It's common—or at least preferred—to end the year on a positive note. Whatever trials and tribulations the last twelve months have brought, there is always a silver lining worth celebrating, and no one wants to head out for mulled wine and pies with the feeling of a dark cloud hanging over the industry they work in.
So I apologize in advance.
Circana sales figures released this week for the US market in November. are already widely discussedbut it's hard to overstate how bad they are. Equipment sales fell 27% year over year to a 20-year low; software and services saw only a modest 1% year-over-year growth.
On the one hand, we shouldn't extrapolate too much from one month's data. After all, 2025 is still on track for modest growth overall (unless December turns out to be an absolute nightmare). If that happens, the narrative scale will go from sinking to standing still—still not what an industry that depends on high growth for its finances would want.
On the other hand, it is extremely significant that after many months of recession indicators flaring up across various sectors of the industry, November was the month when the reversal of fortunes really began to be felt. Traditionally, this is one of the biggest months for hardware and software sales because it's the start of the holiday shopping season—the point when people much more organized 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 installment, which tend to run rampant with the mass market audience.
This year, in a month when families should have been snapping up hardware to escape the big day, all major consoles instead saw year-over-year declines in sales. The worst decline occurred in Xbox hardware, capping off a completely disastrous year for the platform as a whole, but the most surprising numbers were for the Nintendo Switch. Combined sales of Switch 1 and 2 were lower than Switch 1's individual sales last year – even though it was well known that a new console's launch was imminent around this time last year.
The timing of this sales slump, and the particularly painful impact on the Switch 2, which was reasonably expected to do very well during its first holiday season on the market, gives us an important hint as to what's going on here.
Sales of the Switch 2 at launch were excellent, and overall industry sales figures this year have been fairly stable, if not exactly stellar. This is because console releases and regular monthly sales are dependent on the core market, and core consumers are still spending money. The hurdle where we seem to have fallen is the holiday season, when more casual and less engaged consumers typically come in to bolster sales.
The November numbers are a signal that, at least in the US, these consumers are moving away from the industry. Relatively casual gamers, parents buying for kids, demographics that aren't avid enough to care about buying new hardware at launch but that support industry sales during key buying seasons; They are not just canaries in the coal mine of an impending recession, their loss is a major component of the recession itself.
Core gamers may be tightening their belts, especially with soaring prices for things like PC components really starting to bite, but they will always remain consumers of the industry, even if spending levels are capped. This is their hobby and passion. This does not mean that they should be taken for granted, but that they are a reliable pillar of the market.
However, more casual consumers may walk away and not feel the slightest concern about it. The cost of gaming hardware and software is where it compares to many other competing options, so if the prices aren't right or the appeal isn't strong enough, well, another box might go under the Christmas tree.
As economic sentiment declines and belts tighten, these decisions become increasingly stringent, making this a very difficult time for an industry that offers such incredibly expensive equipment. Note that Apple's entry-level iPad is significantly inferior to the PS5 and Switch 2; mainstream gamers may not think this comparison matters, but average families do, and I'm willing to bet that this year Santa will be bringing a lot of iPads to families who would normally consider a console.
However, this does not mean that the problems that brought us here are entirely related to pricing. As important as prices are, especially in the current economic climate, there are other factors that significantly undermine the industry's ability to attract mass market consumers—the most notable of which is that, frankly, most companies aren't really trying very hard to do so.
In fact, over the last decade or so, much of the industry has moved away from games that appeal to kids, families, and more casual consumers, making it entirely inevitable that those markets will go away in turn. The success of Nex Playground, how discussed a few weeks agoshows that there is still an appetite for games in these markets, but very little of what the industry offers is geared towards them, either in terms of content or pricing.
Moreover, even to the extent that products do exist for this audience (and it should be said that Nintendo never lost sight of this market, it simply lost its pricing), the industry has done a very poor job of communicating with them in the post-retail era.
physical network collapsel for gaming 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 are happy to shop online. However, this has caused significant damage to the industry's ability to reach and attract groups such as casual gamers and parents. This is also likely part of the reason for the industry's decline in focus over the past decade, as it's difficult to create games for an audience you no longer know how to reach.
A walk through what's left of London's gaming shops this week turned out to be a depressing mission. Non-specialty retailers have largely abandoned gaming entirely, and specialist retail is a shadow of its former self, largely relegated to a few CEX outlets and small Game-branded shelves tucked away in the corners of Sports Direct supermarkets. I didn't see a working demo unit in any store in central London where people could try out the game or even hold the controller in their hands. Online retailing is great if you assume that consumers know and understand the systems and software being offered, but that assumption will be a major detriment to the holiday season when so many potential sales come from less-informed and less engaged consumers.
Fixing this won't be easy or cheap—the retail industry shows no sign of reinventing itself—but the cost of not having a solution to reach these consumer groups could be a permanent decline in the industry's target audience. If the industry is going to make New Year's resolutions, perhaps the most important one should be trying to find some way to reconnect with this audience.
Repeated interaction with casual consumers and mass market groups requires new products, new approaches and new communication channels. This is undoubtedly more complex work than simply trying to squeeze more and more money out of a small number of core players, but it is clear that in many market segments we are reaching the limits of this strategy.
Industry competition cannot be about everyone chasing the same narrow set of dollars; Surviving a crisis that is not looming, but already here, requires a willingness to invest in new markets, create products that expand the appeal and reach of the medium, and work to reach consumers who are not plugged into gaming media and influencer ecosystems. Perhaps that's why 2026 could be a springboard for new expansion rather than a continuation of the story of slowing growth and fears of a recession.
