Why are video game companies, in addition to other tech firms, laying off people?
In any market, the law of supply-and-demand is king. When people want something, and the supply is limited, prices go up. In response, other suppliers will get into the market with competing products, and supply will be satiated and prices come down.
In theory, this Adam Smith "invisible hand of the marketplace" works well. And in practice, it works pretty well, but tends to overshoot and undershoot like a thermostat with too much hysteresis.
It is like the housing market. Prices skyrocket, so builders jump in and overbuild. Pretty soon demand is satiated, but the market keeps going up based on emotional factors. Before long, you have far more supply than demand, and the bubble collapses - temporarily. That is in essence what happened in 2008.
Video games have gone mainstream in the last few years. Even Grandma is playing a first-person-shooter game, it seems. And "gamers" are spending hours a day playing these games, often as part of an addictive habit - which is, of course, by design. It is sad, but there are people out there who are nothing more than a bundle of addictions - vaping while texting about gaming. Is that even living? I guess for many, it gives them something to do.
When any commodity becomes valuable enough, the fraudsters enter the market. And this is even true for video games. Recently, there was a "game" released with much fanfare. Gamers downloaded the game, paying good money for it, only to realize that the game was unfinished, or really, not even started. I guess the company was hoping to make a quick buck before anyone noticed, much like these "shitcoins" that piggyback off the euphoria surrounding crypto. The company is apparently no more and they have promised to refund buyers - but in reality, if they declared bankruptcy, they wouldn't have to - while still taking home their hefty salaries.
It is akin to the recent "Willy" fiasco, where a promoter used AI to generate posters and a website, promising a "Willy" experience (carefully avoiding the word "Wonka" to avoid messy Trademark issues). Parents showed up with their kids, only to find a dozen tiny set pieces and some bewildered actors who had no idea what a shitshow it was to become. Again, the promoters claim they will refund everyone, but apparently none of the actors hired, or other suppliers, were paid.
And perhaps this is a new business model - use AI to generate convincing game promotions or event promotions, sell tickets and then ske-daddle. The Fyre Festival was a dress rehearsal! And I wonder if anyone has yet to receive their "Trump Sneakers" - the $399 price tag was only for a promised later delivery, and yet some have resold these on eBay for thousands. Did anyone actually get the shoes? Like I said, maybe this is the new business model.
I said, a decade ago in this blog, that Al Gore's prediction that we would move from a "manufacturing economy" to an "information economy" was just the beginning. Eventually we would transition to a fraud-based economy, with every citizen spending every day "working" to defraud their fellow citizens. It would keep people busy and keep money in circulation! It. Just. Might. Work!
But getting back to video games, apparently fraud is becoming an issue, as some insidious folks have put up fake sound-alike "games" online, hoping that a few folks will download their fakes and they can run off with the cash before getting caught. It is a sign of a largely self-regulated industry, to be sure, and also a sign that demand was exceeding supply. Because what the "invisible hand" model fails to account for, is that if demand is high enough, not only will legitimate suppliers pile into the marketplace, but shady operators as well - selling facsimiles of the desired product. I am sure there were con artists selling fake or non-existent tulip bulbs in Holland during that bubble. Hell, they did the same here in the States, selling non-existent French Bulldogs.
But perhaps demand has been satiated. In recent months, one gaming shop after another has announced layoffs - in addition to the big console makers. Could it be that gamers are being over-saturated with new games? Because in addition to all the new titles are sequels to existing titles. I think "Grand Theft Auto" is up to version XXXIV now. How many versions of the same game can you sell?
And the complaints about newer games are pouring in. Many are finding the game-playing similar or the same as in earlier games or versions, with just the graphics changed. As a result, users get bored with playing the "same old game" in a different wrapper. And like the homebuilders during the 2008 bubble, there is pressure to push out games before they are debugged and finished - which might explain why many of these games seem to feel the same as previous games. If you don't get your game on the market quickly, the market may latch onto a different game as "the next big thing!" particularly when the game is multiplayer and online. Such games are more like social media (in fact, the same thing, with messaging and chat rooms, etc.) and if you don't hit that critical mass quickly, the game fails. No one wants to play a multiplayer online game with no other real players.
It may also just be that the market for video games - like any other market - is finite. In order to be a gamer, you have to have a fairly decent income, a place to play, and a lot of free time on your hands. This excludes middle-aged people who are at their height of their careers. It may include teenagers and living-in-Mom's-basement bounce-back kids, as well as a few young professionals who have income and time on their hands. The stressed 20-something working two or three jobs to pay back their student loans probably doesn't have the time, the money, or the energy to devote to the hobby.
Oddly enough, retirees would seem like a perfect market - they have a LOT of time on their hands, enjoy staring at screens all day, and have cash to spare. In fact, you are starting to see a lot of "old timers" getting into video games. I suspect, however, that first-person-shooter games and games of skill might not be as popular, as elderly eyesight and reaction times are not what they once were/ Minecraft, anyone? Still, hard to play if you are nearly legally blind.
Like anything else, these things go in patterns - and eventually the pendulum will swing back. A new generation of users will emerge, along with new games and new gaming devices. Maybe it is Zuckerberg's "Metaverse" or maybe not. The original Nintendo Wii demonstrated that technical sophistication wasn't a perquisite for success in the marketplace. I don't know if you recall, but people were writing the epitaph of Nintendo, as their new console didn't have the graphics capabilities of the Xbox or the Playstation. It turned out that game play engagement was far more important than how many pixels you had. It is why board games still exist today and in fact, are seeing a resurgence, particularly in role-play "fantasy" games.
But I think the real answer is, the market is just over-saturated with new games - and not enough players to absorb them all.
