2023's great games were a backdrop for industry failure | Opinion

It feels somewhat appropriate that probably the last big news story of 2023 is the final death knell of an industry institution. E3 is no more.

After limping on in various forms for the past five years, before finally seeing its latest incarnation cancelled outright in May, the decision of the ESA to walk away from the show it created will come as no shock to anyone – but as is tradition at any wake, most commemoration of E3 has been about the good times, rather than about the distinctly rough later years.

It was unquestionably time for the event to die – there is a strong argument to be made that the very format of the show itself echoed the industry's roots in consumer electronics rather than its present status as an important media and entertainment industry, for one thing, and advances in video streaming and digital distribution made the cost of the show to all parties involved increasingly hard to justify.

Still, it was an institution of the industry for decades; its fall is the end of an era.

It's been the year for that, though, hasn't it? There's been a somewhat cataclysmic feeling in the air as week after week after week, companies across the spectrum of the industry – from the largest to the smallest, from the most successful to the most troubled – announced layoffs that in some cases amounted to a double-digit percentage of their staff being made unemployed.

This is by far the most important story of 2023 – not Microsoft's deep pockets or Tim Sweeney finally getting a court to agree with him on something, but the layoffs that have by conservative estimates now impacted well over 6,000 people across the industry. Other estimates are even higher (over 10,000), and at some companies it's clear that the bloodletting hasn't yet finished.

While we all hope that 2024 will be better on this front, it's unlikely that the ringing in of a new year will bring down the curtain on the spectacle of mass layoffs.

To add insult to injury, these layoffs were happening against the backdrop of one of the most extraordinary years for high-quality game launches. Almost every highly-anticipated title this year hit its mark (with some unfortunate exceptions, granted), and many of them exceeded it, both critically and commercially.

Much of that quality can probably be attributed to the fact that 2023 was the year in which games that had been held back by the pandemic finally arrived – fairly compelling evidence for the case that modern development cycles have become over-pressured, with the external pressures of the COVID era effectively creating some breathing room in that process that has been reflected in a year of really great games.

It's worrying, to say the least, that companies whose entire future success rests on their ability to launch high-quality games have looked at this situation unfolding and decided, en masse, that their response should be layoffs and downsizing.

Of course, it's not that companies looked at critically acclaimed and commercially successful games and thought, "We can do this with far fewer staff and pay ourselves bigger bonuses, right?" – it's not quite that simple (at least not in most cases).

Many companies had spent years taking advantage of the vast availability of investment in a climate with near-zero interest rates to expand in all sorts of unsustainable ways, and 2023 was the year when interest rates soared and that reality came crashing down.

Embracer Group is the poster child of this problem, a company that used the rocket fuel of low-interest investment capital (and ultimately, sovereign wealth fund money, which has arguably been the single greatest distorting factor on business in high-growth sectors in the past decade) to grow far, far beyond the competences and capabilities of its management. It is now in a rapid and possibly terminal collapse, bringing many of Europe's venerable studios with it for the ride.

That's one story we'll wish we could leave in 2023, but whose conclusion won't be written until next year – and Embracer is far from alone. The full accounting of the damage done by companies that grew beyond their means only to have to slash and burn when the easy money dried up will not be written for some time, and we can only hope that the very worst of that damage is past us.

Is that how we will remember 2023, then? The year when the industry was cut off from the teat of easy investment money, and thousands of people lost their jobs in the fallout?

It's worrying that companies whose entire future success rests on their ability to launch high-quality games have looked at this situation unfolding and decided that their response should be layoffs

For those thousands, certainly, that will always be the defining event of this year. For consumers, it's more likely that a major game will be the landmark, of course; although even for those with relatively little curiosity about how the sausage is made, the fact that Microsoft now owns Activision Blizzard has certainly made an impact.

The actual impact of that won't be felt for some time – it will take months if not years to integrate the companies, and the various covenants Microsoft signed to get its deal through the competition authorities around the world will mean that the transition to Activision Blizzard being an Xbox publisher will be gradual rather than sudden.

Nonetheless, this was the turning point; Microsoft started the year, for all its financial muscle and all the goodwill that Xbox has built up, as a fairly distant third place among platform holders in terms of game publishing. By buying one of the world's biggest publishers and adding it to its existing holdings (an odd dynamic – Activision Blizzard dwarfs the pre-existing Xbox Game Studios organisation in almost every meaningful way), Microsoft has turned the table and ends the year as one of the biggest game publishers in the world.

This, too, isn't a story that ended in 2023 – the actual impact of that purchase will take years to be fully felt and understood. That's always the challenge of trying to write a snappy summary at the end of a year – the narratives don't contain themselves nicely and wrap up with a satisfying conclusion in December.

Indeed, one of the industry's other ongoing narratives delivered a surprise twist rather than a conclusion at the end of the year; Tim Sweeney really did finally get a court to agree with him, with Epic Games winning its case against Google over anti-competitive behaviour on the Android platform.

That, then, was 2023: a year of changes, certainly, but not all of them were positive, and some of them we won't really be able to judge for years to come

Lots of people appear dumbfounded by this judgement given that Epic lost its case against Apple on similar grounds – the key issue being that while Apple was controlling the channels for software and payments on its own devices (which is more or less fine, although EU legislation will gradually pry that walled garden open in the coming year), Google's actions served to destroy competition on supposedly open devices made by a variety of third-party companies.

There's more to it than that, of course, but that distinction is probably very important with regard to the impact of this ruling. Some people have speculated that console platform holders could also be forced to open their platforms to third-party app stores, but those platform holders look much more like Apple (running an app store on their own hardware) than like Google (running an app store on third-party hardware and strong-arming those hardware manufacturers into favouring Google's store and payments systems).

Still, the judgement is a major victory for Epic, and is likely worth a huge amount in revenue to Fortnite – and again, it's something whose real fallout and impact we won't fully see until next year (not least because there are appeals yet to be heard).

That, then, was 2023: a year of changes, certainly, but not all of them were positive, and some of them we won't really be able to judge for years to come.

It was a year in which fantastic games helped to redefine what this medium can achieve and the experiences it can offer its players; a year in which games as an entertainment medium felt more relevant and important than ever before, but in which thousands of the people who make those games were laid off even as tens of billions of dollars changed hands over their heads.

Moreover, we go into 2024 with many questions unresolved – and with the grace of a pandemic-backlogged release schedule all used up. Let us hope, at least, that the decisions which guide the industry next year are better ones.