Corporate financials season may not be the most exciting of the year’s changing seasons, but it does present a rare opportunity to take the industry’s pulse in a more-or-less objective way.

It would be an exaggeration to say that financial reports and the statements made on the earnings calls which follow them are free of marketing bluster, but different, stricter rules apply here than at other times. Companies can and do spin the numbers, but the numbers themselves have to be reported honestly – which means that everyone gets a chance to see how everyone else is doing, and adjust their own planning and outlook accordingly.

Since this is also usually when we get firm updates on shipment figures for console hardware, that’s the story that tends to attract the most focus. So with the launch of Switch 2 fast approaching and the threat of tariff impacts looming, it’s no surprise that that’s been the case on this occasion as well.

Still, while platform holder results do hold special importance for the industry, they are somewhat separate from the reality that most other companies in this business are facing. For the broader picture, we really do need to dig into the stack of reports issued from publishers around the globe.

This quarter – and indeed this year, since most firms are reporting full-year figures – a lot of those reports make for somewhat serious reading, even by the dry standards of corporate financials. Looking across the major results released in the past few weeks from companies ranging from Capcom, Square Enix, and Sega, through to Ubisoft, Warner Bros, and Take-Two, there’s unsurprisingly a great deal of diversity on display given their very different market positions and product line-ups, but there are nonetheless a few trends that go beyond the travails of a single company and are worth exploring as potential bellwethers for the wider industry.

Firstly, and perhaps most concerning – sales are generally down, with most companies reporting a drop in revenues over the past year. This isn’t universal, with Capcom being a notable exception as it continued a genuinely impressive years-long winning streak, and Take-Two also managing to report a few percentage points of growth thanks largely to great performance for its sports titles.

Overall, though, revenues seem to be in decline right now. The underlying causes differ in each case – you can look across each company and pinpoint the specific decisions or problems each of them suffered – but the broader trend is still meaningful. That’s especially the case since this fits with the warning signals that have begun flashing in market data from various territories around the world, suggesting that overall consumer spend on gaming has fallen over the past year, albeit only by a relatively small percentage.

In spite of the lower sales numbers most companies are reporting, however, several of these publishers are nonetheless showing improvements in operating income – notably Sega and Square Enix, both of which were more profitable over the past year despite their revenues being lower. This is due in part to restructuring and narrowing the focus of their development efforts, but a major factor is also the strong sales of back catalogue titles, which incur minimal costs and are thus great for a company’s bottom line.

These long-tail sales are proving crucial to keeping the industry’s financials looking healthy (and if we take a broad definition, you could make an argument that transactions in games like GTA Online also comprise a form of long-tail sales for Take-Two, for example), but they may also point to a rising price sensitivity among consumers who are showing more willingness to buy competitively priced older games rather than forking out for full-price releases in some cases.

Again, if that is the case, it fits with broader economic trends; we know that consumers in a lot of territories are feeling a serious squeeze on their discretionary expenditure, and seeking competitively priced alternatives is a natural response in that case. If that’s impacting the games industry’s top line, then this could potentially mean that the industry is facing its first actual recession (not counting the mean reversion that we saw after the massive industry growth recorded in the first couple of years of the pandemic).

There’s a long-standing piece of conventional wisdom which says that although individual sectors may suffer, the games business overall is well-insulated against recessions (we used to say “recession-proof” a couple of decades ago, but I don’t know anyone who’d care to make a wager on that statement these days). This is because games offer tremendous value for money compared to most other discretionary expenditures – such that consumers who have slashed their spending on travel, going out, and other expensive hobbies and pursuits may actually end up modestly increasing their gaming expenditure to fill the resulting free time.

Even by the games industry’s usual standards of franchise obsession, that lack of focus on new IP creation or expansion stands out as unusual

That logic has been strongly challenged in recent years by the existence of things like subscription video services, which offer hours-per-dollar of entertainment easily comparable with any game, or free-to-play games. Not to mention the other free alternative preferred by many consumers: doomscrolling your way through hours of brain-rot. Moreover, there’s an especially tricky calculus at work right now, because the strong possibility of widespread belt-tightening by consumers is coming right as gaming is in the midst of trying to increase prices for many of its top-line products.

The reasons for that are well and good, but the timing is horrible, and in these results we may be seeing the first signs that some groups of consumers are actually noping out of paying higher price points for premium games. It’s not just competitively priced back catalogue titles that seem to be over-performing relative to other segments. We’re also seeing very strong performance from games (such as EA’s Split Fiction, and indie title Clair Obscur: Expedition 33) which chose to launch at $50 price points.

Their success is a data point worth bearing in mind at a moment when several publishers are trying to push past $70 and establish $80 as a new regular price level.

The fact that things like remasters of back catalogue titles sit comfortably at lower price points may well be part of their appeal, both to consumers and to publishers. The restructuring of development efforts that many publishers are currently undertaking is always described in terms of streamlining and improving, but generally looks a lot like strategic de-risking – focusing in on sure-fire bets and a small number of core franchises.

In fact, one common point across every company that has reported results in the past couple of weeks is that they’re all quite open about being tightly focused on three or four core IPs. The only company in the bunch with anything really positive to say about a non-core or original IP was Sega’s reference to the strong performance of Metaphor: ReFantazio.

Even by the games industry’s usual standards of franchise obsession, that lack of focus on new IP creation or expansion stands out as unusual – and even in the companies that are doing very well, like the aforementioned Capcom, it’s notable that remakes, remasters, re-imaginings and re-visitings describe pretty much the entire software pipeline. The overall sense is clear: publishers are in battening-down-hatches mode right now.

In that respect, assuming the economic situation is going to worsen, this approach probably makes sense. Companies facing a market in which consumers are feeling financially precarious need to focus on relatively sure bets for their headline titles, and fill in the gaps with lower-cost games, for which digging into the back catalogue is ideal.

In the medium to long term, though, we have to hope against hope that publishers who are narrowing their focus to tentpole franchises right now have some strategy for getting back to building new IPs eventually. Franchise exhaustion is also a very real concern, and growth, ultimately, has to come through creative innovation. No company can run forever just by finding increasingly aggressive ways to flog the same dying horses.