① Due to various reasons, 2023 became another major blowout year in game history; ② A series of masterpieces also held back the growth rate of the game industry at a time when the global economy was gradually slowing down, but bad news such as layoffs and bankruptcy continued to follow; ③ Although the market's overall expectations for 2024 were not high, the emergence of a series of new technologies such as AI inspired industry participants and investors to have a positive outlook on “imminent change.”
Financial News Agency, December 22 (Editor Shi Zhengcheng) From any point of view, 2023 is undoubtedly a big year for games that went down in history.
At the “The Game Awards” (The Game Awards) award ceremony in early December, Tencent-invested Larian Studio won numerous awards such as Best Game of the Year with the role-playing game “Baldur's Gate 3,” which became the biggest winner this year.
Arriving at Nintendo in Los Angeles with two blockbusters, “The Legend of Zelda: Tears of the Kingdom” and “Super Mario Bros.: Amazing,” I was disappointed to return home with awards for best action/adventure game and best family game. Famous companies in the game and e-sports industry, such as Sony, CD Projekt, Mihayu, and JD, have also made their own gains.
If I had to say which company was relatively lonely on the stage this year, Microsoft was probably the only company. Originally, the “money power” giants who were expecting to become famous in 2023 ended up leaving only a series of hindrances that were mocked by players.
Behind a series of blockbusters, the global game industry in 2023 can still be described as difficult: there are dozens of well-known game companies that announced layoffs during the year, and listed companies such as Microsoft, Epic Games, CDPR, Amazon, and American Electronic Arts are all on the list. At the end of last month, the game media Polygon even published an article saying that the wave of layoffs in the game industry is creating an industry crisis.
The industrial growth rate is expected to remain low
The latest industry report by Newzoo, a well-known game industry consulting firm, maintains the forecast that the global game market revenue scale will only rise slightly to 184 billion US dollars in 2023 (+0.6% year-on-year). The main reasons include the slight weakening of the mobile game market and the Asia-Pacific region. As a reference, the game market in 2022 just experienced a “burnout period” after the pandemic, and revenue fell 4.3%.
Looking back, Newzoo's current forecast for the global game industry in 2026 is 205.7 billion US dollars, and the corresponding annualized compound growth rate is only roughly 4%. It should be emphasized that this expectation also has some vague elements. For example, Newzoo also takes into account the boosting effect brought by “Nintendo's Next Generation Switch.”
As for the upcoming 2024, Drew E. Crum, a consumer retail industry analyst at multinational investment bank Stifel, stressed that compared with the “extraordinary lineup” of new games released in 2023, the upcoming game lineup in 2024 seems weak, and there may be challenges in replicating or surpassing the previous year's performance.
Outlook 2024: Change and AI become high-frequency terms
As for the upcoming 2024, although many game industry developers and investors still talk about difficulties, their words already show a sense of mission that the transformation of the industry has arrived.
In an interview with game industry media Games Industry this week, George Ng, co-founder and chief technology officer of GGWP, an AI solution platform, said that the first generation of games that actually utilize AI will be launched in 2024, and these games will have features such as dynamic partners and personalized stories. Ng is also optimistic that the social nature of games will continue to grow. At the same time, regulatory developments, including the EU Digital Services Law, will encourage developers to design and adopt more safety measures to better protect the safety of players in these social experiences.
Michalo Nowakowski, chief commercial officer of CD Projekt Red, a publicly traded game company in Poland, also expressed his passion for AI. Michall said the smart use of AI will be important to enhance developers' creativity and help everyone reach new heights. He also believes that there will be quite a few interesting new works next year, and reminded the industry that “there are also popular blockbusters in 2023 that are not favored until they are released.”
Mike Rose, founder of the British game publisher No More Robots, saw an opportunity for “whales to fall to life.” Mike predicted 2024 would be more difficult, there would be more layoffs, and more developers and publishers would go out of business. Judging from the optimistic part, there will definitely be news of a new Nintendo console next year. At the same time, in the ashes of the collapse of major institutions, more small studios may also emerge.
Investors, for their part, also saw potential additional opportunities in 2024.
Shum Singh, founder of game industry investment bank Agnitio Capital, said that as 2023 comes to an end, there are several positive macroeconomic developments that will have a beneficial impact on the game industry in 2024. For example, the Federal Reserve's recent policy shift has also contributed to a sharp rise in game industry stock prices. This seems to be the first real indicator of a shift in market sentiment from bearish to more optimistic.
Singh pointed out that as more capital flows into the stocks of listed game companies, they will start investing in new games, acquiring small studios, and financing projects for external game development. It is expected that by the second half of 2024, mergers and acquisitions and investment activities in the game industry will increase.