Video game industry poised to rebound after steep declines, says former Nintendo of America president

The video game industry is about to hit a turning point after a tumultuous few years that saw sales come crashing down from the peaks reached at the start of the pandemic. And things are only expected to get better in 2025, as Nintendo (NTDOY) prepares to launch a sequel to its wildly successful Switch console and Take-Two (TTWO) gears up for the release of its highly anticipated “Grand Theft Auto VI.”

“I would say the gaming industry as a whole is poised for a recovery,” Reggie Fils-Aimé, former president and COO of Nintendo of America, told Yahoo Finance.

“Just last month, late last month, there were a number of game announcements across the industry that consumers responded very well to,” Fils-Aimé said.

“These are new games coming later this year. These are games coming in 2025. There are new platforms coming, including from Nintendo, as well as rumors of a game adaptation. [PlayStation 5] So there are a lot of positive things that indicate that we’ve basically passed the trough for the video game industry, and we’re now poised for a recovery.

This illustration photo created in Los Angeles, California on December 5, 2023, shows the trailer for Rockstar Games' Grand Theft Auto 6 being shown on computer screens. The first trailer for This illustration photo created in Los Angeles, California on December 5, 2023, shows the trailer for Rockstar Games' Grand Theft Auto 6 being shown on computer screens. The first trailer for 

Take-Two’s “Grand Theft Auto VI” game is expected to be a powerful catalyst for the gaming industry’s recovery in 2025. (Chris Delmas/AFP via Getty Images) (CHRIS DELMAS via Getty Images)

The video game market boomed at the start of the pandemic, as consumers around the world hunkered down at home with little to do but play video games and stream shows and movies.

According to IDC, worldwide mobile gaming revenue jumped 32.8% to $99.9 billion in 2020, while spending on digital games on PC and Mac jumped 7.4% to $35.6 billion. Spending on home console games climbed 33.9% to $42.9 billion.

But that growth quickly declined in the following years. Mobile gaming revenue grew by just 15% in 2021 before falling by 3.3% in 2022 and 3.7% in 2023. PC and Mac game sales still grew by 8.7% in 2021 but fell by 1.4% in 2022, although the segment saw a slight increase of 2.1% in 2023.

And after booming in 2020, console gaming spending stagnated in 2021, growing 0.7%, before revenues declined 3.4% in 2022. However, they returned to growth in 2023.

Console sales in 2020 were also boosted by the launches of Sony’s (SONY) PlayStation 5 and Microsoft’s (MSFT) Xbox Series X and Series S consoles. But system sales struggled due to the supply chain crisis at the time, hampering growth.

SHANGHAI, CHINA - FEBRUARY 25, 2024 - The Nintendo Switch game console store in Shanghai on February 25, 2024. (Photo credit should be CFOTO/Future Publishing via Getty Images)SHANGHAI, CHINA - FEBRUARY 25, 2024 - The Nintendo Switch game console store in Shanghai on February 25, 2024. (Photo credit should be CFOTO/Future Publishing via Getty Images)

Nintendo is expected to launch the successor to its popular Switch console in 2025. (CFOTO/Future Publishing via Getty Images) (CFOTO via Getty Images)

“Microsoft and Sony invested a lot of money before new machines were launched. The money was essentially free,” Fils-Aimé says. “So game developers created a plethora of content and, frankly, some content that probably shouldn’t have been created was put out there. And, frankly, it just didn’t do very well in 2023. So the market contracted.”

The story continues

These cuts also led to massive layoffs across the industry, with thousands of workers losing their jobs as companies ranging from Microsoft and Sony to Riot and Unity (U) cut positions. And the layoffs didn’t stop in 2024, with EA (EA) laying off about 5% of its workforce and Sega cutting 240 jobs.

But the crisis should be coming to an end.

“I think we’re through the worst of it,” said Mat Piscatella, executive director and video game industry advisor at Circana.

“Mobile really carried the load in the first half of the year and is the main reason why overall content spending numbers have remained so strong. Through the end of May, 2024 content spending on mobile games in the US was up 12% year-over-year. The PC, Cloud and non-console VR segment in the US also performed well, with spending also up 12% through the end of May compared to last year,” Piscatella added.

The home console market continues to struggle, however, though it should be bolstered by game releases this fall and Nintendo’s next-gen console next year, not to mention a booming handheld market led by Valve’s Steam Deck portable system.

And while growth is not expected to be as rapid as at the start of the pandemic, it should still provide some relief to the entire sector.

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Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.

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