Games industry between awakening and consolidation

Games industry between awakening and consolidation

Cologne At first glance, the euphoria in the Cologne exhibition halls seems great: after a three-year Corona break, visitors are again at the Gamescom – the largest video game event in the world. The rush is correspondingly large: hands are shaken and real contacts are made.

And even if you take a look at the numbers, you could initially assume that the corona pandemic has even accelerated the growth of the gaming industry. Since the last Gamescom Three years ago, according to the Game industry association, sales increased steadily: by 29 percent in 2020 alone, and by another 17 percent in 2021 to 9.8 billion euros.

Management told the analysts that sales of graphics chips for game consoles such as the Playstation 5 or the Xbox Series X had fallen. “Macroeconomic headwinds around the world have prompted a sudden slowdown in consumer demand,” he said Nvidia-CFO Colette Kress.

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That fits with the weak numbers of the three console giants Microsoft, Nintendo or Sony. Alone in the United States their sales fell in the second quarter by 13 percent to 12.4 billion dollars, the US market researcher NPD recently calculated.


Sony’s CFO Hiroki Totoki explained the decline to the analysts with “the increasing number of opportunities for players to leave the house – because the Covid-19 infections are declining”. Video games were already a mass medium before the pandemic, but curfews and strict rules for public events have given the industry an additional boost in recent years.

Mobile games on smartphones in particular are played today by people from all social classes and age groups.

With the pandemic, many players discovered the social component of these games for themselves: The game “Animal Crossing: New Horizons” from March 2020 is now one of the 15 best-selling video games of all time because players can access their virtual games they have set up themselves via the Internet visit islands and spend time together.

Gamescom 2022

Visitors play new computer games with keyboard and mouse at Gamescom 2022 in the Cologne exhibition center

(Photo: action press)

Most of the corona protective measures have now expired and no longer have such a significant impact on social life. Analysts therefore expect a drop in sales for the industry. In 2022 alone, the industry’s sales would fall by 1.2 percent to $188 billion, the English market researcher Ampere Analysis recently predicted.

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This is a necessary correction, says the renowned analyst Michael Pachter from Wedbush. The “oversized sales” and “record figures” were “impossible to beat”, so declines are to be expected. In Germany the gaming industry was even able to defy the global trend. There, sales of video games grew slightly by two percent in the first half of 2022.

The managing director of the German industry association Game, Felix Falk, is no longer expecting a downturn: “The people who discovered games for themselves during the pandemic are not stopping now, but are staying true to their new hobby,” he said Handelsblatt.

In the case of the giants of the industry, however, consolidation has recently progressed rapidly. In January, Xbox manufacturers had Microsoft announced the big game company Activision Blizzard to want to buy for 67.8 billion US dollars.

Activision is known for bestsellers like “World of Warcraft”, “Overwatch” and series like “Call of Duty”. In January alone, gaming industry acquisitions totaled $85 billion.

Many German companies sold

There were also major takeovers on the German market: in January 2022, the British games company Team 17 bought the German simulation game developer Astragon (formerly Rondomedia) for 100 million euros. Larger parts of the value chain are relocating abroad because there are no large companies in Germany that could act as buyers.

However, smaller studios often spring up around these larger companies. “The real innovations rarely come from within the large corporations, the new providers will at most be bought by them at some point,” said Julian Riedlbauer, gaming M&A expert from the IT consultancy GP Bullhound. “New players with new ideas and game concepts are constantly emerging and are celebrating unexpected successes.”

Some of them come from Germany, where there are almost only small and medium-sized games companies. Many of them have been sold, with Astragon, Bigpoint, Innogames, Goodgame Studios and Wooga, many other larger independent games companies have already been taken over by larger competitors.

The market has currently been bought almost empty, says Riedlbauer, who advised Astragon on the sale in January. He says: “First of all, new companies have to grow.”

Funding expires

However, the framework conditions for new game developers in Germany are currently anything but favorable. In 2023, funding for the video game industry, which only started about two years ago, is to be cut.
In order to bring the German gaming ecosystem into balance, Falk proposes the settlement of international gaming giants in Germany.

After a two-year Corona break: Gamescom attracts video game fans to Cologne

“When I have big blockbuster productions at the location, small teams split off quickly, which often become successful very quickly,” says the game managing director. Industry spokesman Falk is optimistic that Germany has become much more attractive as a business location in recent years: “We’re finally on a competitive level with Canada, Great Britain and France.”
For the industry representative, video games are a key technology that is closely linked to many other industries and future technologies. “Just developments around the metaverse offer huge possibilities.”

More: The most valuable chip company in the world reports a slump in profits and makes a weak forecast

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