Mobile Games Are Being Dethroned In the Post-Pandemic World

Changes in player behavior and the drop in consumer spending due to inflation are harming companies in the mobile gaming universe. According to Financial Times, the once thriving market is set to decline for the very first time since the beginning of the smart phone era. 

The cards have changed

We might know mobile games since Nokia’s snake from the late 90s and Nintendo, but Apple’s App Store launched them to unforeseen heights when it was created in 2008, fueling the industry to its $100 billion value and making it accountable for half of the gaming industry’s overall revenues. Even the streaming pioneer Netflix took part in the game with two more games to be launched soon and bringing the total number of games available on its platform to 48. August data of Netflix showed that less than 1% of its streaming subscriber base is playing these games on a daily basis, even Netflix is determined to position itself in the gaming universe.

But after more than a decade of extraordinary growth for Netflix, once a fast-growing industry is now facing limitations such as rising advertising costs, weakened customer power and the end of the pandemic that boosted player engagement to unforeseen heights. Many fear that the industry is maturing and even reaching saturation as the pace of innovation has also slowed down.

A wakeup call for the industry

According to the forecast made by gaming data company Newzoo, this year’s revenues are forecasted to fall by 6.4 per cent to $92.2 billion, making a sharp reversal from last year’s 7.3 percent growth and 2020’s impressive 25.6 percent rise owed to lockdowns that made inhouse entertainment the center of our lives. Besides setting a high bar in user engagement, COVID-19 also brought on major supply chain issues that hampered sales of Sony Group’s SONY eagerly awaited PlayStation 5 console that was the most popular this year, both in terms of units and dollar value. Last month, Ampere Analysis, another research group, also downgraded its revenue forecast, targeting $6 billion less than 2021, due to drops in the world’s biggest markets, namely the US, China and Japan.

Even the leaders behind the mobile gaming revolution have seen their income from app purchases of virtual outfits and in-game currencies drop by as much as 20%, according to the Financial Times.

Changes are on the horizon for Big Tech

Last year, 97% of mobile web browsing was on browsers that are powered by Apple or Google's software, but their dominance will be investigated by the UK’s competition regulator, potentially bringing changes to the industry, along with new limitations.

Last year, Apple’s new restrictions on targeted advertising erased billions of dollars from advertising revenues on largest platforms including Facebook, Twitter, Snapchat and YouTube, with the gaming industry still grappling with this blow. Many developers that thrived on using behavioral data to target players who were likely to spend significant funds in their gaming universe literally lost this income source altogether.

A different set of rules

Unlike in other industries, VR or AI is not as important in the world of mobile gaming because only quality content can keep gamers engaged. Market players know this which is why Nintendo NTDOY has released generous amounts of content this year despite delays and component shortages that harmed the console sales of Nintendo. Unfortunately for Nintendo, content alone is not enough to protect the bottom line.

Outlook

Although FIFA and the holiday season always help to boost sales, it’s usually only the top sellers like Microsoft who get to benefit. Microsoft reported that gaming revenues increased 4% with Xbox hardware sales rising 13% in the first quarter of fiscal 2023. But turning the fortune of the industry is a different matter even for Microsoft.

Positive news are always a good sign for the holiday season and not only for Microsoft as in the case of Activision Blizzard ATVI whose Call of Duty: Modern Warfare 2 (2022) instantly became the top game of the month. Electronic Arts' sales have been getting a boost from FIFA 23.

But financial figures are what matters at the end of the day and numbers don’t lie. Even Roblox RBLX’s November update showed slowing growth as revenue declined YoY due to the strength of the U.S. dollar.

Although new releases always give the top line a boost, the gaming industry altogether is facing a broader weakness and an entirely new set of factors shaping its macroenvironment. Only time will show its ability to play the new “game” that is in the making.