Rarely has the industry looked to the future with such trepidation – but this turmoil is a transition, not a crash, and some paths ahead are visible
A lot of minds around the industry currently seem focused on one thing: the future. Whether it was Amir Satvat's Gamescom Dev keynote, or the plethora of industry luminaries who lined up to discuss ongoing and impending turmoil for Edge magazine's latest issue, the topic of the moment is what's next – and the mood is apprehensive, to say the least.
While not everyone is catastrophising, nobody seems to be outright rejecting the framing of "Crash 2.0" either. The spectre of the 1983 videogame crash looms large, though we can't read too much into its invocation in this particular moment. The industry does have an occasional flair for the dramatic and a habit of raising the spectre of desert pits full of E.T. cartridges at the first sign of market turbulence, after all.
Before talking about the future, in fact, let's talk briefly about the past. 1983 wasn't a downturn or a rebalancing; it was a near-collapse of industry revenues from over $3 billion in 1983 to a mere $100 million by 1985. Analysts justifiably wondered out loud whether video games themselves had been a passing fad that would now fade into obscurity.
We are not facing anything like that. This is cold comfort to anyone who has seen their job or company disappear, or watched their labour of love sink beneath the waves of discoverability on launch, but the industry's headline revenue numbers are fine. Even if Sony was still going to let us have physical copies of anything, we wouldn't be burying them in the desert. Games are a firmly established medium with a huge audience; at this point, wondering if there's any future for video games is no more sensible than asking if people will soon get over this whole listening-to-music fad.
So if not a catastrophic crash, what exactly are we facing? Why is everyone so convinced that the industry's fortunes are perched on a knife-edge right now?
Unsurprisingly, given the size, complexity, and reach of the modern games business, there's no one neat answer to that question. The roots of 1983's crash make for a satisfactory elevator pitch: an immature market with narrow appeal was flooded with low-quality products and tipped over the edge by a price war in the neighbouring home computer market. By comparison, the woes of 2026 look more like an intersecting set of factors that are all coming to a head at once.
Some of those factors are obvious and often discussed. The wild rise in the price of hardware components that are crucial to every gaming device shows no sign of easing off in the near term, forcing console price hikes and making PC upgrades almost prohibitively expensive. Development costs for games have skyrocketed, with budgets of over $100 million now routine, and $300–400 million budgets being relatively common at the high end of AAA. And then there's the concentration: more and more of the revenue and attention on every platform is being monopolised by a smaller and smaller set of gigantic games, the business models of which are often increasingly focused on extracting more revenue from existing players.
But there are other factors at play here, too. It's no coincidence that the industry started to convulse with massive layoffs right around the time when interest rates – which had largely held close to zero since the 2008 financial crisis – shot upwards in 2022. Financing dried up across the board as investors reconsidered the risk profile of video game projects, and companies reeled in expensive speculative ventures they'd launched when money was practically free. The boom around generative AI delivered the coup de grace, sucking up any potential tech investment money for miles around, which was instead thrown at the very data centres that are making gaming hardware unaffordable.
Meanwhile, China has become a major force in game development and publishing; it's often still overlooked in the West, but you could argue that Sony's failed attempt to pivot to live service games was less about wanting the next Fortnite and more about wanting the next Genshin Impact. And alongside it all, there's the foundational malaise that's troubled the entire tech industry for the past decade – the failure of every attempt to introduce a new technology with the same transformational potential as smartphones in the late 2000s, or the internet a decade or so before that. Concepts like VR, AR, or the metaverse have largely failed to make a dent on the mass market.
Some of those factors are interrelated; some of them are internal to the industry and some are entirely out of its control. Nobody knows for sure how any one of them will play out in the end, let alone how the complex interactions between them will shape the coming years. "People will figure out how to make computers understand and output natural language, and it will make PlayStations really expensive" wasn't on anyone's bingo card for this decade.
Even within that tangled mess of probabilities, though, there are a few strands that look reasonably certain. Let's do a little light prognostication, and hope it all turns out more Hari Seldon than Madame Web.
Playable Worlds CEO (and MMORPG legend) Raph Koster cited some figures in the Edge article suggesting that inflation-adjusted budgets for games have risen from around $1 million in the mid-nineties to $10 million by 2005, and eventually to $100 million by 2015. By that growth rate, we'd expect to routinely see billion-dollar budgets at this point, but GTA 6's budget allegedly breaking through that ceiling is instead considered an eye-popping outlier. Budget inflation has slowed somewhat, largely because it's running into some mechanical limits – few companies can finance budgets at this scale, and even among those that can, the risk profile is unappealing. The idea that you could release a game that makes hundreds of millions of dollars and still lose money is enough to start putting a ceiling in place over all but the biggest, surest bets.
We have to acknowledge that there are market forces pushing in the opposite direction too, though. Few, if any, other games will ever justify a budget on the scale of GTA 6, but that game will establish player expectations nevertheless; on some level, every other game (but especially those in an adjacent genre or setting) will be compared to it for years to come. The arms races for graphical fidelity, environmental detail, or open world size don't disappear just because the budget numbers start getting unpalatable, and will continue to drive inflation at the very top end.
The slow-down of the hardware upgrade cycle that will be forced by the component pricing crisis will offer some breathing room here – lots of companies are going to put off tooling up for the next generation for several years past their original plans. Figuring out creative ways to do more with less (in terms of both finance and hardware) is already a hugely valuable skill in the industry, and this will only become more prominent; teams that can deliver polished-looking titles at budgets in the tens rather than hundreds of millions will be greatly in demand. Short-cuts will prove disappointing in the end; generative AI tools will likely become a fixture of very specific, ringfenced parts of development (notably on the programming side), but will do little to reduce team sizes or cut budgets, and in the short term might actually have the opposite effect.
