The Video Game Market Crash of 20XX9 minute read

Is the video game industry paving the way towards a repeat of 1983, or are the chances even higher?

Every gamer knows (or should know) about the Video Game Market Crash of 1983. It is heavily talked about, there are multiple documentaries on the subject and it’s now one of those subjects that is mentioned in pretty much anything relating to video game history. A lot of it appears credited towards the over-inflated legend (and fact) of Atari burying their E.T. The Extra-Terrestrial game in a landfill in America. Whilst this is one of the key events that occurred in the crash of the industry it is safe to say that the crash had already happened before this biblical event.

Many other factors were the cause of such a worldwide issue in the industry. There were far too many consoles for a start. Reading about the generational warfare published here will alone give you enough insight into the amount of companies trying their hand at the industry – and the article doesn’t even cover that many of what was available.

The crash can also be attributed to the rise and thriving nature of personal computers. Consoles were the only affected party whilst the sales of the likes of Apple soared as they became more affordable. There were issues with everyone who was able to code making video games, because they could. As Ian Malcolm once said, they “were so preoccupied with whether or not they could that they didn’t stop to think if they should.”

But many things did not fail, such as arcades. Bowling alleys are seen to have saved the arcade scene and this helped video games hang on until the development of the Nintendo Entertainment System. With new hardware coming out of the other side of this worldwide failure, and companies having to slash the prices of older systems it gave a means of younger gamers to afford and become interested in gaming. This caused the market to gain a fast recovery and traction into the future.

The NES – phoenix of the video game market crash

So what about now? We are in the year 2021 where the video game industry is now the largest media type by industry value. Collecting old games has seen a massive surge in the last decade and games are literally everywhere. Are we about to face another decline and another market crash? Are we, as gamers and collectors, now sitting inside a bubble that is about to pop?

The current generation competitors

Those who do not learn from history…

To answer this we need to look at the data we have available and see if it is somewhat relatable to the 1980’s cataclysmic event. Firstly the amount of consoles should be questioned. Do we have as many consoles as the 1980’s had? By no means, but what we do have are smaller companies starting to produce flashback devices, quirky consoles and also larger companies attempting to create streaming “consoles”. Classic consoles are being developed and marketed, such as the Classic NES, Classic SNES and the PS1. We also have more niche gaming platforms like Evercade which boasts re-releases of older games in both handheld and console-based formats. But on the other hand we also have some missing parties. Xbox Series S/X and PlayStation 5 are both current generation consoles but there are huge shortages around the globe. This causes an issue with people who invest in games as to whether they hold out for some stock of the newer consoles or whether they continue to invest in the last generations offering. It also proves difficult for developers to make current generation development financially viable whilst the older platforms are still being used as heavily as they are now. Couple this with the fact that Microsoft have made a “Microsoft Family” to make sure new software runs on old hardware and as a consumer you have to ask – what is the point in an upgrade?

Tactics by Microsoft also seem to point towards more focus on backwards compatibility and online streaming capabilities. The focus on new titles at the moment seems to be lacking and no platform can survive without new titles, no matter how many old games it has to give to the player. Sony on the other hand seem to be scaling down what they support in terms of older systems, which is the polar opposite of Microsoft.

We also have Nintendo, who are performing amazingly well with sales of hardware and games. Their console/handheld hybrid has brought about the best of both worlds – new titles and old alike. However Nintendo, along with the other large parties, also highlight a growing market of the Indie gaming scene. Indie development is on the rise and the games are starting to prove ever popular. Anyone can code a game together in their room with raw knowledge or the likes of Game Maker and produce and publish a game to every platform imaginable. This sounds very similar to the 1980’s saturation of the market. Not everyone can invest in every game that is released, and this is why less than 3% of released PC games and 15% of console games now are considered a success (selling more than 100,000 copies) as discussed here.

No newbies please

Then we have the problems with newer platforms. Google Stadia boasted 4K streaming and an assortment of games “without the hardware”. With the streaming giant that aimed to combat expensive consoles and hardware came issues of its own. Firstly the ability to play through a TV did have the necessity of hardware, as well as the subscription and then individual game prices on top of this. Secondly there will always be an element of planned obsolescence as they upgrade their hardware to improve the service. Other issues came in the form of 4K streaming not working to the original specifications during the marketing stage, the closure of their in-house gaming development studio a year after launch as well as the drop of 68% of internal job offerings. Google is struggling in the same manner that the Ouya did upon that launch.

One issue that comes with the sufferings of newer platforms is that it means there are less points of failures. Much like Disney, who are in the business of buying many smaller networks, Microsoft and other companies are doing the same to artificially bolster their current catalogues. It is safe to assume that these developers were initially struggling (not all of them agreed) to necessitate the sale of the companies in the first place. Even studios under the likes of Bethesda have had issues in recent years with the lack of The Elder Scrolls titles and the horrific release of Fallout 76. But buying up lots of smaller companies mean that there is one point of failure. If Microsoft lose this, or the next, generational war then everyone goes down with the same ship. Don’t believe the internet patrol that states “there is no console war” because there is and always has been. It would make no business sense to not be concerned with the market percentage that your platform holds against the opposing companies.

“This has all happened before, and all this will happen again”

So as a reflective exercise let’s look at the now and the then. The 1980’s saw a collapse due to bedroom coders and the amount of games entering the market. This is called market saturation. Now in 2021 we have seen the soaring increase in Indie developments, limited run companies producing cartridges and physical games and the third-party saturation of the mobile and Steam markets. Check.

Not all small developments (or large) are as good as Team Cherry’s Hollow Knight

The 1980’s also saw a huge amount of platforms which caused consumers to become tired, confused and limited the amount of revenue for all parties involved. 2021 see’s a small amount of this but an unfortunate polar opposite with three major companies taking all the profits, studios and titles with them. If one or two of these dominate either generation then we will see a third collapse in the market with immediate effect. This is also confirmed with the struggle of smaller companies or flashback attempts into the industry. Neither pole makes a balancing effect. Check.

Another aspect to this bubble that we find ourselves in is the collecting communities bubble. Prices of old games ten years ago were a tenth of what they are today. The prices are soaring to a point where they will need to do one of three things. They will either level-out, drop heavily or continue to rise. The continuation of the rise of prices is not something that will be able to happen for much longer. The collecting community will get to a point where people cannot afford to bolster a collection, leading to selling of smaller collections and the lost of the hobby. Prices dropping will also means a loss in interest in older games, making a questionable impact on backwards compatibility and the likes of Limited Run Games. Prices remaining the same would be the best outcome, but as any hobby or industry show us, this will not happen.

Let us hope we are wrong

So we are now at an impasse. The industry is quite possibly hanging on a thread, with too few points of failure, over-saturation of the market and a proven fact that as few as 3% of games are actually considered a success depending on the platform. With soaring prices of older wares, the lack of current generation hardware and the increase of bedroom coders we find ourselves in a similar situation to the early 1980’s. The only thing we need now is another E.T. game.

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