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Game-Time reports/It is said that the game industry will have a difficult time in 2022 and 2023, but it seems that Western developers are not optimistic about the situation in 2024. Recently, the European Game Developers Federation (EGDF) sounded the alarm to its members: “2023 is a bad year, and 2024 will be even worse.”
The EU trade body said that its more than 2,500 small and medium-sized game studios and about 40,000 game developers aim to survive this year, and expressed anger at Apple’s new EU App Store terms. “Brace yourself, 2024 is going to be painful,” EGDF President Hendrik Lesser concluded in an open letter to members.
EGDF cited oversaturation of the gaming market, financial constraints, the failure of Web3, dwindling public funding, and geopolitical conflicts, including in Ukraine and Israel, as contributing factors to the industry’s difficulties. Lesser also mentioned subscription services such as Apple Arcade, Google Play Pass, Netflix and Xbox Game Pass, which offer very good terms to selected developers, but leave out many small and medium-sized developers.
However, at the end of the open letter, he also expressed optimism, “The European games industry is and will continue to be a new opportunity for the games industry, and we must help the industry take advantage of these disruptions. Despite the efforts of gatekeeper platforms to hinder it, the DMA It is likely to lead to the launch of efficient new games and cross-platform distribution channels.”
As long as you’re still making games, he said, it doesn’t matter. “We’re not just going to survive, we’re going to grow and thrive.”
The following is the full text of Hendrik Lesser’s open letter compiled by Gamelook:
We Want to Survive – The Current State of the European Gaming Industry in 2024
It’s no secret that the European gaming industry has seen a lot of growth during the pandemic. After those years, growth slowed or even stagnated or declined. From an outsider’s perspective, the changes may not seem that drastic, but that couldn’t be further from the truth.
Let’s start by discussing the challenges many of us are facing today.
Brace yourself, 2024 is going to be painful.
The gaming market is becoming increasingly saturated. On many platforms, the number of new games released every day is almost as many as a year ago a decade ago. Although there will be big winners in 2023, we also see a relatively high failure rate, with many studios struggling to survive in obscurity. Success appears to be polarizing again, squeezing the middle of the market.
Many games that were funded years ago have failed to live up to the expectations of publishers and investors. Game studios as a whole are struggling to find and maintain work contracts, joint development arrangements, and publishing agreements. Self-financing developers and small publishers are suffering. Because there are fewer and fewer platform exclusive agreements.
The promise of NFTs and cryptocurrencies has not materialized, and Web3 is clearly not the next big thing, and while its day may come, there is currently no solid foundation to build a business on.
The challenges facing European companies in the mobile games market remain extremely high following the introduction of data access restrictions on ‘gatekeeper’ platforms. The DMA Act was supposed to open up the closed garden of the mobile game market to competition, but ‘gatekeeper’ platforms have brought new barriers to market entry, and this situation looks difficult for the foreseeable future.
A few years ago, we hoped that subscription platforms would bring new revenue streams, and we’ve all heard the success stories, and the results empowered the creation of some great games, but those days have passed. Big IPs are still effective, but small independent game IPs must work harder and harder at the community level to have a chance of success.
Private equity venture capital investment in game R&D has also begun to decline. VCs and PEs in the game industry ecosystem still have funds, but many would rather invest in companies that are already profitable. Few game developers are able to build a profitable studio before getting investment growth, and then again, the days of early venture capital funding are over.
In many EU member states, public funding is under scrutiny as difficult times lead to budget cuts. The easy days of building public support tools are over.
Interest rates have long been very low, making loan financing virtually free. These times too have passed. Where before you could get a business loan with an interest rate of less than 10 percent, today those rates easily exceed double percentages.
Companies that have been able to build profitable businesses also have trouble scaling. There was a time when an IPO seemed like a reliable path to long-term growth, but those days are over.
So it’s no surprise that these opportunities are ending for many independent game development studios and boutique game publishers, and many studios are closing. At the same time, many European companies acquired before the crisis have collapsed as global gaming giants cut spending. As more studios are shut down, more of them as subcontractors, service companies or co-developers will struggle.
A lot of companies are laying off workers because they have to. Some company layoffs are an overreaction to difficult times, with many local game developer communities and even countries losing talent in the gaming industry as people can’t find new jobs.
Beyond this, wider world politics is showing increasing signs of instability. Not only is the economy struggling, the diplomatic process is failing, and the conflict is still killing thousands. Leaders began discussing it on a pre-war basis, with wider conflict in Europe and the Middle East an increasingly realistic proposition.
But there are many reasons why Europe is a great place to be in the gaming industry during these difficult times.
