Video games earnings will see its first drop since 1995, says analyst

A combination of China’s freeze on new games, battle royale fatigue, and the 2019 lineup for games are the cause of what an analyst thinks will be the first drop in video games earnings in 25 years. And with the current-gen consoles nearing the end of their life cycle, it could be a dip we see for a couple of years.

In an interview with Bloomberg, Pelham Smithers, who is coincidentally the owner of research firm Pelham Smithers Associates, explained that he predicts one percent dip in sales this year. Such a decline would mean that the video game industry could earn around $136.5 billion, which still seems like a pretty decent sum, but it would mark the first drop in the market since 1995.

Smithers says the drop is down to a catalog of reasons; citing the freeze for new games in China, he suggests that while the ban has been lifted, the process for new game approvals is a slow one, while high-earning companies like NetEase and Tencent are still prohibited.

He goes on to suggest that a steady decline of players for both PUBG and Fortnite Battle Royale gives further weight to his prediction. Smithers told Bloomberg that this battle royale fatigue could affect PC sales, though he didn’t mention whether it would affect console revenue for the games.

The proof of the imminent decline, says Smithers, is also in the games that will release this year compared to 2018. The likes of Marvel’s Spider-Man and God of War played a part in Sony hitting new revenue records, though PS4 players only have a couple of exclusives lined up for this year in Dreams and Days Gone. We’re still not sure when The Last of Us Part Two or Ghost of Tsushima will arrive, and Death Stranding‘s release is also up in the air. Smithers claims that it’s not just first party titles though, 2018 also saw Red Dead Redemption 2 release alongside Black Ops 4 and Assassin’s Creed Odyssey, claiming that the lineup for 2019 can’t quite match up with the titles we saw last year. That said, Resident Evil 2 and Kingdom Hearts 3 are kicking off what looks to be a busy first quarter for the year, so it’ll be interesting to see how publishers have got on by April 2019.

With the PS4 and Xbox One entering the final phase of their life cycle, Smithers reckons that the revenue drop he predicts could extend into the next couple of years. He explains that “If the PlayStation 5 comes at the end of 2020, that’s great for 2021 but bad for 2020,” as it leaves a year-long gap as developers get to grips with what the new hardware can do.