It’s been a difficult 2024 for the US video game industry. After the explosive growth of the early pandemic years that saw consumers holed up in their homes buying games and consoles to pass the time, gaming continues to contend with sales declines.
In its most recent quarterly earnings, Microsoft (MSFT) reported a 41% drop in Xbox hardware revenue, while Sony (SONY) said it sold 2.4 million PlayStation 5 units versus 3.3 million units during the same period last year. Nintendo (NTDOY), meanwhile, said hardware sales fell a staggering 46.3% from 3.91 million units to 2.10 million in the quarter.
New games also struggled to gain traction as gamers continued to log into older titles like “Fortnite,” “Call of Duty,” and “Roblox.”
EA (EA) saw net bookings decline from $1.5 billion to $1.2 billion in its latest quarter. “Grand Theft Auto” publisher Take-Two Interactive (TTWO), for its part, posted slightly better-than-anticipated earnings.
The industry’s generally poor performance can be attributed to a handful of factors, though the primary drivers include a combination of declining revenue and engagement compared to the early pandemic years and the fact that the PlayStation 5, Xbox Series line, and Nintendo Switch are reaching the later part of their life cycles, when sales tend to retreat.
But according to Circana video game industry adviser Mat Piscatella, gaming’s future is looking brighter.
“The transition to the new normal in the video game market has not been painless,” Piscatella said in a press release. “However, the long-term outlook remains optimistic, with 2025 in particular carrying significant growth potential.”
2025 should drive growth
It hasn’t been all bad for gaming in 2024. According to Circana, EA Sports College Football 25 has performed exceedingly well and hit the top spot as the best-selling game of the year to date, powering hardware and accessory sales.
One of the most important launches coming in the year ahead is Nintendo’s follow-up to the Switch.
On sale since 2017, the Switch has been a stunning success for Nintendo thanks to its accessible games and intriguing console design. The 2-in-1 Switch, which can be used to play games on a television via a dock or as a handheld system, is Nintendo’s second-best-selling platform of all time behind its Nintendo DS handheld, totaling 143 million units. The company has also sold more software for the Switch than any other console: 1.2 billion titles.
But the Switch, which was arguably underpowered compared to the PlayStation 4 and Xbox One X when it launched, is looking long in the tooth. Developers have tried to bring games designed for the PlayStation 5 and Xbox Series X line to the Switch, but they’ve been rough ports, to say the least. Look no further than the widely criticized version of “Mortal Kombat 1” for the Switch, which looked laughably bad compared to the PS5 and Xbox versions.
All of that is to say, Nintendo is overdue for a new console. While the company hasn’t offered many details about the system, Nintendo President Shuntaro Furukawa noted on X, formerly known as Twitter, that the gaming giant will make an announcement about the Switch’s successor within the fiscal year.
Reports point to Nintendo launching the next-generation Switch sometime in March 2025, setting up what could be a massive sales cycle for the Mario maker.
Circana noted that the industry has seen an uptick in other portable gaming consoles in the same vein as the Switch, including handheld PC systems like Valve’s Steam Deck, which allows you to play PC games on the go without the need for a bulky laptop.
The category is still in its earliest stages but has seen backing from the likes of Sony, which launched its PlayStation Portal that allows you to stream games wirelessly from your PlayStation anywhere you have a decent connection. Microsoft is also reportedly working on its own kind of portable device, though it’s likely still a ways off.
'Grand Theft Auto VI' will be massive
The other major release set to power the game industry’s 2025 is also one of the most anticipated games in years: “Grand Theft Auto VI.” The follow-up to the wildly successful “Grand Theft Auto V,” “GTA VI” is expected to hit the market in the fall of 2025.
According to Take-Two, “GTA V” has been the best-selling game by unit volume and dollar sales in the US for the past 10 years. And it continues to dominate the charts. So far, Take-Two has sold 200 million copies of the title, and its online iteration, “GTA Online,” draws players into its world.
The excitement over “GTA VI” won’t just help drive sales for Take-Two, either. Sony and Microsoft should also see a jump in console sales as consumers who haven’t purchased the systems yet grab them to play the title.
The new Switch and “GTA VI” aren’t the only products set to boost the industry in 2025. You can expect a regular cadence of releases to help turn around gaming’s fortunes in the year ahead. And I’m already getting my dent in the couch ready.
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.
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