Video Games Face Unprecedented Competition from Digital Alternatives
A startling new report from games industry advisory firm Epyllion has revealed that video games are no longer primarily competing with traditional entertainment like movies and music. Instead, they are losing ground to social video platforms like TikTok, online gambling, and creator pornography services such as OnlyFans. This shift represents a significant challenge for an industry already grappling with high development costs and fluctuating player engagement.
The Pandemic Boom and Subsequent Decline
The video game industry experienced massive growth during the coronavirus lockdowns, when people worldwide were confined to their homes. However, this surge proved temporary, with many players not sticking around afterward. Western publishers had gambled on sustained interest, but the reality has been starkly different. Since the pandemic, spending on PC and console gaming in the United States has dropped by 8%, highlighting a worrying trend of dwindling engagement.
Seven Key Competitors Stealing Attention
Epyllion's report identifies seven alternative interactive experiences that are diverting attention from video games:
- Social video platforms, including TikTok
- Creator pornography, exemplified by OnlyFans
- AI assistants and chatbots
- Crypto and memecoins
- Prediction markets
- Online sports betting
- iGaming and iCasinos, which allow real-money betting
The report states, 'Video games not only compete with many new interactive substitutes, but video gamers face a barrage of new, interruptive, and irresistible notifications for these substitutes.'
Financial Comparisons Highlight the Shift
The data reveals a dramatic financial disparity. Since 2019, spending on video game software in the U.S. has increased by $12.9 billion (approximately £9.6 billion). In contrast, collective spending on OnlyFans content, online betting, and iCasinos has surged by $31.6 billion (about £23.5 billion). This indicates where consumer dollars are increasingly flowing.
Demographic Changes in Entertainment Consumption
More American men aged 18 to 45 are now likely to use AI chatbots, engage with creator pornography, or participate in online gambling than play video games on consoles, PC, or mobile devices. The report clarifies that the issue isn't simply about choosing TikTok over a AAA game or OnlyFans over a PlayStation. Instead, 'on a Friday evening, players are placing a growing share of their time and spend elsewhere.'
Market Saturation and Live Service Dominance
The problem is exacerbated by a video game market dominated by a small number of long-running live service games like Fortnite and Minecraft, often five years old or more. This makes it difficult for new titles to break through. Even established franchises struggle to grow audiences as desired, with examples like EA Sports FC 25 reportedly underperforming despite high expectations.
Potential Solutions and Future Directions
Given the heightened interactivity offered by AI chatbots and creator pornography, publishers may need to explore making games more personalized. Sony has already experimented with an AI chatbot based on Horizon Forbidden West protagonist Aloy, allowing players to hold conversations with the character. Additionally, Sony has filed a patent for 'LLM-based generative podcasts for gamers' featuring PlayStation characters tailored to individual interests.
Direct interaction with game characters could represent the next evolution for the medium, though no publisher has openly committed to this approach yet. However, an additional challenge looms: gaming hardware may become harder to manufacture as AI companies buy up components, leaving fewer resources for the gaming industry.
The video game industry stands at a crossroads, needing to innovate and adapt to retain its audience in the face of rapidly evolving digital entertainment alternatives.
