The video games industry is facing significant challenges, with industry leaders predicting up to two years of turmoil, restructures, layoffs, and closures. The current situation is attributed to continued high interest rates, oversaturated video game stores, and cautious investors, according to industry insiders who spoke to GamesIndustry.biz.

One CEO of a public company expressed concerns, stating, ‘If 2023 was the year of layoffs, 2024 will be the year of closures. Not just developers, but publishers, media, service companies… There are just too many unprofitable businesses in video games. We’re looking at up to two years of pain.’

Investors also anticipate a potential decrease in interest rates, which could stimulate more investment later in the year. However, until then, there are perceived to be ‘far safer ways to invest your money than video games,’ as stated by an angel investor.

Additionally, interest rates are putting pressure on various business costs, including wages, insurance, travel, and rent, with no room to raise video game prices to compensate. This financial strain is further exacerbated by the oversaturation of games being released across all platforms. Industry insiders emphasize the need to return to pre-pandemic levels in terms of release schedules, which is estimated to take about two years.

According to a leading VC, competition isn’t the primary factor in the current industry challenges, but it poses a significant challenge, especially considering the current disposable income levels. The expansion and investment over COVID have left engagement-based businesses spread too thin, leading to concerns about the effectiveness of current strategies.

Overall, the industry is bracing for a prolonged period of instability, with publishers signing fewer games and the market being saturated with releases that are not meeting expected performance levels. The industry is facing a critical phase that may extend into 2025, as industry leaders navigate the complexities of an evolving market landscape.