According to Karol Severin, Senior Analyst and Strategy Director at MIDiA Research, we’ll see even more layoffs this year than last…

Severin was contacted by WCCFTech to share his views on the state of the gaming industry. Despite a 1% increase in game sales in the US and a 1.7% increase in Europe last year, and Newzoo’s forecast for growth, this year has seen 60% of last year’s total layoffs in the industry in less than a month. The industry could be in for up to two years of tough times.

“It is important to note that while these statements may seem intuitively contradictory, they are not necessarily mutually exclusive. It is possible that the industry (depending on how you count/define ‘the industry’) will grow revenues in absolute terms. MIDiA’s forecast is that growth will be very modest (about 3% globally in 2024) and below the rate of inflation, which means that while the revenue number may end up higher, the industry is likely to be worse off in reality. The growth in absolute numbers will be driven more by continued price increases and a growing player population. The layoffs are an ongoing part of the industry’s consolidation and optimization for profitability (though some call it “sustainability”). If we assume that the market is currently oversaturated with too many games, then it is possible for layoffs to occur without affecting global game revenue. It will likely just become more concentrated among fewer game companies as closures and/or downsizing efforts play out.

As for “bracing for up to two years of pain,” it depends a lot on who you ask. Traditional pure-play gaming companies will find it harder to compete as tech giants and other non-pure-play entertainment companies (e.g. Netflix) move into gaming and compete for valuable time spent. These companies are not entirely financially dependent on games, making it easier for them to sustain lower margins as they compete for market share. So yes, pure-play companies are going to have a tougher time in the coming years. We are seeing a gradual redistribution of market share/power/influence from traditional game companies to more sector-agnostic players in the games industry. This is not to say that all game companies will struggle. In any market transition, there are always winners and losers,” Severin said.

Severin added that Microsoft made the cuts at Activision Blizzard King to better integrate the publisher into itself, and the 1,900 people laid off are not just at Activision. Companies and departments are scaled for growth, not for profit, and that’s why the number of people laid off is in the ballpark of what MIDiA expects, because 5-12% of companies’ workforce has been laid off recently, and Microsoft falls into that average. Finally, on Palworld, he said there will always be winners, but the environment for pure-play companies is changing, but that doesn’t mean there won’t be successful companies. Palworld and game developer Pocket Pair are good examples.

So be prepared to see a lot of people end up jobless this year!

Source: WCCFTech