💸 Gaming Industry 2024-2025 - Crisis, Transformation, and Opportunity | Pixels & Profits
We recap 2024 and make predictions for 2025 on game industry trends, challenges, and major game companies
Welcome 2025!
As we bid farewell to 2024, the gaming industry finds itself at a fascinating crossroads. The year brought significant challenges, with record-setting layoffs and established live service games tightening their grip on player attention. Yet amidst these headwinds, we witnessed remarkable developments: China's dramatic rise in the global gaming market, the transformative power of excellent live operations, and early signs of how AI might reshape game development.
This week, the Pixel & Profits crew recap 2024 and discuss our predictions for 2025.
Key Topics We Explore:
2024 Review:
Industry Recession Impact: 14,600 layoffs and the shift from broad cuts to strategic restructuring
Live Service Dominance: Why only 15% of Steam players engaged with new 2024 releases
China's Gaming Success: How Chinese developers captured 50% of top mobile games globally
Live Ops Renaissance: The story behind Brawl Stars' 6x revenue increase
UGC Reality Check: Why venture-backed platforms struggled despite high engagement
2025 Predictions:
Development Evolution: The decline of monolithic development practices
AI Integration: Three levels of AI adoption reshaping game development
Market Recovery: Key catalysts, including Nintendo's next console and GTA VI
Companies to Watch: From Embracer's transformation to Tencent's expanding influence
Industry Transformation: How workforce dynamics and operational models will evolve
Read about these critical shifts to help you navigate 2025, and be sure to follow the podcast, which will have exclusive podcast-only content:
🎧 Listen on Spotify, Apple Podcasts, or Anchor
Speakers:
Joseph Kim. CEO at Lila Games.
Brian Peganoff. Founder at Timber Advisors.
Matthew Kanterman. Director of Research, Blue River Financial Group.
🎮 Gaming Industry 2024 Recap and 2025 Predictions: Key Trends Shaping the Future
2024 Year in Review: Key Industry Developments
1. Gaming Recession Impact
Layoffs reached 14,600 in 2024, up 40% from 2023's 10,000
Early 2024: Broad cost-reduction measures across companies
Later 2024: Shift to more targeted, project-specific cuts
Industry focus moved toward operational efficiency
Many companies adopted "survival mode" mentality through 2025-2026
2. Live Service Dominance
Steam's year-end data revealed striking engagement patterns:
Only 15% of players engaged with 2024 releases
47% played games from previous 1-7 years
37% chose titles over 8 years old
Successful live service games maintained audiences through:
Sophisticated live operations systems
Deep social integration features
High player investment in existing content
Regular content updates and events
Strong core gameplay loops
3. China's Gaming Ascendance
Mobile success:
Captured 5 of top 10 grossing mobile games globally
Key titles included Honor of Kings and PUBG Mobile
Demonstrated superior development efficiency
HD gaming breakthrough:
Successfully launched major titles like Black Myth: Wukong
Showed ability to compete in AAA space
Leveraged lower development costs
Maintained more intense development cycles
Strategic advantages:
Continued investment during industry downturns
Strong incentive structures for developers
Efficient approval and decision-making processes
Clear strategic focus on Western expansion
4. Live Operations Excellence
Key developments:
Brawl Stars achieved 6x revenue increase through improved operations
Clear performance gaps emerged between similar titles based on live ops quality
Companies began reevaluating their live ops team structures
Increased investment in live operations capabilities
Greater emphasis on turning around declining games
5. UGC Platform Challenges
Despite high engagement:
Venture-backed UGC studios struggled to achieve profitability
Platform holders (Roblox, Epic) maintained majority of profits
Business models shifted toward marketing activations
Monetization remained elusive despite strong user metrics
Short session lengths (avg. 7 minutes) limited monetization potential
2025 Predictions: Key Trends to Watch
1. New Development Models
Expected changes:
Shift away from monolithic development approaches
Integration of more agile methodologies
Adoption of Chinese development practices
Streamlined approval processes
Reduced bureaucracy in creative decisions
Greater emphasis on efficiency and speed
2. AI Integration Levels
Three distinct phases expected:
Level 1 - Basic Integration:
Data analysis automation
Concept art generation
Testing and QA support
Level 2 - Pipeline Integration:
Automated battle pass systems
Art pipeline automation
Content generation systems
Level 3 - AI-Native Games:
AI as core gameplay mechanic
Dynamic content generation
Adaptive gameplay systems
3. Market Recovery Catalysts
Key events that could drive recovery:
Nintendo Switch successor launch
GTA VI release
Gaming IPO market revival
Increased M&A activity
Private equity deployment
New game development initiatives
4. Companies to Watch
Notable players for 2025:
Embracer Group:
Continuing restructuring
Potential acquisition target
Asset spinoff completion
Nintendo:
New platform launch
Fresh software lineup
Market share opportunity
Take-Two:
GTA VI release
Zynga integration progress
Revenue growth potential
Tencent:
Scale advantage utilization
Western market expansion
Technology leadership
CD Projekt Red:
Witcher 4 development
Cyberpunk franchise recovery
Studio reputation rebuilding
5. Industry Transformation
Workforce and operational changes:
Continued but reduced layoffs
New hiring in growth areas
Greater emphasis on efficiency
Focus on data-driven decision making
Increased importance of user acquisition optimization
Evolution of monetization strategies
The gaming industry enters 2025 at a crucial juncture, with traditional models being challenged by new approaches, technologies, and market dynamics. Success will likely favor those adapting to these changes while maintaining operational efficiency and creative excellence.