The Istanbul Gaming Summit 2023 came at a critical moment in the video game industry's history. Over the past few years, the industry has experienced unprecedented growth, with video game spending and time spent playing games skyrocketing. However, this trend began to show signs of slowing down in 2022, with the mobile gaming market declining for the first time in recent history.
Data.ai analysis revealed that while players still spent over $16 billion, the numbers were slightly down from 2021 but higher than pre-pandemic levels in 2019. To make matters worse, the current geopolitical and economic difficulties and the subsequent market fallout have dragged down game spending in most markets.
Against this backdrop, the Istanbul Gaming Summit 2023, presented by Google and Deconstructor of Fun, offered valuable insights into the industry's future, and in this article, we will explore the key takeaways from this year's event.
The overarching sentiment among the speakers and audience at the Istanbul Gaming Summit 2023 was that the video game industry is facing tough times. Many industry leaders agreed that the market is likely to get worse before it gets better, with several factors contributing to the gloomy outlook.
The gaming industry has faced a series of unprecedented challenges over the past three years. The global pandemic, along with other events, resulted in a surge in the industry throughout 2021, with easy access to funds and a trend towards innovations in crypto and NFTs.
However, by the end of the year, the market began to experience a downturn, which was further compounded by the implementation of IDFA in April and recent changes to Google interstitial policies. As a result, many companies in the gaming and tech sectors prepared for an anticipated recession, which led to a significant number of layoffs.
However, despite these challenges, industry leaders expressed cautious optimism that the industry will recover eventually. The consensus among the speakers and the audience was that the industry needs to weather the storm and prepare for a potentially rocky road ahead.
At the summit, Google presented data that shed light on the challenges facing the mobile gaming industry. According to their analysis, gaming is falling behind all other categories when it comes to mobile screen time. While social media, music streaming, and video streaming grew around 10%, gaming screen time grew only 3%, widening the gap between gaming and other forms of mobile entertainment.
Moreover, gaming's share of overall in-app purchase (IAP) revenue is steadily falling compared to non-gaming IAPs. In Q1 2020, gaming accounted for 71% of overall IAP revenue, but by Q4 2022, it had dropped to 62%. This trend indicates that gamers are becoming less willing to spend money on in-app purchases, which is a concerning development for mobile game developers and publishers.
In addition, Google's analysis revealed that the average revenue per monthly active user (ARPU) has fallen by a third on average between January 2021 and January 2023. This is a significant decline, and it highlights the increasing difficulty that mobile game developers and publishers face in generating revenue from their products.
Taken together, these findings paint a challenging picture for the mobile gaming industry. The data suggests that the industry is losing ground to other forms of mobile entertainment, and gamers are becoming less willing to spend money on in-app purchases. While there is still growth potential in the industry, it will require new approaches and innovative solutions to overcome these challenges and stay competitive in an increasingly crowded market.
According to Google, the share of new games in the top 100 charts for revenue and downloads was less than 2% in 2022. This statistic highlights the difficulty that new games face in breaking through in today's overcrowded gaming market. Therefore, it's critical not to chase shiny new things and to avoid stepping too far from the core business. Instead, the focus should be on what the studio has been doing well and continually iterating and improving.
By listening to player feedback and making incremental improvements to their games, studios can keep their products fresh and engaging. Additionally, by building on existing strengths, studios can create a unique identity and distinguish themselves from competitors. By focusing on what the studio does best, developers and publishers can build a loyal fan base and establish a reputation for quality. This, in turn, can help to drive revenue and provide a solid foundation for growth.
Another key aspect discussed at the summit was the challenges of raising capital in the video game industry. Capital has become extraordinarily expensive compared to previous years, making it difficult for many studios to secure the funds they need to grow.
However, despite the high cost of capital, there is a lot of activity in the market. More sellers than ever are coming into the market, looking to shed assets and raise additional capital to extend their runway. This trend has created opportunities for investors, but it has also made the market more crowded and competitive.
In the last 1-2 years, a shift has occurred in the source of capital, with 80% of investments in 2021 being made by public companies, compared to only 20% in the last 12 months. There is a new universe of buyers now, and they are increasingly focused on making synergies and thinking about how to add value through strategic acquisitions.
The changing landscape of capital in the video game industry presents both opportunities and challenges for studios. On the one hand, the increased interest from public companies can provide access to capital and resources that were not previously available. On the other hand, the industry is increasingly competitive, with more buyers in the market and higher valuations for studios and intellectual property.
As the video game industry continues to evolve and face new challenges, it's essential to consider what factors will be relevant going forward. At the Istanbul Gaming Summit 2023, industry leaders discussed several key factors that are likely to have a significant impact on the industry's future:
The Istanbul Gaming Summit 2023 provided valuable insights into the future of the video game industry. While the industry has experienced unprecedented growth in recent years, there are challenges ahead, and the market is likely to get worse before it gets better. However, the industry leaders at the summit expressed cautious optimism and provided actionable strategies studios can use to succeed in this evolving landscape.
Overall, the Istanbul Gaming Summit 2023 provided a wealth of knowledge and insights that will help industry professionals navigate the challenges ahead and stay ahead of the game. By staying focused on their strengths, being innovative, and being strategic in their approach, studios can position themselves for growth and success in this evolving landscape.
If you are a game developer or part of the video game industry and need help navigating the business aspect of the industry or are looking for tax and financial advisory tailored to the needs of game developers, don't hesitate to contact GameBiz Consulting. Our team of experts can provide you with tailored solutions and insights to help you succeed in this constantly evolving industry. Contact us today to learn more about how we can help you reach your goals.