Video Game Console Market Faces Significant Decline in 2024, But Signs of Recovery Emerge

A lack of permanent price cuts and the continued viability of older platforms took their collective toll on the video game console market in 2024 as shipments fell an estimated 25.4% year over year to 37.7 million units. Each of the vendors we track posted double-digit declines for the full year, and only Sony grew sales in the final quarter.

Console vendors have been challenged by flat or growing upstream component costs, particularly for CPUs and graphics processing units (GPUs), preventing them from pursuing permanent price cuts to sharpen the value proposition of their hardware.

Furthermore, vendors have been incentivized to slowly migrate users to the new platforms as many of the top franchises (Fortnite, FIFA, Call of Duty) still support the legacy hardware. Those software sales are good margin growth centers whereas most hardware sales are comparatively less friendly to the bottom line.

But leaning into this dynamic could eventually be considered "eating the seed corn." That is to say, the existing user base will diminish over time without strong console sales creating new users.

However, there are signs that things are changing in the year ahead.

• First is Sony’s apparent recognition in the fourth quarter that it is time to prioritize user acquisition. The release of the PS5 Pro at $700 gave them some margin cover to push some temporary price cuts at key retailers. The result was a 14.9% year-over-year bump in console shipments and one of Sony’s best quarterly results on record. (Microsoft was not able to make the same impact, and the Xbox Series’ image as an also-ran in the current console race solidified.)
• Another factor that may help the industry bend back toward growth in the year ahead is the release of the Switch 2. The successor console will put attention back on Nintendo after a slow year for the industry stalwart.
• The third catalytic component is the slated release of Grand Theft Auto 6 in the fall. All eyes are on Take-Two to deliver in an unqualified hit for consoles.

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On a related note, our video game funding round tracker showed investment grew 16% in 2024 to $4.29 billion. Those platform holders that can build and maintain a robust installed base stand to benefit from the new games, ideas and revenue models that will emerge from bets being placed now.

The largest video game funding round in 2024 suggests that there is still room for the consumer metaverse to grow, even on consoles, as Disney pushes deeper into virtual worlds with a $1.5 billion investment into Fortnite publisher Epic Games.

Build A Rocket Boy is building its own metaverse hub with Everywhere and took a $110 million round from an investment group that includes Endeavor Capital Management, Redbird Capital Partners Management and NetEase. Build A Rocket Boy was also featured in Sony's latest State of Play event with its story-driven action game Mind's Eye.

Aonic took the third-largest funding round of the year with a $110 million round from Metric Capital Partners. Aonic's OtherSide Entertainment subsidiary had a big media moment in late 2024 when a trailer for its forthcoming Thick as Thieves multiplayer stealth game was announced at The Game Awards, held Dec. 12 at the Peacock Theater in Los Angeles.

Thick as Thieves is being developed by Warren Spector, who had leadership roles in the development of classic games such as Deus Ex and Thief: The Dark Project and Ultima Underworld. He also had a stint at Disney, where he produced Epic Mickey.