It is customary – or at least preferred – to end the year on a positive note. Whatever trials and tribulations the past twelve months have brought, there’s always a silver lining worth celebrating, and nobody wants to head off to their mulled wine and mince pies with the sense of a dark cloud hanging over the industry in which they work.
So, apologies in advance.
The sales numbers Circana released this week for the US market in November are already widely discussed, but it’s hard to overstate just how bad they are. Hardware sales are down 27% year-on-year to reach a 20-year low; software and services managed only a meagre 1% year-on-year growth.
On the one hand, we shouldn’t extrapolate too much from a single month of data. After all, 2025 is still on track to show a narrow sliver of growth overall (unless December turns out to be an absolute nightmare). If it does, that turns the narrative dial from “sinking” to “treading water” – which is still not where an industry whose finances rely on high growth would wish to be.
On the other hand, it’s extremely telling that after many months in which recession indicators have been flashing in different quarters of the industry, November is the month when the reversal of fortunes really started to bite. This is traditionally one of the biggest months for hardware and software sales, because it’s the start of the holiday shopping season – the point where people far more organised than I start thinking about what’s going to be under the tree in late December. Consequently, it’s also a banner month for the industry’s biggest releases, especially those – like sports games and the annual Call of Duty instalment – that are usually sure-fire wins with mass-market audiences.
This year, in a month where families should have been snapping up hardware to hide away for the big day, all the major consoles instead saw a year-on-year decline in sales. The worst decline was in Xbox hardware, capping off a thoroughly rotten year for the platform overall, but by far the most surprising numbers were for Nintendo’s Switch. Combined sales of Switch 1 and 2 were lower than the sales of Switch 1 alone last year – even though the launch of the new console was well-known to be imminent in this period last year.
The timing of this sales slump and the especially stinging impact on the Switch 2 – which should reasonably have expected its first holiday season on the market to deliver very solid sales – gives us an important hint as to what is happening here.
Switch 2 sales were excellent at launch, and the industry’s sales figures overall this year have been reasonably stable, if not exactly stellar. This is because console launches and regular month-to-month sales are driven by the core market, and core consumers are still spending. The hurdle at which we have seemingly fallen is the holiday season, when more casual and less engaged consumers usually pour in to buoy up sales.
The November numbers are a signal that, in the US at least, these consumers are disengaging from the industry. The relatively casual gamers, the parents buying for kids, the demographics who aren’t hardcore enough to care about picking up new hardware at launch but who prop up the industry’s sales through key buying seasons; these aren’t just canaries in the coalmine of impending recession, their loss is a major component of recession itself.
Core gamers may tighten their belts, especially with the soaring prices of things like PC components really starting to bite, but they’ll always remain industry consumers, even if it’s at a constrained level of spending. This is their hobby and their passion – which isn’t to say they should be taken for granted, just that they’re the reliable backbone of the market.
More casual consumers, however, can walk away and not feel a single pang about it. Spending on games hardware and software is something they weigh up against many other competing options, so if the prices aren’t right or the appeal isn’t strong enough, well, a different box can go under the Christmas tree.
As economic sentiment tumbles and belts tighten, those decisions become more hard-edged, making this a very tough time for the industry to have such eye-wateringly expensive hardware on offer. Note that Apple’s entry level iPad undercuts PS5 and Switch 2 by a fair chunk; core gamers may not consider that comparison important, but regular families do, and I’d wager Santa will be bringing a lot of iPads this year to households that might ordinarily have been considering a console.
This is not to say, however, that the problems which have led us here are entirely about pricing. As important as prices may be, especially in this economic climate, there are other factors which have significantly undercut the industry’s capacity to appeal to these mass-market consumers – the most notable of them being that, bluntly, most companies aren’t actually trying very hard to do so.
In fact, in the past decade or so, much of the industry has walked away from games that appeal to kids, families, and more casual consumers – making it fairly inevitable that those markets would walk away in turn. The success of the Nex Playground, as discussed a few weeks ago, shows that there’s still an appetite out there for games within these markets – but so little of what’s on offer from the industry is pitched to appeal to them, either in terms of content or pricing.
Moreover, even to the extent that products do exist for these audiences – and it should be said that Nintendo never lost sight of that market, it just lost the plot on pricing – the industry has done a very poor job of figuring out how to communicate with them in a post-retail era.
The collapse of physical retail for games has often been underestimated as a driver of market change because it hasn’t hurt the core market too much: core gamers are informed about the products and happy to buy online. However, it has done significant damage to the industry’s ability to reach and appeal to groups like casual players and parents. It’s also probably responsible in part for the shrinking of the industry’s focus over the past decade, since it’s hard to make games for audiences you don’t know how to reach any more.
A walk through what’s left of London’s game retail this week was a depressing mission. Non-specialist retail outlets have mostly dropped games entirely, and specialist retail is a shadow of its former self, largely reduced to a few CEX outlets and some little Game-branded shelves tucked away in the corners of Sports Direct superstores. In not a single central London store did I see a working demo unit where people could try a game or even hold a controller. Online retail is brilliant if we assume consumers know and understand the systems and software on offer, but that’s an assumption that’s going to deeply hurt the holiday season when so many potential sales are to lower-information, less-engaged consumers.
Fixing this won’t be easy or cheap – there are no green shoots of renewal evident in the retail space – but the cost of not finding a solution to reach those consumer groups may be a permanent shrinking of the industry’s addressable audience. If the industry’s going to make New Years’ Resolutions, then perhaps the most important one should be to try to find some way to reconnect to those audiences.
Re-engaging with casual consumers and mass-market groups requires new products, new approaches and new channels for communication. It is undoubtedly harder work than just trying to squeeze more and more cash out of a narrow set of core gamers, but it’s clear that we’re reaching the limits of that strategy in many market segments.
Industry competition can’t be reduced to everyone chasing after the same narrow set of dollars; to get through the crisis that is no longer looming but very much arrived, there has to be a willingness to invest in fresh new markets, build products that expand the medium’s appeal and reach, and put in the work to engage consumers who aren’t plugged into games media and influencer ecosystems. That, perhaps, is how 2026 can become the springboard for new expansion, rather than the continuation of a story of slowing growth and fears of decline.
