Price rise, consoles shift, and AI, Bernstein take on video games industry

Investing.com -- The global video gaming industry is entering a new era of pricing power, platform shifts, and AI-driven innovation, with Bernstein forecasting a return to growth in 2025 after a turbulent year.

Industry revenues are projected to rise near 5% to $215 billion next year, following a 2.7% decline in 2024 to $205 billion, according to Bernstein’s deep dive into global gaming trends. The rebound is expected to be led by the highly anticipated launch of Nintendo’s Switch 2, a renewed push from PlayStation on first-party titles, and modest gains in mobile.

Mobile remained the largest segment in 2024 at $108 billion, while console revenues dropped 15% amid late-cycle dynamics and a lack of new flagship games. PC gaming grew 3.6% to $42.8 billion.

But the headline change is pricing. Nintendo’s $80 price tag for Mario Kart World sparked backlash and then sold out. Microsoft (NASDAQ:MSFT) quickly followed with its own hikes. Bernstein believes $80 games will soon be standard, breaking a decades-long ceiling that failed to keep up with inflation or rising production costs.

“Even at these new prices video gaming remains one of the cheapest forms of entertainment measured on dollars per hour of engagement, in contrast with say… movies or live events.,” Bernstein said.

The firm also flagged a potentially underappreciated industry shift: a U.S. court ruling limiting Apple’s cut of off-platform purchases. Developers are already experimenting with alternate payment paths, which could reduce mobile store fees and boost margins.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads.

Microsoft’s pivot away from Xbox hardware after years of struggling to gain share outside the U.S. signals a consolidation around Sony (NYSE:SONY) and Nintendo in consoles. Meanwhile, AI is accelerating development, with generative tools enabling faster asset creation and smarter non-player characters.

Bernstein sees these changes combining to lift revenue, margins, and long-term outlooks across the gaming ecosystem.

Should you invest $2,000 in MSFT right now?

With MSFT making headlines, savvy investors are asking: Is it truly valued fairly? In a market full of overpriced darlings, identifying true value can be challenging. InvestingPro's advanced AI algorithms have analyzed MSFT alongside thousands of other stocks to uncover hidden gems. These undervalued stocks, potentially including MSFT, could offer substantial returns as the market corrects. In 2024 alone, our AI identified several undervalued stocks that later surged by 30 or more. Is MSFT poised for similar growth? Don't miss the opportunity to find out.

Reveal Undervalued Stocks Now