not the end but rather a continuation of the new norm in gaming. 

This has been an ongoing conversation for the last 3-4yrs and frankly it is tiring for most gamers to keep abreast of. The people who make money from online discourse are eating well at the moment as they cannot make videos and post fast enough to feed the insatiable beast that is the negative gaming cycle. Clicks and views, point and counter points are all based on very little data or at the very least, well selected data and hearsay that fuels their point of view. Trolls have existed forever. They are making videos now but before they were in forums and before then (if you are as old as me) they were there in person and have been as long as people existed. I am pretty sure there is graffiti in Pompei by a Roman troll trying to wind someone up for kicks and giggles. The major difference is with every iteration of trolls their reach increases as do their numbers of people effected. They reach more people now and therefore spread more misinformation and hearsay that then becomes whispers and finally becomes facts without evidence. Take the story saying Sony is pulling back from PC. This information was released how long ago and the only confirmation we have received so far, is not from PlayStation, but another story citing an all hands on deck meeting (behind closed doors) at PlayStation confirming this. A server case of ‘Trust me bro’. I am not saying that they won’t do this, that is not the point, the point is it is hearsay until it isn't and until then it cannot be taken as fact. I do believe this is exactly the type of thing an executive at PlayStation would do. It is short term gain with no actual evidence that there will be long-term benefits. There have been PlayStation execs stating that putting first-party games onto PC is like printing money. But PlayStation execs have the data and will make decisions based on that.

The long and short of all of this is we have no idea what the internal metrics are at any games company. That goes from massive companies like Microsoft, Sony and RockStarr right down to smaller studios like Larian, Moon Studios or Sandfall. Xbox may have been happy with Compulsion or Double Fine breaking even or making smaller profits as they add density to their offerings and therefore value. This may not be the case anymore. We are given snippets of information from these companies and all of it is curated and purposeful. It is not designed to be open and transparent.

This brings me to the real conversation I would like to have. I would love to interview Matthew Ball and/or Mat Piscatella. There is so much information that they release that I feel people completely overlook or at the bare minimum cherry pick the most important or salient data that adds to their personal viewpoint. Initially when Mat Piscatella released data on the most played games on all the platforms people took  notice. This reduced as time went on as it is the same week in and week out. This is the point I feel of what he is trying to show people. It is a small amount of data with little to no real background and thus only a starting point to springboard off of, but it is a stark overview of the state of the gaming industry. It also feels like every time he releases his lists there is an audible, exasperated sign from him accompanying it as I really don’t think people see what he is saying. 

Matthew Ball’s State of Video Gaming Flipbook fascinated me last year and has once again interested me this year. It has all the data you need to see why gaming is where it is at the moment. There is detailed data and clear explanations of what has happened to bring us to this point without the emotion usually associated with games downfall conversations. This has been used to cherry pick in order to fit the argument being presented and used again to refute said argument. 

The long and short of it all is when you ask - did X factor contributed to the crumbling of the games industry as we know it, the answer is yes irrelevant of what that factor is. Did greedy corporations and uninterested shareholders cause this? Yes. Did CEOs who know nothing about gaming but just want to increase growth with no care for the industry they have entered cause this? Yes. Did free to play games, games as a service and lifetime games cause this? Yes. Did the chasing of products that create a heavily controlled ecosystem that pull you in and hold you there forever in order to syphon money from you such as the metaverse, Roblox and Fortnite cause this? Yes. Did the introduction of monetisation methods like skins, microtransaction and GOTCHA style mechanics cause this? Yes. Did overblown budgets, misspending and mismanagement of development time cause this? Yes. Did gamers expecting too much while wanting the same and being generally fickle cause this? Yes. Did gamers not buying games, supporting Game Pass and similar subscription services or not accepting that games cost more and therefore should have higher selling prices cause this? Yes. Did the sales expectations of publishers that were never going to be met thereby leading to disappointing sales figures cause this? Yes. I can go on by adding in any other talking point people use to try and explain why we are where we are but I feel it is redundant. The present situation we find ourselves in within gaming is a product of all of this. 

My answer to all these issues people bring up is simply that these things exist because people pay money and buy them. Microtransaction, DLC, skins, £80 games, £100 early access granting premium editions, free to play and games as a service games, all exist because people buy them or spend money in them. These games or services make money. I hear people complain about DEI and developers not listening to gamers but many of the games they complain about have sold well enough and generally have good reviews even if the sales were not enough to meet the expectations levied on them. The people who like them like them. Games like Dragon Age the Veilguard is just not the Dragon Age game people remember and is just a different game. I lost interest in Dragon Age with Inquisition, which many people loved. 

