The volume of venture capital funding for video games fell to a three-year low of $700.3 million in the third quarter of 2023. For market experts this is not a surprise, but on the contrary, a reflection of the trend: investors are unwilling to take risks in the face of the increasing costs of developing “successes” in a highly competitive market.
The current rate of total venture capital investment in the gaming sector is the lowest since 2020, according to PitchBook data cited by Bloomberg. In two years, the industry raised more than $2 billion quarterly.
Venture capital investments peaked in the middle of last year ($5.9 billion). And from that moment on, the volume of financing in the industry began to decline.
Video game companies are suffering from a hangover (cited by Bloomberg) after a surge in gaming activity during the pandemic. People are spending less and less time indoors, creating more competition for gamers’ attention. As a result, revenue in the desktop and mobile games market last year decreased by 5.1% to $183 billion.
All of this, in turn, makes investing in new products riskier and marketing them more expensive. Interest in the gaming sector is declining among both venture capital funds and private investors.
The lack of financing is affecting the labor market. In recent weeks, Epic has cut 830 jobs and Team17 has also laid off dozens of workers. Swedish gaming holding company Embracer Group is also making cuts. Companies are also suspending development and freezing projects.
Author:
Ekaterina Alipova
Source: RB
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