Video Games – 2022 State of the Union

August 15, 2022

It's been a wild ride for video game studios, console manufacturers, and fans the past few years. With an exciting Q4 around the corner (scheduled release of MW2, Overwatch 2, Skull & Bones, God of War: Ragnarok), let's take a moment to recap 2022 and how I believe it will impact our industry for years to come...

Microsoft & Sony, like a game of studio hungry hungry hippos:

Microsoft & Sony acquiring studios isn't new news, but I think we can all agree the stakes were raised in '22. In January, the industry was rocked when Microsoft purchased Activision Blizzard. In July, Sony completed its purchase of Bungie - the makers of Destiny, and they doubled down on their investment in Epic Games, the studio most known by angry parents for its creation of Fortnite. It seems the 800 pound Gorillas in our industry have graduated from healthy competition to full blown acts of war... let's cut this up into 3 parts - The Good, The Bad & The Ugly.

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The Good:

We're talking about some great studios here. It's a well known fact amongst our readers that I'm a fan of Call of Duty and have fond memories of World of Warcraft from my college years... (I'd like to apologize to my college girlfriend, Kristina, for not giving her the attention she deserved at the time, but I mean... The Wrath of the Lich King...am I right!?) Activision is about as Triple A as it gets. Bungie is a fantastic studio as well, I was legit obsessed with OG Destiny - shout out to Deej, whom I met at E3 one year - very nice guy. So what's the good for these studios? For one, more money and the power to take well known titles to the next level puts a big 'ol smile on my face. What's most exciting? How about a little oversight... Activision has totally dropped the ball with the last two COD releases - Cold War and Vanguard. How did we go from MW 2019 to that!? Warzone is the future for COD - we'll always have a place for small map/shoot 'em up gameplay - but more complex objectives where your life actually MATTERS is where FPS is heading. I'm hopeful that both Microsoft and Sony can keep these studios on the right path for future releases.

The Bad:

Simply put, and potentially hypocritical to my previous statement, studios losing their independence. In my career in AdTech I've experienced a few acquisitions myself... some good...some bad. Although it's important for the acquired subsidiary to align with the new parent - the best acquiring companies are those that allow the subsidiary to feel empowered to make their own decisions and in control of their destiny (no pun intended). If Sony and/or Microsoft are not careful - there's potential for a massive brain drain across the recently acquired studios. This would ultimately benefit publishers that still maintain independence, or the creation of new development companies, but I'd hate to see this happen across titles I'm a fan of.

The Ugly:

The most important thing about the video game industry is community - being able to play with friends and take the opportunity to catch up. As a 36 year old with friends out of state, some of whom recently became fathers, time is limited for us. Video games offer us an ability to have fun and stay connected with one another. My biggest fear with the consolidation movement is that battle lines will be drawn and communities won't be able to play in a traditional cross-platform fashion. I think Microsoft would be making a HUGE mistake in not releasing future COD titles on Sony... do I see it happening? No, they'd lose too much money. Granted, it's an opportunity to give early access or additional benefits to PC & Xbox owners, but removing COD entirely from Playstation is a bad move - same if Sony removed PC/Xbox support from future Destiny releases.

  • The console squeeze: Let me start by saying, I think MW2 is going to be big...like REAL BIG. I've stayed on top of all articles, confirmed updates, leaks, and with 73 days until release - I can taste it! All the news on making COD more realistic and moving towards a game style that mirrors Escape from Tarkov is really exciting. BUT, MW2 and other upcoming titles are still going to be limited by past gen consoles like PS4 and Xbox One due to the console squeeze. Although I was lucky enough to score an Xbox Series X the day it was released - not everyone has been so lucky in acquiring a new console. The chip shortage has forced studios to slow development capabilities so as to not alienate the less fortunate. So what's been the main cause of the chip shortage? A combination of things really - increased demand, low reserves, and shutdowns due to the pandemic. It's not just COVID-19 that is slowing the production of consoles either - semiconductor producers require neon to produce chips. Where does the vast majority of neon come from? You guessed it - Ukraine. Two companies in particular: Ingas and Cryoin are located in Mariupol and Odesa respectively. Both cities have been bombarded by Russia, causing more concern over the growing chip shortage. I'm thrilled with the upcoming releases scheduled for Q4, but you can't help but wonder how great these games would be if not limited by past gen capabilities.

  • Video game pandemic boom finally slows: The video game pandemic boom....is over. Am I the only one that looks back at March 2020 with a certain level of happy nostalgia? Certainly some great times dropping into Verdansk with the boys, or playing Mario Kart with couples across state lines while drinking wine. It seemed the industry was absolutely booming and rightfully so, it offered up solace when we needed it most. Due to recent inflation causing companies to be more financially strict, consumer fatigue on indoor activities, and many of us going back to work in an office - the gaming industry saw YoY revenue declines almost across the board. US spending across game hardware, accessories, and related content fell 11%. Now the industry is still "up" from 2019 levels, but there are some interesting things happening:

    • Players are buying less games: both Microsoft & Sony reported declines in software sales when compared to last year
    • Gamers are playing less than they were this time last year: Sony, during an earnings report, said PlayStation user gameplay time declined 15% YoY in Q1. Microsoft didn't share stats, but did mention it impacted revenue
    • Hardware sales are down (shocker). Industry wide, US hardware sales dropped by 8% in the first half of 2022 and new console sales fell 9% in the same time period
    • Both Microsoft and Sony are promising more inventory for the holidays - let's hope they're right

What are you most excited about for Holiday '22? Join us across our social platforms and Discord - we love hearing from you!

Stay frosty my friends!
Willy Green

Wilbo

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