Gaming Industry in the Face of an Imminent 'Mild' Recession

The gaming industry is considered a top player and a massive economy in the US. The giant had an estimated value of almost $100 billion in 2022. However, like any major economy, challenges tend to surface, especially concerning the financials. Recent speculations by gaming CEOs indicate the gaming industry might be heading into a recession this next quarter of the year.

Brace for a mild recession - Gaming CEOs warns

According to the American Gaming Association, the current baseline economic outlook indicates the gaming industry might slip into a mild recession in the 4th quarter. This is coming after the recently released AGA gaming industry outlook. A Current Condition Index that reads 100.6 in the third quarter shows that the gaming industry experienced slight growth from April to June. Evidently, one can see how well the industry has been doing. However, the Future Condition Index reading of 99.6 indicates there might be some turbulence up ahead.

For layman, a recession indicates a period after which a country’s GDP has been negative for two consecutive quarters. The songs of recession have been ringing in the ears of most US citizens for a while. In 2020, during the COVID-19 pandemic, the US economy slipped into a relatively brief recession that lasted two months. It was also speculated that the country experienced a recession sometime last year.

With all the economic uncertainty, the gaming industry has been holding steady and doing significantly well. Hence, this news might be quite a shocking surprise to most. The giant US casino, Las Vegas, has been considered to be doing relatively well, even amidst the several economic crises that have been rocking the US over the years. Similarly, rebranding efforts in the gaming industry, like those by Crown Resorts, reflect attempts to adapt and remain relevant in these challenging times.

However, trouble may be looming, characterised by the unchecked spending of the US government, which has raised inflation to its highest in over 20 years. The fragility of the current US economy is definitely going to affect the gaming industry. The question is, how much?

Why does this matter?

The principal purpose of any industry is to make a profit. However, profit-making is more than just selling your products or services in the best way possible. Quite sometimes, external factors tend to have a significant impact on revenue generated. As highlighted above, the US is flaky at best, and there have been speculations of another recession on the way. With this in mind, a recession brings with it surging inflation rates, which makes consumers cut back on spending.

Reports show that job gains aren’t as much about new jobs as they seem. As of May, over 70% of US job gains have been people returning to their old jobs after the pandemic. The meaning is implied: fewer people are working, and the revenue generated is dwindling. With an industry heavily reliant on consumers with high spending habits, one can see how this poses a problem to the gaming industry. Just as well, real wages have experienced a decline of 5% since the start of the year. This implies people will most likely be willing to spend less, majorly focusing on significant expenses.

The ratio of gaming executives with access to credit skews in favour of those who claim it is now challenging to get access to such facilities. With limited access to funds, it might be a lot more difficult to cushion the effect of a recession on the economy of the gaming industry.

Wrapping up

The current market condition shows the future looks rather bleak for the gaming industry as macroeconomic conditions are already dealing deathly blows on the industry. Although a “mild recession” is speculated, the impact is expected to affect the industry significantly.

There is a need for gaming industries to go back to the books and prepare for the potential recession. The ability to diversify revenue streams, optimise costs, and collaborate effectively will be pivotal in weathering the impending economic storm. Moreover, securing regulatory approvals and expansions, as seen with PlayAGS, will be crucial for companies looking to broaden their reach and cushion the economic impact. As the gaming industry confronts this new reality, its adaptability, and determination will undoubtedly play a crucial role in its future success.