According to a new report from market research firm Newzoo, the global video game market will see sluggish growth this year due to weak sales of game consoles.

In a blog post published Tuesday, Newzoo said the gaming industry is expected to grow 2.1% year-on-year to an estimated $187.7 billion.

This is slightly below a previous forecast in January, in which the company expected the video game industry to grow 2.8% to $189.3 billion in 2024.

Nearly half of all consumer spending on games in 2024 is expected to come from the US and China, Newzoo said, with $47 billion in revenue coming from the US and $45 billion from China.

Although this is an increase from last year’s growth rate of 0.6%, the gaming industry is not experiencing the same growth rates as it did during the turbulent days of the Covid-19 pandemic.

Michiel Buijsman, chief gaming market analyst at Newzoo, said that despite sluggish growth expected for 2024, next year is expected to be an important year for the gaming industry.

According to Newzoo, console gaming revenue is expected to decline 1% year-on-year this year. Last week, Sony announced that it sold 2.4 million units of its PlayStation 5 console in its first fiscal quarter, compared to 3.3 million in the same period last year.

However, in 2025, growth in the console market will “probably come back with a bang,” says Buijsman.

Major new releases, including a successor to Nintendo’s flagship Switch console and a new game in the hugely popular Grand Theft Auto series, are expected to boost the industry’s outlook.

In May, Nintendo President Shuntaro Furukawa said the company expects to announce the launch of its next Switch console in the fiscal year ending in March 2025.

Meanwhile, Take-Two’s Rockstar Games has pledged to release its highly anticipated Grand Theft Auto VI in fall 2025.

Analysts say these major new releases could give the gaming industry a boost after it struggled to match the growth of previous years.

Between 2020 and 2021, the gaming industry experienced tremendous growth as people spent more time indoors due to the Covid-19 lockdowns.

Recently, however, the industry has faced a number of challenges, including lower spending, a shift in consumer behavior from indoor to more outdoor activities, and higher interest rates.

From 2023 to 2024, the gaming industry around the world also saw mass layoffs, with major studios cutting thousands of jobs.

Microsoft cut 1,900 jobs in its games division in January, just three months after acquiring Activision Blizzard. A month later, Sony announced it would lay off 900 employees from its PlayStation division.

Gaming software company UnitAmazon’s own livestreaming service Twitch, mobile game publisher Playtika and social platform Discord have also announced waves of layoffs.

Newzoo’s Buijsman said one of the biggest challenges for game studios this year will be “keeping costs under control in a crowded, increasingly consolidated market.”

He added that developers need to ask themselves questions about the competition between free-to-play games and premium releases, as well as the use of generative artificial intelligence in game development, marketing and operations.