I wanted to write about Matthew Ball’s report but realistically there is just too much data there, but the report makes clear just how much data these companies have. Add to that that they have data analysts that analyse the data and extrapolate out what is actually happening and what the company needs to do in order to make money. This is often different from what we as gamers think or feel is happening. This is why DLC, microtransaction and skins are so prevalent. That is why we continue to get games we capital G Gamers complain about. The sheer number of people out there that play games is astounding. 90mil PS5s, 30-40mil XBOX consoles, 180mil Steam users. Even if you accept that many have multiple systems, that is still a huge number of people. When you add in Mat Piscatella’s charts of the most played games you can see why there was/is a push for these types of games. 

I am going to state something very controversial, We as gamers have never had it better. There are more games than we could ever play. If there is a game we don’t want to play (GTA 6 for me for instance) there will be hundreds of other games that we can choose from. Don’t like the new Star Wars Xcom like? No problem, there are other games to play. 

The immediate response to this is what about the layoffs and studio closures? Do you not care about the developers and creatives? What about game cancellations? What about the AI creeping into gaming? What about the lack of creativity and vision in gaming? What about the Shareholders ruining games? These are all valid and important, but they are different conversations from where we as gamers sit at the moment and the sheer number of games we have access to. These are all important but it is all part of the whole conversation and we can discuss these as individual items as well as a discussion of the whole. The acceptance of all of these concerns is a sliding scale. Someone will be fine with AI being used, others will be fine with basic and background assets being generated by AI whereas most will probably be completely put off by AI. 

My overall take on this is we as gamers, developers and publishers have a supply and demand problem. 20K games released on Steam alone last year. And yes there is an argument that some of these games are slop and AI cash grabs, but even so that number is mind boggling. If you played all of them you would need to play 54 games a day in order to play them all. Even if half of those are cash grabs and rubbish you would still have to play 26 games a day to get through them. If you played a game a day you would still only have played less than 2% of the games released. Add to this thought the 100hr games and that knocks your playable games right down. Information I can find shows that the average time gamers play each week is 8hrs (based on ESA, Newzoo and YouGov studies) and this is most heavily skewed for teens and 20-30yr olds (15hr and 10hrs respectively) and reduces drastically (as expected) the older people get (6hrs for 30-50yr olds and 4hrs for 50+). Just based on this a 100hr game will take 12.5 weeks to complete (or 24 weeks for a 50yr old). 

This, to my mind, is why a 7 or 8 out of 10 game is often overlooked and I feel our mindset has adjusted to see them as not worth our time and, more importantly to developers and publishers, our money. When we have all this choice, why would we play a game that is said to be above average game (7 or 8) by people we personally feel hold a reliable opinion, when we have all these other games that are so much better, completely objectively obviously. Why play South of Midnight when we have Expedition 33 or GTA 6 for example. This is excluding the current skepticism surrounding the well known journalists from sites like IGN and Kotaku. 

The simple fact is we cannot play every game and we make selection based on our personal preferences and the opinions of people we trust, be that journalists, influencers or, the old fashion way, our friends. Previously we played what there was as we did not have that level of choice we have now. Games like Ninja Gaiden were held up as amazing back in the day whereas if it was released today as a new franchise, it would be hard pressed to reach people. Every game is fighting for our time, attention and, again for the developers and publishers, our money. 

This brings another point forward, people do not have money to buy every game out there. A recent report showed that people are individually buying less games than ever. 60% of gamers purchase 2 or fewer games a year with more than ⅓ not buying any games in the previous year at all. Games costing $60-£70 with $100 premium editions are out of many gamer’s price range in order to buy multiple of them. Many wait for a sale and this can be highlighted by games going on sale and having deep discounts far more quickly than before. Not to mention the dreaded backlog of games that hangs like a cloud over many of us. There is no financial incentive to buy a game on day one. 

Add to this Matt Piscatella’s weekly charts highlighting that the most played games are live service, games as a service and metaverse style games, and you reduce the number of people who buy games drastically. I fail to see why people who are amazed why companies like PlayStation have so aggressively chased the live service dragon. For every Concord there is a Fortnite. A few duds that collectively cost $400-$500mil before they are cancelled or decommissioned, are worth it for the long-term gains of a Fortnite that makes $4-5Billion a year (average from the last 4yrs). I found an estimate that Helldivers 2 has made $1.6billion since it launched in February 2024. As a comparison Marvel’s Spiderman 2018 Playstation best selling game across multiple platforms, has made an estimated $3.8Billion but this figure includes console bundles and other revenue streams and I cannot find a separate number for Spiderman on its own (although it is said to have sold 22Mil copies and that estimates out to $734Mil excluding the remaster and the Miles Morales game.)

