Speaking to an industry veteran about the current layoff crisis: "We are not out of the woods yet"

2023 was an amazing year for gaming with the release of many high-profile titles such as Alan Wake 2, Baldur's Gate III, Hogwarts Legacy, Starfield, and Marvel's Spider-Man 2. But behind the scenes, trouble was brewing as studios worldwide started laying off staff. Unfortunately, this year has brought no relief, and the worrying trend has only intensified with even console manufacturers like Sony and Microsoft closing several of their studios.

But perhaps times are finally changing for the better? Earlier this summer we met up with Ian McGregor, chief marketing officer of Green Man Gaming, at the Swedish-based games conference Nordic Game 2024. Besides his current job with the digital games retailer, McGregor has previously worked for companies such as Activision and EA, and so he knows the industry inside out, especially when it comes to the business side of things. And while he certainly was concerned about the current environment, he also told us that the tide might soon turn, offering better times for the industry.

"Thousands have been affected which is awful," McGregor told us about the industry layoffs. "But I think the first thing to say is that all industries work in cycles, it's not just games. And clearly, we're in a circle of downturn where businesses are looking to cut costs, reduce headcount and reduce their risk. It's all about balance sheet exposure, and businesses are looking to reduce risk."

"In terms of how we got here, there isn't a country that hasn't been affected worldwide. Interest rate has changed, borrowing money is now more expensive, and typically where people were looking to invest that money - Silicon Valley - the cost of people has gone up dramatically, and the cost of technology has gone up dramatically. I think all those things have created the perfect storm. If you've made an investment based on borrowing money on a low interest rate, and these investments haven't come good, or haven't broken even, then it creates a perfect storm, and sadly it's people, our colleagues that suffer."

While changes in the general economy on the production and investment side has led to difficulties, the good news is that the demand for games is still high among the consumers. The video game analyst Newzoo suggests that the market for console and PC games grew by 2.6% hitting $93.5 billion in revenue last year, rising to an estimated $107.6 billion in revenue by 2026. Other sources suggest a similar growth trajectory. Clearly, there is money to be made in the video games industry, but it might not be the same kind of games that will generate the most revenue going forward.

"The consumption of games hasn't gone down, and if you're a maker of great content that great content will sell. Games worldwide will increase. Billions upon billions of dollars are being generated, so I don't think we will see a financial decline. But what I do think is that a lot of the studios who have been disappointed or let go by their publishers, will look for different markets. Game makers are unbelievably creative and resilient, and I think what we will see is a real surge of independent titles that will push the boundaries of creativity and will put pressure on the financial stranglehold of the AAA-titles. And I think that is good for the industry," says McGregor.

Of course, the rise of indie games has been going on for quite some time, and has only seemed to increase as more digital store fronts and publishers have emerged over the years - as well as new ways of distribution such as bundles and subscription services. Green Man Gaming launched in 2010 as a digital games retailer. Today, they stock more than 10,000 games from over 2,500 developers and have expanded into distribution and even publishing (having published 36 titles since 2015). This provides the company with key insights into the market, and, perhaps unsurprisingly, McGregor thinks third party publishers play a vital role in promoting games.

"The perpetual battle, whether you are a publisher or a developer, is about discovery. And I think developers throwing all their bets at, for example, just selling on Steam creates a narrower opportunity for them to be discovered. I think the benefit of third-party sellers is that it gives consumers access to more games, and brands access to more consumers. If you look at the top 150 digital retailers they bring an audience of about 100 million people, and for your game to be successful, you need to deliver reach and get people excited about the games and the stuff you are making."

Whether smaller titles, AAA cash cows or the ever-expanding mobile market will be the driving force, the video game market seems poised for a rebound, once the current downturn is over. But how long must we wait for this to happen? McGregor is cautiously optimistic.

"I don't think we are out of the woods yet. I think it will be another six months and then the market will settle down. And then I expect we will see investment shifts from the US back into the European nations where the cost of talent is sometimes cheaper."

Time will prove whether he is right - we certainly hope that he is, and that the wait will be short.