Cologne At first glance, the euphoria in the Cologne exhibition halls seems great: after three years of corona forced break, visitors are again admitted to Gamescom – the largest video game event in the world – this year. The crowd is correspondingly large: hands are shaken and real contacts are made.
And even those who take a look at the figures could initially assume that the corona pandemic has even accelerated the growth of the gaming industry. According to the industry association Game, sales have steadily increased since the last Gamescom three years ago: in 2020 alone by 29 percent, in 2021 by another 17 percent to 9.8 billion euros.
Sales of graphics chips for game consoles such as the Playstation 5 or the Xbox Series X have fallen, management told analysts. “Macroeconomic headwinds around the world have led to a sudden slowdown in consumer demand,” said Colette Kress, Nvidia’s chief financial officer.
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This fits in with the weak figures of the three console giants Microsoft, Nintendo or Sony. In the US alone, their sales fell by 13 percent to $ 12.4 billion in the second quarter, according to the latest US market researcher NPD.
Sony’s chief financial officer Hiroki Totoki explained the decline to analysts with “the increasing number of opportunities for players to get out of the house – because Covid-19 infections are declining”. Video games were a mass medium even before the pandemic – but bans on going out and the strict rules for public events have given the industry an additional boost in recent years.
Mobile games on smartphones in particular are now played 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 today one of the 15 best-selling video games of all time, because players could visit each other via the Internet on their own virtual islands and spend time together.
Gamescom 2022
Visitors play new computer games with keyboard and mouse at Gamescom 2022 at the Cologne Fair
(Photo: action press)
Now most of the corona protection measures have expired and no longer have such a significant impact on social life. Analysts therefore expect a decline in sales for the industry. In 2022 alone, the industry’s sales would decline 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 of Wedbush. The “oversized sales” and “record numbers” had been “impossible to beat”, declines were therefore expected. In Germany, the gaming industry was even able to defy the worldwide 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, therefore no longer expects a downturn: “The people who have rediscovered games for themselves in the pandemic are not stopping now, but are staying true to their new hobby,” he told Handelsblatt.
At the giants of the industry, however, the consolidation has recently progressed quickly. In January, Xbox manufacturer Microsoft announced that it would buy major gaming company Activision Blizzard for $ 67.8 billion.
Activision is known for bestsellers such as “World of Warcraft”, “Overwatch” and series such as “Call of Duty”. In January alone, the total‧sum for acquisitions in the gaming industry amounted to 85 billion dollars.
Many German companies sold
There were also major acquisitions on the German market: the British game company Team 17 bought the German simulation game developer Astragon (formerly Rondomedia) for 100 million euros in January 2022. Larger parts of the value chain are shifting abroad because there are no large companies in Germany that could act as buyers.
However, smaller studios are often created in the environment of these larger companies. “The real innovations rarely arise within the large corporations, the new providers are bought by them at some point at most,” said Julian Riedlbauer, gaming M&A expert from the IT consulting GP Bullhound. “New players with new ideas and game concepts are constantly emerging and 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 Bigpoint, Innogames, Goodgame Studios and Wooga, in addition to Astragon, many other larger independent game companies have already been acquired by larger competitors.
The market is currently 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
But the framework conditions for new game developers in Germany are currently anything but favorable. In 2023, the funding for the video game industry, which was only launched 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 up quickly, which often become successful super fast,” says the game managing director. Industry spokesman Falk is optimistic that the attractiveness of Germany as a business location has increased significantly in recent years: “We are finally at a competitive level with Canada, the United Kingdom and France.“
For the industry representative, video games are a key technology that is closely connected with many other industries and future technologies. “Developments around the metaverse alone offer huge opportunities.“