As gamers we are sitting pretty with game choices as well as competition for our time, attention and money. If we don’t like a game, we don’t buy it. If a game has performance issues, we don’t buy it or refund it or, in the case of Cyberpunk, they are forced to fix the game. We no longer need to buy whatever is available just because we want to play a game. This is where we sit currently in gaming and therefore it is no real surprise that games don’t perform as well as the developers or publishers think it will. If you spend $200mil on a game (Concord for example) it has to sell 4-6Mil copies just to break even (this takes into account platform fees, marketing, storefront cost and many hidden costs we don’t even see). This is to break even, forget profit. Saros has sold a reported 300K units (0.3% of the PS6 install base) in the first two weeks generating $22mil in revenue against an estimated total of $76mil in production and marketing cost. The maths as they say isn’t mathing. This happens across the board and is not exclusive to PlayStation. South of Midnight sold 500K units and estimates are there was a $100mil in development and marketing costs. After fees on Steam the developers made $1.2mil. Bear in mind this is on Steam and does not include other storefronts or the sales on XBOX itself. Now with Game Pass this is somewhat a skewed figure because we have no idea what value Xbox puts on South of Midnight’s addition to Game Pass nor the added revenue gained by keeping people subscribed. These are internal metrics we will never have access to and we should not make any assumptions based on facts we do not have. 

We have lost that interest in games like Saros and South of Midnight because they are a tiny blip in a sea of noise. GTA6 is the loudest game in the room at the moment and has shown its weight by making every game, no matter how big, move out of its way for the last two years running. There was a collective sign last year when its release date was moved to this year (apart from the games it moved directly in front of!) Multiple games have stated they are 100% moving their release date this year purely because of the release of GTA6. 

A massive talking point for many is also the consolidation of developers under big corporations. The acquisition of ActivisionBlizzardKing by Microsoft (and the initial merging of these companies to begin with) as well as the acquisition of Bungie and others by PlayStation have had an impact on developers being able to get on with making games. The developers often become homogenised when under the same umbrella and through this stop being the company that they were and therefore stop making games they were known for. The kind of games they release are subject to the parent companies direction and scope and therefore by proxy have less uniqueness as a result. Developers are less free to try random stuff as the corporation requires they show value for their price tag. Not all companies can make it work like Larian, Team Cherry or Moon Studios, many require constant battles for funding (Tim Schafer from Double Fine is a prime example of this) and the assurance of future funding by a parent company can in these cases alleviate the pressure and actually benefit them, allowing them to make games they would not be able to make. But even in these cases you are still at the whims of the corporation and at any time can be told your security blanket can be whipped away in the name of profitability and futureproofing (as we can see with Bungie, Double Fine, Compulsion Games and Ninja Theory).

Although the shuttering of studios and the cancellation or discontinuation of games is a really bad sign of the state of the industry, not to mention it’s appalling and reprehensible as the developers are not necessarily at fault for this, it was inevitable. This is not a COVID thing as many seem to think, this has steadily been happening for multiple years. Although the PS6 is on track to be PlayStation’s fastest selling console, the numbers of new users has not substantially increased across gaming very much over the generations (PS2 sales 160mil, PS3 87mil, PS4 117mil and currently the PS5 sitting at 90mil). Compare this to new games being released (275 games on steam in 2010, to 9600 in 2020, to 21417 last year with over 11000 this year already), and you can see the all out scrum developers and publishers need to engage in in order to just get their game into our field of vision. Add the often quoted live service/games as a service model and you can see why someone like Asha Sharma coming into XBOX will do what she is doing. Add the cost of development and the exponential increase in time it takes to make these games in order for them to stand out in an increasingly vast and varied crowd and the lack of funding for games becomes obvious. Every developer thinks they have the next big thing or the game people will love, and some of them do (Expedition 33, Dave the Diver, Stardew Valley and so on), but the sheer volume of games overwhelms them as well as the consumer out to buy their product. The gaming industry has grown too much and cannot be supported by the consumer base they are all chasing after. There are games that will always stand out (GTA6, EA sports games, Call of Duty and so on) and with the right kind of mixture of production, marketing and luck, there are games that will stumble into our collective consciousness. But for everyone else there will be a hard fought battle that has a predictable outcome. 

So what do they do then? Every development team and publisher out there need to find a realistic target to set themselves when it comes to predicted sales and revenue and work back from that in order to set costs. Not easily said and one I realise. Saros should have predicted 500K sales and worked back from that. Development times need to be reduced (hence the AI conversation.) This will lead to a situation where if they have an Expedition 33, Stardew Valley or Peak moment it is a boon rather than the expected. There is a reason XBOX hired Matthew Ball as his insight into gaming has been shown through his last two reports. 

Gaming is going through a major, aggressive restructure. All gamer’s concerns are valid. Developers are losing their jobs, AI is being used to replace not supplement developers, interesting games are not being greenlit due to the lack of expected profit, shareholders are more the focus of gaming and less so the consumer, games take longer to make due to high expectations. The list is exhaustive and if you turn on any gaming commentary video you will see a plethora of reasons why gaming is dead and the industry is crashing. And yet games keep releasing, Studios keep being formed, games are still getting funding and publishers are still being set up. I am fascinated to see if we learn from our mistakes or whether this is the future of gaming now where the cycle just keeps repeating itself.