Now I’ll start this by saying: I’m no economist, and I have a very basic understanding of economics, but I don’t think you need to be an economist to see the woes in the industry, especially now with Microsoft’s Xbox shutting down several of its studios, including Arkane Austin, Tango Gameworks, and Alpha Dog, all in order to cover the $70 billion hole left in their pocket after acquiring Bethesda and Activision (both massive publishers with dozens of high profile studios and franchises under them).
However, this didn’t come out of nowhere. Even before Xbox’s drastic cost cutting, monetisation of video games going awry has become standard in the industry, with big new releases underperforming financially being standard, either due to a poor plan for monetisation, or due to the game just not being all that fun. Add to this the fact that some publishers such as EA are doubling down on generative AI to make games (in part to cut down the production costs without reducing the number of releases, even if the quality of the game suffers), and you have a lot of people wondering if a video game market crash like that of 1983 is on the horizon.
The answer is… complicated. However, before I give you my two cents and speculate on what might happen now, let’s look at a couple historic events I consider relevant, I swear it will make sense later.
The Crash of 1983
There’s no doubt this crash was bad, with many companies going out of business. However, when you look at it closer you start noticing that the conditions leading up to the crash were quite different.
In 1983, everyone was just kinda doing whatever. Nobody knew what they were doing, either in terms of game design or running a video game company. Lots of bizarre games being released, on multiple incompatible systems, and few ways to tell if a game was good before buying are the main reasons the video game market crashed.
However, this is quite different from today. Compared to half a dozen incompatible consoles and just as many incompatible home computers, today we only really see 3 consoles and a single PC architecture, all relatively similar to each other (yes, I know the PS4/5 and Xbox One/Series S and X are technically not PCs, but as far as developing for them goes, they’re a lot closer to PCs and each other than most systems used to be back in 1983).
The issue of not knowing whether the game you’re about to buy is any good is mostly gone today as well. Between player reviews on the store page, and let’s plays on YouTube and Twitch, it’s a lot easier today to see if a game is worth your buck before pulling the trigger. And even if you do end up buying something you don’t enjoy, refunds are quite a lot easier now than they were before, making it harder for buyer’s remorse to set in and stay unmedicated, so to speak.
So, video game crash not coming? Well, most definitely not like in 1983. The environment is just too different from back then to get a similar crash.
However, I do believe there is a different period in video gaming history which is a lot more like what we’re seeing today.
The MMO Gold Rush
MMOs, and particularly MMORPGs have been around for nearly as long as video gaming itself, with some of the first MMOs dating back to the mid 70s. However, in the 2000s it really felt like everyone was trying to sell you on their new MMO. This was in large part due to a few MMOs, World of Warcraft being probably the most popular of them, striking gold. They became so successful their developers quite simply didn’t need to worry about money anymore, just keep the servers running, mix things up regularly, and the money would keep coming in.
And that’s when everyone wanted in. But of course, most didn’t make it. A handful of MMOs stayed and have gathered a dedicated enough fanbase to keep going for years, but most were such commercial flops they shut down within a few years.
Now compare this to today’s live service rush. From battle royals to extraction shooters, from mobas to a few attempts at an MMO every now and then, everyone wants a big live service game to keep the cash flowing in. However, much like the MMO gold rush from the dawn of the new millennium, most attempts fail. For every GTAV and Rainbow Six Siege that makes big bucks every year with no signs of stopping, there’s a Red Dead Online and Tom Clancy’s The Division that just couldn’t keep the momentum and faded into obscurity.
And with that, I think I can finally get into some of my own thoughts and speculation.
Are we on the brink of a video games market crash?
No, most likely not. We will, however, keep seeing financial woes in the AAA scene for a while. Seemingly every publisher tries to make the next game that everyone sinks thousands of hours into, and most attempts will fail, so until the live service gold rush slows down we will likely keep seeing failed games and big publishers shutting down their studios.
There are, however, other factors to consider.
Subscription services such as Xbox Game Pass and PlayStation Plus offer a “Spotify for games” service that allows players to pay a small fee each month and get access to hundreds of games. This sounds great, right? Well, not so much for developers, as they end up profiting from it about as much as musicians profit from Spotify, which is to say they get scraps if even that. Xbox Game Pass is actually cited as one of the reason for Xbox’s financial woes leading to the cost cutting mentioned earlier, with some sources saying the company is hesitant to add the next Call of Duty to Game Pass’s roster as to not undermine the game’s revenue.
This, of course, only directly impacts companies offering such subscriptions, namely Microsoft and Sony. However, let’s not forget that those are the companies responsible for Xbox and PlayStation, which collectively make up the majority of the console market. Ripples from the two’s financial issues are bound to be felt by others, including game studios which are not directly tied to either company.
And for the sake of completeness: Nintendo offers a similar subscription service as well, but they only offer older games from their back catalogue in it, with all new games being sold more traditionally. This makes the service a lot less risky for the company, and as such they don’t have the same issues as Microsoft.
Big companies aside, indies are probably going to be fine. Mostly.
Some indie studios sell to publishers in order to gain financial stability, but it really seems that those indie studios are the ones to pay the bill for their parent companies muck ups. So if you’re an indie studio, don’t sell. It might be hard to keep the lights on when you don’t know if you’ll have enough money to finish the next game, but with publishers eager to shut down indie studios first, it really seems that staying indie is your best chance at staying in business.
Oh, and if you’re a gamer: support your favourite indie developers. Buy their games, and spread the word far and wide of how great their games are. Maybe then the big guys will also see that everyone’s tired of everything being a live service game built on a house of cards waiting to crumble, and things will stop being the mess they are now.