8:30 PM GMT•February 16, 2024
The global video game industry surpasses the combined revenue of movies and music annually, yet it has not been immune to the macroeconomic shifts of recent years. Layoffs in gaming companies and a decline in venture funding marked 2023, hitting a five-year low. However, venture capitalists hold optimism for a turnaround in 2024.
According to a report by Konvoy Ventures, gaming startups secured $2 billion in funding last year, a notable decrease from the $9.9 billion in 2021 and $6.7 billion in 2022. Despite concerns that 2024 might present challenges for startups, particularly in the face of delayed exits until 2025, some VCs view the video game sector as a potential outlier.
Several positive developments occurred in the gaming industry in 2023, including the release of titles like Baldur’s Gate 3 and Hogwarts Legacy, each selling over 22 million copies. Although overall industry growth remained flat, projections anticipate the gaming sector to reach $229 billion by the decade’s end.
Industry dynamics are evolving, prompting startups to align with emerging trends. With a shift away from mobile games towards cross-platform games and the nascent integration of AI in video games, opportunities for innovation abound.
Josh Chapman of Konvoy anticipates a return to normal growth in 2024 as pandemic-driven gaming surges wane, allowing the industry to resume organic growth. While the hype around web3 and crypto gaming subsided, the sector retains its strength, bolstered by corporate participation and a surplus of developer talent.
Despite challenges, the rise of AI in gaming presents a pivotal trend to watch. The integration of generative AI could revolutionize game development, enabling users to shape every facet of gameplay. While AR and VR have not garnered similar enthusiasm, recent industry developments, including Disney’s investment in Epic Games, offer promising prospects for video game startups.
In the face of adversity, Chapman emphasizes that transformative companies often emerge during challenging times, citing examples like Halo and League of Legends. Despite the uncertainties, the gaming industry stands poised for innovation and growth in 2024 and beyond.