Section 3: Interactive digital media at a crossroads

The video game industry has suffered one round of layoffs after another for months on end.

According to one Canadian research group, 10,500 video game-industry employees were laid off worldwide in 2023, with close to another 6,000 January 2024 ¹. In tandem with this trend, game release cancellations, mergers and acquisitions, and the impact of inflation on production costs have created speculation about the economic health of the sector, which contributed $5.5B to the Canadian economy in 2021, according to the Entertainment Software Association of Canada (ESAC) ².

What is the state of play in an industry that PricewaterhouseCoopers (PwC) ³ predicted would grow by nearly 40 per cent by 2027, and with worldwide revenues projected to increase from US$227B to US$312B?

The sector is certainly undergoing a rebalancing act, not unlike the audiovisual industry. After a frenetic pace of new releases to meet a surging demand for entertainment during the pandemic—14,500 new games were released on Steam in 2023, compared to 8,100 in 2019 ⁴ —the industry is currently focusing more on profits than on growth.

Industry stakeholders believe that the market will stabilize at a less frenzied release pace, and with Nintendo’s next console arriving in March, 2025. Growth is poised to continue but at a slower rate than in recent years.

And despite that more than 40 positions were eliminated at Vancouver-based Blackbird Interactive in August, ⁵ and nearly 100 job cuts came down at Ubisoft Montreal in November ⁶ among other cuts, the video game industry is “at the highest level of employment ever, including during the pandemic,” according to Jayson Hilchie, president and CEO of the Entertainment Software Association of Canada (ESAC) ⁷.

Perspectives on 2024

The good news is that Canadians are huge fans of video games: 61 per cent of 18- to 64-year-olds are gamers ⁸. According to Global Web Index (GWI), 29.5 per cent play every day, and 18.8 per cent play two to three times a week (chart 3.1).

Francophone 16- to 24-year-olds are at their consoles for 95 minutes a day—slightly more than their Anglophone counterparts, who clock in at 89 minutes (chart 3.2). While console ownership remains high, online gaming is the preference of 70 per cent of players ⁹.

While still in early stages, cloud gaming holds tremendous potential for studios. The online platformization of the industry will not only create access to emerging markets in Southeast Asia and Africa, but will also allow studios to monetize their intellectual property and sustain the attention of gamers more effectively, as detailed in the next chapter.

Streamers conquer the gaming industry

Gaming as a new horizon for streamers’ expansion

^{By: Corinne Darche
Coordinator, Foresight & Innovation, Canada Media Fund}

Artificial intelligence (AI) dominated the tech industry in 2023 and continues to be a hot topic in 2024 as firms scramble to produce their own competitors to OpenAI’s ChatGPT. Even companies like Disney and Microsoft scrapped their metaverse and virtual reality (VR) teams to get all hands on deck for AI ^{1, 2}.

So what happened to the metaverse, the former darling of the tech world?

First, let’s clarify what the metaverse actually is. Coined by Neal Stephenson in his 1992 book Snow Crash, the term designates persistent, immersive, social 3D virtual worlds. Immersion can be achieved through extended reality (otherwise known as XR, which encompasses VR and augmented reality (AR) technologies such as headsets.).

However, the metaverse goes beyond XR and includes rich digital worlds found in multiplayer video games like Roblox and Fortnite.

Said games are massively popular, particularly among young audiences, and for good reason ^{3, 4}. Gen Z and Alpha have a strong relationship with gaming: nearly nine in 10 Canadian children aged 7 to 11 reportedly play games, as well as 85 per cent of teens ⁵. Growing up with technology and digital worlds, Gen Z and Alpha gamers have been experiencing metaverses without the need of a headset for years. As of December 2023, nearly 80 per cent of players engage with the game on mobile devices, as seen in chart 3.5 ⁶.

Brands have taken note of Gen Z and Alpha’s interest in these immersive gaming worlds. Fortnite launched partnerships with kid-friendly brands, including LEGO ⁷ and Disney ⁸, to cater to young audiences. Future Chicken Today Show ⁹, a Canadian series that teaches kids about environmental sustainability, expanded beyond television to reach children through multiple mediums, including Roblox. These brands meet young audiences where they are, hoping to hold their attention for as long as possible. Immersive and social worlds do just the trick.

Meanwhile, the XR market grows. Statista’s projections in chart 3.6 suggest 31.1 million Canadians will be using some form of XR by 2028 ¹⁰. Immersive exhibits have also seen massive success, such as Space Explorers from Felix & Paul Studios and PHI Studio, which sold 450,000 tickets since its launch in 2021.

Even though XR has been around for a while, it still has not reached the mass adoption necessary for it to be a sustainable ecosystem. There are many contributing factors: cost of headsets (particularly the Vision Pro, which is highly criticized for its US$3,500 price tag ¹¹), lack of mainstream titles, and cybersickness, etc.

But there are bleeding-edge studios finding niches and pushing the boundaries in immersive storytelling, user experience, applications, and distribution—all of that despite XR’s ups and downs. XR headsets being used in virtual production in the audiovisual industry is but one example of that ¹².

Immersion is often viewed as the future of entertainment, despite the spotlight moving away from it over the past 18 months. Keep in mind, however, that an industry’s future isn’t built in a day, nor uniquely based on trends. It involves investing in talent over time to build a robust ecosystem and to grow trust and interest with audiences. The same can be said for immersion.

Audiences and tech companies clearly haven’t given up on immersion – not even close. As the talent pool in the gaming and XR industries grows and develops, the rich immersive worlds that they offer are still finding new ways to reach audiences, old and new, across generations.