Mobile game revenue will decline for the first time in history this year, market research firm Newzoo now says in a revised outlook for the 2022 global games market. While the whole game industry is expected to contract by 4.3% — another first since Newzoo began tracking the market in 2007 — the company is predicting a 6.4% decline in mobile game spending on top of a 4.2% decline in console game spending.
Back In May, Newzoo was forecasting a year of growth for the game industry, with its outlook predicting more than $200 billion in global games industry spending thanks to a nearly 6% increase in the mobile gaming sector to a $103.5 billion. But this summer, as warning signs emerged about the effects of inflation and a severe downturn in the digital ads market, analysts and market researchers began to predict a unprecedented decline for the game industry, which in 2020 and 2021 grew at staggering rates due to excess spending on and time spent playing video games. In particular, mobile gaming declined in the first half of the year for the first time ever.
Mobile gaming has typically offset the losses in console and PC gaming and has been the largest and fastest-growing sector in the industry for years. But this year's decline marks a surprising downturn for mobile. “Mobile game spend in the U.S. continues to decline as consumers contend with both economic uncertainties and a new post-pandemic normal,” said Sensor Tower gaming insights lead Dennis Yeh last week. “While there is still a decent chance this year’s U.S. mobile game revenue will surpass 2021 levels, worsening headwinds have firmly shifted the conversation away from the question of by how much.”
A confluence of factors has created a particularly difficult time for game developers, and not just mobile ones. For one, consumers are spending less on gaming due to inflation increasing the price of everyday goods. A number of high-profile console and PC games have also suffered from delays this year, setting up a return to growth in 2023.
"Some of the drivers of the decline include the return of experiential spending, higher prices in everyday spending categories such as food and fuel, the uncertain supply of video game console hardware and certain accessories such as gamepads, and a lighter release slate of games, among others," explained NPD game director Mat Piscatella back in July, when NPD forecast a 8.7% decline in the U.S. game market.
Additionally, the digital advertising market on which many mobile games rely for revenue is also having a tough year, in part because Apple's iOS privacy changes have made it more difficult to track the effectiveness of the install ads through which many mobile developers both acquire new users and also earn money from other app makers. (Many mobile games allow players to earn digital currency by watching ads prompting them to install competing games.)
Advertisers are also simply spending less. "The timing here is clear: The declines take place as the world’s banks increased interest rates and the specter of recession was everywhere in the press,” Unity CEO John Riccitiello said on an earnings call this month. "When we talk with our advertisers, the sense we get is clearly one of caution and reticence to commit to the aggressive campaign spends." Unity, the game engine of choice for mobile developers, also runs a digital ads business. Some major publishers like Zynga owner Take-Two Interactive have also cited mobile when downgrading annual outlooks in recent weeks.
Newzoo in a press release said, "2022 is a corrective year following two years of lockdown-fueled growth, but our long-term outlook for the games market remains positive," and the firm says it still expects gaming to hit surpass $211 billion in global spending by 2025.
"While this may seem like a setback for the games market, we note that the sum of revenues generated from 2020 to 2022 is almost $43 billion higher than we originally forecast pre-pandemic," the company said.