Gaming industry facing setbacks as looming recession weighs on consumers
The video game industry has seen a slump in profits in recent months as consumers' pocketbooks are hit by record-high inflation and the looming threat of a recession
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The gaming industry, long thought to be recession-proof, is seeing revenue drops as consumers weigh discretionary purchases amid the rising cost of living.
Nvidia, which manufactures graphics processing units (GPUs), is among the latest companies in this space to warn that a gaming slowdown is impacting its bottom line.
FILE - A video game controller (Akio Kon/Bloomberg via Getty Images / Getty Images)
Last week, the company said its second-quarter revenue was expected to be around $6.7 billion, down 19% from quarter one on overall weakness in its gaming business.
Analysts estimated gaming would contribute more than $3 billion to the chipmaker’s revenue, Reuters reported. But preliminary gaming unit revenue, which includes high-end graphic cards, declined 44% from Q1 to $2.04 billion — down from 33% from the prior year.
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Meanwhile, X-box maker Microsoft reported a slump in gaming revenue in July. PlayStation-maker Sony has also recently trimmed its forecast and Sony has pointed to easing COVID restrictions and waning interest due to lack of new games available.
Nintendo Switch video games on display inside a Nintendo Tokyo store in the Shibuya ward of Tokyo, Japan. (Stanislav Kogiku/SOPA Images/LightRocket via Getty Images / Getty Images)
Research last month from Ampere Analysis, a market research firm in London, indicates that global video game sales are forecasted to contract 1.2% to $188 billion in 2022.
The study said the idea that the gaming industry was recession-proof was a fallacy. But the firm expects the global market to spring back next year as mature markets stabilize and growth markets continue the adoption of gaming.
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"After two years of a huge expansion, the games market is poised to hand back a bit of that growth in 2022 as multiple factors combine to undermine performance," research director Piers Harding Rolls said in a statement. "Even so, the year will end well ahead of pre-pandemic performance, and the outlook for the sector as a whole remains positive, with growth forecast to return in 2023."