In an interview with GamesBeat, Matthew Ball, CEO of Epyllion and author of The Metaverse, provided an in-depth analysis of the gaming industry’s recent downturn following its unprecedented growth during the pandemic. Speaking at the Hollywood and Games event in December, Ball outlined the factors behind the rise and fall of gaming’s modern era and explored possibilities for future growth.

The State of Video Gaming in 2025

The Peak of Gaming During the Pandemic

The gaming industry reached its peak in 2021 as the COVID-19 pandemic confined people indoors, driving many to seek entertainment through gaming. Key drivers of this surge included the growth of mobile platforms, live service games, free-to-play models, cross-platform play, and the popularity of genres such as battle royales. Social gaming services and user-generated content also gained significant traction during this period. This convergence of factors enabled gaming to outpace other markets and expand rapidly.

Peak Gaming Drivers

The Decline Following the Boom

However, the gaming industry faced a marked decline over the next two and a half years. Ball identified several reasons for this downturn, including the exhaustion of growth drivers that had propelled the industry for over a decade. Changing user behaviors, evolving monetization models, and intensifying competition compounded these challenges.

External factors, such as macroeconomic pressures, platform policy changes, and the rise of alternative entertainment like TikTok, further disrupted the market. The impact was stark, with over 34,000 industry layoffs and a reduction in investment capital for new studios. Many of the anticipated growth drivers, such as cloud gaming, esports, and web3, failed to meet expectations, leaving the industry in a state of stagnation.

Growth Engines That Failed 

Key Challenges Facing the Gaming Industry

Ball emphasized that several structural challenges have hindered the industry’s progress. The console market has seen little growth in its installed base, while production timelines and development costs have continued to rise. Restrictive app store policies and user acquisition costs have further constrained growth, and many players have gravitated toward established live-service games, reducing the visibility and success of new titles. This has created a cycle of stagnation, with fewer innovations and risk-averse investments leading to diminished revenues and profits.

Emerging Opportunities for Renewal

Despite these obstacles, Ball expressed cautious optimism about the potential for recovery. The impending release of new hardware, such as the Switch 2 and devices from Valve, Sony, and Microsoft, may rejuvenate interest in gaming. Mobile gaming has seen success with high-quality titles like Genshin Impact, while non-core markets, including the Middle East, are showing promising growth.

Additionally, user-generated content platforms like Roblox, Minecraft, and Fortnite continue to expand, offering new opportunities for creative engagement. Advances in artificial intelligence may also revolutionize game development, reducing costs and enabling novel gameplay experiences. Regulatory changes in app stores could provide relief to developers by addressing high fees, while emerging game genres may attract new audiences.

Future Growth Engines

A Balanced Outlook for the Industry’s Future

Ball’s analysis underscores that while the gaming industry faces significant challenges, opportunities for growth remain. Recovery will depend on the industry’s ability to adapt to changing market conditions, embrace innovation, and address structural issues. As new technologies and platforms emerge, the gaming landscape is likely to continue evolving, with winners and losers shaping its trajectory.

In conclusion, the gaming industry’s decline after its pandemic-driven peak highlights the complex interplay of market dynamics, consumer behavior, and technological trends. Ball’s insights provide a valuable framework for understanding these shifts and navigating the path toward a potential recovery.

Source: GamesBeat