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News video games 17 May 2021, 18:18

author: Angelika Kaldus

Video Game Industry Will See a Dip in 2021, Newzoo's Report Claims

Newzoo claims that the video game market will see a decline in revenue compared to last year. Reasons for such assumptions include Apple's policies and the universal deficit of chips.

IN A NUTSHELL:
  • Newzoo predicts a decline in revenue in the video game industry in 2021;
  • Reasons for this are expected to include Apple's new policy or a lack of chips in the global market.

The vast majority of reports show that the value of the games industry will grow over the years. Despite the projected trend, according to Newzoo, the current year is expected to break out of the series - the market value of our field will drop from almost 178 billion dollars in 2020 to almost 176 billion dollars in 2021.

Why such forecasts? Newzoo claims that the decline will be caused, among others, by the difficult situation on the chip market and Apple's new policy related to tracking user activity, not to mention the delays of numerous upcoming games. We also can not forget about the reference point, the year 2020, which was a record high thanks to the pandemic.

Video Game Industry Will See a Dip in 2021, Newzoos Report Claims - picture #1
Game market forecasts / Newzoo, April 2021

Chips, chips... where are the chips?

The first of the main factors that will undermine the performance of the video game market in 2021 is the still insufficient production of chips - the whole tech industry is losing out: from the automotive, to the phone, to the computer and console industries. The chip deficit means less progress not only in developing modern hardware, but also in creating better and more engaging games. Unfortunately, this problem is expected to be felt worldwide even by 2023.

Apple and privacy above all

Video Game Industry Will See a Dip in 2021, Newzoos Report Claims - picture #2

Apple has declared war on companies that advertise on mobile devices, including major corporations (such as Facebook). The boycott of businesses, however, did not make Apple back down from its policy.

Another issue is Apple's new policy on IDFA (identifier for advertisers), a feature of iOS that is designed to identify individual mobile devices and their users, and assign them to specific advertising categories. Update 14.5, released on May 3rd, this year, has enabled owners of a significant proportion of iPhone and iPad models to control the information they share. Now, advertisers must ask permission to "track activity through third-party apps and websites.". The notice is structured in such a way that it is easier for the user to say no than to agree to a similar solution, which is still rare in the mobile marketing world.

All right, but what impact does all this have on the games industry? Well, as a consequence, publishers will have more trouble finding customers for their products - gamers who don't follow the latest industry news, but who want to play a good shooter, MMO or RPG from time to time. After the changes introduced by Apple, there may be fewer such consumers, and it will certainly be harder to attract their attention.

COVID demolished all video game development schedules

The pandemic has severely affected larger development studios that are working on AAA games for consoles and PC, which is why titles such as Hogwarts Legacy, Gran Turismo 7 or Skull & Bones won't be released until 2022. What's more, we're in the middle of the second quarter, so we can expect more news about games that won't be finished on time. All these slips have a big impact on the current year, but they should also boost the results for 2022.

The industry in numbers - PC vs mobile vs consoles

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Increases and decreases in revenue by platform / Newzoo, April 2021

Despite these problems, Newzoo predicts that the mobile games sector will record revenue growth of approx. 4.4% in 2021, thus taking over half of the global video games market (52%). Nonetheless, that's a small increase over the past 12 months. Casual gamers have grown in stature during that period, and the quickest way to turn on a game for many of them was to download an app. Plus, a lot of people were integrating with friends in various MMO titles to make up for time lost due to lockdowns. Therefore, beating the increases of 2020 in 2021 by a higher percentage would border on a miracle.

As the pandemic has mainly affected large PC and console titles, both of these market segments are projected to see dips - by 8.9% for consoles and 1.7 la PCs.

Record-breaking investments

Video Game Industry Will See a Dip in 2021, Newzoos Report Claims - picture #4
IPOs of gaming companies / Source: InvestGame

According to analytics firm InvestGame, in the first quarter of 2021 over 39 billion dollars was spent in 280 business transactions in the game industry - including investments, IPOs and acquisitions of other companies - that's 6 billion more than in all of 2020 with 664 deals. This just goes to show how much companies have gained in previous accounting periods: they earned more than expected, and were therefore able to invest in new projects. Such a huge scale of development spending by publishers and development studios could result in very good results for 2021, exceeding Newzoo's predictions. However, we have to take into account that the pandemic is still taking its toll - and the releases of major games are being postponed for years to come.

Still, Newzoo's report takes into account the fact that it was the pandemic that drove so much revenue growth in the gaming industry in the second and third quarters of 2020. Add to that the release of the PlayStation 5 or the Xbox Series X/S, and we get a huge increase in interest in the tech and gaming sector. Events of similar magnitude are unlikely to take place in 2021, so the vision of declining revenues seems real.

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