With the console and gaming PC market at a standstill, gaming is facing one of its largest crises in a decade. Momentum the medium took for granted — new console generations, affordable hardware upgrades, and a growing player base — has hit a wall. The ripple effects could be devastating, leading to more layoffs and shuttered studios.
But before we can look ahead, we need to understand how we got here. Gradual shifts in demand over the last decade set the stage, and economic supply shocks locked them in place.
The first signs of a major shakeup appeared around 2018 with Fortnite’s massive success. The free to play “game as a service” (GAAS) drew massive player growth and revenues that rapidly outpaced full priced games from similar genres. Other GAAS like Roblox and Minecraft followed similar trajectories around the same period.
A few years later, the COVID-19 pandemic accelerated demand for digital entertainment. That demand sparked a massive expansion in supply: new streaming services like Disney Plus, new social media platforms like TikTok, alongside VR investments from Valve and Meta. Established companies like YouTube and Spotify expanded into new markets. As on-demand entertainment options proliferated, casual gamers spent less time on games and more on social media, streaming, and other distractions.
The growth of GAAS and competing entertainment options has reshaped gaming habits. Most players have cut back on purchases and narrowed the breadth of games they regularly play. Recent Circana analysis shows that over half of console and PC gamers purchase two or fewer games a year. Most casual players stick to GAAS like Fortnite or free to play versions of popular franchises like Grand Theft Auto or Battlefield. When they do buy, they gravitate toward familiar mega-brands like NBA 2K, Call of Duty, or Monster Hunter.
Macroeconomic pressures have only made things worse. Last year I wrote about how price hikes on consoles and games would impact the gaming industry, but the situation has become far worse in the months since. U.S. protectionist trade policies have lasted so long that many suppliers that may have absorbed some tariff costs today find the practice unsustainable. They’re now passing an increasing share of the burden directly to their customers. Meanwhile, the AI boom has spiked demand for RAM and video cards, in some cases doubling or tripling their prices within months.
These headwinds hit the gaming PC market especially hard, where players buy hardware upgrades piece by piece. But even console and PC manufacturers — less sensitive to component price fluctuations given they produce in bulk and negotiate lower costs — can’t avoid macroeconomic forces this severe. Expect another price increase for the Switch 2, PS5, and Series X sometime this year, likely between $50 to $100. Valve’s Steam Machine will probably launch at a higher price than originally planned, potentially around $800 or higher. Looking ahead to 2027, when Sony and Microsoft may release new consoles, it’s unlikely either will sell for under $700. That’s a 40% price increase over today’s systems.
The combined impact of all three forces — GAAS dominance, competing on demand digital entertainment, and hardware price hikes — has effectively frozen the industry. Many hardcore players will be priced out of further upgrades for their PCs. Sony and Microsoft are rumored to have postponed launches of next gen consoles by at least a year, extending this generation to its longest ever. Casual gamers considering entering the market through a new gaming PC or console are deterred by high prices and cheaper alternatives. Most will just game on hardware they already own: smartphones, tablets, and lower powered Windows and Mac laptops.
This frozen gaming market will shakeup the kind of games that will find an audience and succeed financially. Big budget AAA originals are at risk, while nimble AA and indie breakouts should find bigger, more receptive audiences.
In particular, high end games with steep hardware requirements and less familiar IPs — titles like 007 First Light, Pragmata, and Phantom Blade Zero — are in danger. There’s now a smaller addressable market that can play them. Even for those with capable hardware make skip these games amid or wait for sales given general economic uncertainty.
Mid budget games, on the other hand, are well suited to the current market. They play on older hardware, launch at lower price points, and blend familiar genres with fresh gameplay mechanics. Examples from 2025 include Clair Obscur: Expedition 33, Split Fiction, Dispatch, and Arc Raiders. Indie breakouts will find an audience with niche gameplay genres and affordability that makes impulse purchases easy. Games like Balatro, Peak, Blue Prince, and Schedule 1 could thrive in a dynamic market.
Still, I’m worried that the larger industry will be too slow to adapt to this market pivot. Small indies are primed for success, but today face discoverability challenges. New games flood the market on Stream, PSN, and the Nintendo Shop every month, making it hard for individual titles to stand out.
Diversifying production to more AA and indie games requires a strategic overhaul, but the biggest publishers have stuck with the “bigger games, bigger profits” corporate playbook for years.
The end result will be missed sales targets, more layoffs, and studio closures. The industry has been in an employment crisis since 2022, and a volatile market will only make the situation worse.
Granted, eventually the industry will adapt. Valve, Sony, and Nintendo will find innovative ways to promote standout indies within their digital stores. Publishers like Sony will produce more smaller, idiosyncratic titles like Astrobot. The biggest games and GAAS will stay remain cash cows that dominate mindshare and play time.
Hardware prices should eventually stabilize. Perhaps the rampant AI demand will slow, or innovations in cloud and chip technology will deliver high end graphical performance at a lower cost.
Nevertheless, I suspect gaming could look very different within a few years. Nostalgic reminders of past heights will remain: Grand Theft Auto VI will probably be the biggest entertainment event of the decade, and Nintendo remains uniquely well equipped to weather this storm with the Switch 2 and its first party hits. Still, new consoles and dedicated gaming PCs will form a narrowing market, while the broader mainstream turns to niche games that suit fragmented, always online lifestyles.
With disruption comes opportunity — new audiences, new games, and new creativity. But I worry about how much talent the gaming industry will lose before it finds its footing again.