Game and esports data firm Newzoo predicts that the global video game industry will shrink in 2021 after reaching record highs amid the COVID-19 pandemic in 2020. This is the first time in many years the gaming industry has been forecasted to fall rather than rise.

This news may seem foreboding at first, but fans of the industry don't need to panic. It is still expected to surpass $200 billion by 2023 according to the same report, Newzoo simply finds it unlikely that 2021 will be able to beat the numbers it reached over 2020. The pandemic has also pushed back the deadlines of many games, including Warner Bros.' slate of AAA titles, but it has had an overall positive effect on industry earnings.

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Newzoo games market lead Tom Wijman told VentureBeat that the industry will hit a total of $175.8 billion in 2021, which is 1.1 percent off from the $177.8 billion it reached in 2020. There are a number of reasons for this, including an ongoing shortage of semiconductor chip, the disruption of global supply chains, and Apple’s decision to prioritize privacy over targeted advertising, but the most important one is timing. Further delays are expected to push back the releases of games for next-generation consoles, reportedly including God of War Ragnarok, to the latter half of the year - or even to 2022 in some cases.

In the long term, Newzoo believes there is no cause for concern regarding the video game industry's prospects. It's still predicting very healthy growth in the market over the next several years. The firm's position is that 2020 was simply a unique opportunity thanks to the pandemic, and a projected drop in 2021 is the market correcting itself.

This may reassure fans watching many gaming companies struggle to adjust to the new digital-only marketing landscape, a task that some are more successful at than others. For example, one insider claims that Microsoft is planning to unite Xbox and Bethesda press conference plans for E3 2021.

Last year also saw huge growth partly because of the PlayStation 5 and Xbox Series X/S being released in the fourth quarter, which spurred incredible demand. All in all, Newzoo reports that the game market generated a total of $177.8 billion in 2020, marking a 23.1 percent increase from 2019. This is the highest market growth recorded since 2012, when the firm first began tracking industry revenues. After such a remarkable year, a slight shrinkage is to be expected.

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Source: VentureBeat