Just as the health effects of COVID-19 can linger on years later, so too are the economic effects of the pandemic continuing to cause ripples.
When the world shut down and people were confined to their homes for months at a time, there was not much left to do other than watch TV, play video games, and keep in touch via videoconferencing platforms.
Thank goodness for the internet.
Named after the popular video conferencing software, this period has been dubbed the ‘Zoom Boom’ on account of the financial boost to businesses in these areas. Gaming, which was already a huge industry, had never had it so good.
The morning after
Fast forward to today, however, and the world looks very different.
Covid-19 has been tamed. The world has reopened. People have started going out again and travelling. Meetings are once more face-to-face. And our screen time has dropped from its peak in 2020-22. Even dedicated gamers are gaming less.
Some industries recovered strongly: think of travel and tourism. But video conferencing platforms, internet TV streaming services, and gaming have shrunk.
Companies that kept the world connected and entertained during lockdown—and that often grew at breakneck speed to meet demand—now look financially exposed.
Cue a round of layoffs and cost-cutting, which is, in many ways, a market correction.
These firms were lavished by a Covid-induced sales surge. Revenues rallied, share prices shot up, and investors piled in. Cash was abundant. Recruitment was dizzying. There seemed to be a new starter every week.
The era was marked by notable successes and substantial revenue accumulation, especially for games such as The Legend of Zelda: Tears of the Kingdom, Baldur's Gate 3, Alan Wake 2, and Marvel's Spider-Man 2.
Editorials in trade magazines had a giddy tone. The industry was now worth $200bn, bigger in many ways than Hollywood. What could possibly go wrong?...
Numbers falling
This tale will be familiar to many: opportunistic and spontaneous growth, rapidly burgeoning payroll, and strategies that foresaw the good times lasting forever.
However, last year, the Zoom Boom seemed to be going bust. US gaming revenue fell by 2.3%.
Consumers were applying the brakes, spending less and using less. The average weekly gaming time of 16.5 hours in 2021 dropped to 13 hours in 2023.
All the graphs and charts pointed in the wrong direction. Indeed, the falls began in 2022. There were 6% fewer gamers in the US in 2022 than in 2020.
Given the problems, companies began making layoffs: 8,500 in 2022, followed by 10,500 in 2023, and a staggering 6,200 in January 2024 alone.
The industry's most dramatic slowdown for 30 years has been painful, with growth propelled by smartphone games having reached its limits. Last year, spending was down 2%, to $107bn.
