Video Games is no child's play: Gaming Trends 2023

Top trends in the video game industry in 2023:

1) Video Game Industry has settled into an oligopoly

The great consolidation occurring in the video game industry is no secret, but the extent of it might still shake you. This consolidation has allowed publishing houses to consolidate negotiating power, direct game development, reallocate resources amongst subsidiary studios, share overhead costs, and stabilize revenue volatility.

2) Game Development hits a plateau

How do the top console games in the market today, compare to the ones you grew up with a decade ago? The correct answer: they're pretty much the same. Major game publishers are laser focused on monetizing existing IPs and franchises, not on the development of new video games. This is due to a number of trends over the last few years, the biggest of which are: increased cost to develop a new IP, increased risk of underperforming expectations of gamer community, relative saturation in technological advancements in game development, and the advent of micro-transactions to replace traditional new game sales as the leading method of monetization. The corporatization of the video game industry has led to a plateau in innovation of intellectual property, worlds, and genres, and instead the focus is on improving existing franchises and extending the life of their games.

3) Indie game development on the rise, as mobile takes over

With the increasing popularity of game development tools and the reduced skill barriers needed to develop new games, there's been a boom in indie developers trying to make 'the next PUBG'. With this long tail of developers, the competition for game development (specially on mobile) is at an all-time high, in contrast to the console and PC game development market. Epic's Unreal engine now costs $1500/year for a license and provides leading edge development and design capabilities that used to require hundreds of engineers and designers to create. Unreal also allows 'free to develop' until your game hits $1M in revenue. We should expect big box games to become less common compared to games coming out of indie developers using Unreal and Roblox.

Mobile has outperformed traditional HD devices in becoming the primary device for gaming, although game development for mobile is a whole different ball game. With intense competition, lower barriers to entry, and rising demand, mobile game development is leaning towards low-tech, standard core loop, hyper-casual games, leading to fragmentation and increased focus on monetization via in-app purchases.

4) The fight for game publishing is at the 3P store layer

Valve used to be known for making CounterStrike and DOTA. Now they're known for the Steam marketplace, the platform where most games are published, discovered, downloaded, and purchased. While other major publishing houses are still fighting to keep their games on their own launchers/stores to avoid Steam's 30% commissions, it is easier said than done. Many game publishers have built their own 1P stores (Battle.net, EA Origin, Rockstar), but Steam and Epic Games Store still have the highest used platforms (in terms of MAU) for purchasing and downloading video game content.

5) The console war is at a standstill

For years, the battle for market share in the prized video game console market drove consistent innovation. Playstation and X-Box came out with something new every 5-8 years, while Nintendo was on a much quicker innovation cycle. All that changed when Switch launched in 2017 and exploded in popularity. The incredible and unexpected success of the device stopped Nintendo in its tracks and avoid risking its cash cow, while its peers have been trying to chip away at the share with little success. Sony and Microsoft still enjoy the loyalty of their hardcore gamer base but Nintendo has penetrated as the secondary/handheld device in this segment, as well as gaining a lion's share in the mobile-only segment.

6) Gamergate opened a can of worms

A misogynistic online harassment campaign that started as a right-wing backlash against feminism in 2014. The movement employed doxing and violent threats against notable feminist personalities but was ill-defined and loosely organized. This movement served to shed light on sexism and lack of diversity in the gaming industry, which is a long-documented, much-debated but seemingly intractable problem.

7) Publishers Exert Power, Game Workers Unite

Along this same timeline, there's also been visibility on the concentration of power at the major publisher levels, leaving the lower rungs of the industry particularly vulnerable, with game developers and testers exploited for long hours, little pay, and the threat of layoffs post launch. "Crunch culture" has been a well known phenomenon, and in 2018 resulted in workers organizing into the 'Game Workers Unite" movement. Workers continue to fight for better working conditions while game companies are at the mercy of investor returns.

8) The Next Billion Gamers

Similar to the broader tech industry, gaming is increasingly focusing on SEA for scale of new gamer acquisition. With game development powerhouses having focused on mostly western markets in the past, things are changing with the seemingly infinite upside in growth in these markets. While the number of users in Asia is significant, monetization is still difficult to realize with the proliferation of free to play options.