Europe is the ideal place for difficult times
2023 is a bad year, and 2024 may be even worse. After the rapid growth during the epidemic, it has now just returned to the normal growth state before the epidemic. Games have always been and will continue to be a major global trend and the cultural technology of this century. Sooner or later, the game industry will overcome this difficulty.
The European games industry is and will continue to be one full of new opportunities. We must help the industry take advantage of these disruptions. Despite the efforts of gatekeeper platforms to hinder it, the DMA bill will likely lead to the emergence of efficient new mobile games and cross-platform distribution channels. EGDF is here to ensure that the European Commission does not let a gatekeeper platform prevent European game developer studios from exploring their new rights. In the meantime, new opportunities are still brewing in Web3, VR/AR, and even aspects of the Metaverse, and we should be open to them.
The global games industry is returning to growth, but we must also help European industry open up new markets. The gaming industry is no longer centered around the EU and the US. Games are a truly global medium and you can still distribute games in the growing markets of Asia and Africa with one click, and we should help partners participate in these markets. This is a huge opportunity for us and many EGDF member associations are now planning trade missions, especially to Asia, where collaboration with emerging markets is vital to the future of the European games industry.
Many European game development studios are in better shape than ever and are able to weather the difficult times. Many European companies are struggling, but some are rebuilding or are profitable and growing. Many European companies that were acquired before the crisis now have stronger shoulders to weather the difficult times. European studios that have completed major investment or public support deals in due course are now able to weather the difficult times with this safety in mind.
Europe has one of the largest and best gaming industry talent pools in the world. Access to top gaming industry talent has never been so easy in decades. For years, recruiting talent from other industries has not been easy. Today, the talent shortage factor that has hindered industry growth is losing its grip on the industry, and those companies that can do it are hiring as much as possible, as fast as possible.
Europe has one of the strongest and broadest professional gaming education frameworks in the world, and we must ensure that it is also one of the best. We must also find ways to support entry-level talent into the games industry. Many EGDF member associations already work closely with professional games education institutions. In addition, they are encouraging game development studios to expand their intern programs and increase the flow of talent into the industry.
Europe is one of the most attractive places for gaming industry talent. European cities like Berlin and Barcelona remain among the most attractive places for gaming talent, with Lithuania, Poland and the Czech Republic still growing because of all the good gaming talent that has moved there since the war in Ukraine began.
For global game industry investors, Europe represents a golden opportunity to find promising companies and acquire the talent needed to grow. Many EGDF member associations are organizing trade missions around the world, outside of GDC in San Francisco, to help European game developers meet with investors. We are lucky to host Gamescom, one of Europe’s leading global B2B games industry events. Investments from outside Europe may not always align with your company values, but due diligence can quickly separate high-value funds from low-value funds.
European investors may be hesitant to invest, but they have more money than before. We must work to help investors find the best investment targets in Europe and build public support instruments to reduce the risks of making these high-risk investments. We must ensure that game developers understand changes in investor preferences. They want to see profits, they want to see something completely new. Fortunately, many EGDF member associations have decades of experience in promoting investor relations.
Europe has some of the best public financing instruments in the world, and it is now helping many highly promising companies grow. But we do need more and better public funding. EGDF and EGDF member associations are actively lobbying to make it bigger and more influential.
Difficult times can bring out the best entrepreneurs. We must find ways to support those starting new businesses during these difficult times. Hard times create the best entrepreneurs, and the next wave of startups have emerged from the ashes of shuttered studios. EGDF and EGDF member associations are actively lobbying for new incubators and accelerator programs to help.
We must continue to support the Ukrainian games industry, which is struggling more than any other game developer community. EGDF and its member associations have not forgotten our Ukrainian friends who are fighting for our future.
We need a more strategic approach to building digital growth and jobs in Europe. The EU needs its own game industry strategy, and member states need their own game industry growth strategies. EGDF and many of its member associations are already updating their strategies to prepare and assist.
Summarize
To sum up, this year we must:
Focus on supporting students and startups; focus on obtaining public funding; focus on facilitating private investment and co-development agreements; focus on creating strategic growth methods.
We will keep calm and carry on. We will help each other. We will create a path for growth and success. We ask the hard questions and stand up when others try to take advantage of these difficult times to undermine our position in the value chain. Regardless of whether we have to go up against key game engine developers, major gatekeeper distribution platforms or large European telecommunications companies. We will be a clear and loud voice for European industry.
It doesn’t matter if you’re a publisher or a developer, as long as you’re making games, we’re going to piece this shit together.
Not only will we survive, we will grow and prosper.
EGDF President Hendrik Lesser
