the board or produce fewer physical games. Price hikes will feel like a betrayal to players already frustrated by $70 base games and paywalled DLC, making such a move risky for the publisher’s image. But reducing physical media? That’s not just a business move —
it’s a cultural shift. Physical media is more than just plastic and paper; it’s proof of ownership, a safeguard against digital delisting, and for many, a ritual. Even without concerns around ownership, many consumers simply ‘like’ physical media over digital. We saw this most recently with the massive outcry that Alan Wake II’s digital-only launch brought — something Remedy eventually reverted to with the launch of a physical version of the game a year later. In short, there is no easy solution to the tariff increase for the
games industry. Indeed, even the big players in the market have seen this problem on the horizon for some time. In 2019, Nintendo, Sony, and Microsoft warned that a 25% tariff increase would add at least $840 million to holiday-season costs — a stark figure we’re seeing potentially becoming a reality now.
TEMPORARY ADAPTATIONS So what can companies do here and now? Outside of the games sector, many have been moving physical production to markets that aren’t affected by tariffs, and we’re liable to see larger players in the games industry follow suit. Like Nintendo’s move to relocate half of its Switch production to Vietnam, other game companies may be scouting out markets that can navigate these tariffs. However, this may not be so simple. While finding a new
production market may sidestep some costs, these shifts won’t be cheap to achieve — even for large players like Nintendo and Microsoft. While companies may avoid the increased tariffs, the additional cost of setting up in a new region will likely trickle down and still affect consumers. Even if this is a preferable alternative, there’s no telling what other markets will be affected by future tariffs. A publisher may opt to move their production to a new market, only to see that location added to the list of tariffs. Some others may try to set up production internally, negating the
whole issue of tariffs entirely, but the fact remains that this approach would likely cost more than the tariffs themselves. As TSMC’s founder once noted, the US federal government’s efforts to increase onshore chip manufacturing were an expensive and wasteful exercise, so too would any onshore games production be for most markets.
CHANGING HOW WE PLAY With difficult choices facing everyone in the games industry, we’ll see a dramatic shift in the approach to video games should the tariffs remain in place for the long term. While modern consoles offer a wide range of apps and tools, their
primary purpose is still playing video games. As the cost of living continues to rise, it will be harder for consumers to justify purchasing a specialist product - a fact that some speculate could lead to a 57% drop in console sales — marking the worst decade for console sales in recent history. This downward trend could affect physical games, which are still primarily reliant on traditional console players. A drop-off of
physical media would threaten game preservation, the resale market, and creative freedom in an already franchise-driven market. However, the impact of a digital-first games industry on consumer choice is even more concerning. While the tariffs will raise prices for all physical production, the
impact on consoles will be the greatest. PC and laptop hardware won’t be immune to global macroeconomic trends, but they are multi-use products. A PlayStation 5 or a Switch 2 isn’t the go-to tool to write an email
or attend a meeting, but a laptop that can run Baldur’s Gate 3, handle your personal finances, run LLMs and stream your favourite shows offers a more all-in-one offering to consumers. It’s not unrealistic that consumers may now be thinking about why they should buy a gaming console when a PC can do both spreadsheets and run Skyrim. But the tariffs will likely impact the game development side as well.
As everything increases in price and disposable income decreases, the industry may be forced to get creative with the type of game they’re making. AAA games are already expensive to produce, and the added pressure on tariffs and consumer spending will lead to fewer premium titles entering the market. As a result, we’ll no doubt see a more aggressive approach to monetisation and even higher pay tiers targeted at wealthier players. On a practical level, this potentially means we’ll see a spike in
free-to-play games with heavy microtransactions involved. In-game advertising may also see growth outside of the mobile market, featuring in AA and AAA titles to recoup costs. While consumers may push back on this trend, we’re already seeing EA consider this approach for future titles, and the rising costs in the market will likely cause others to consider following suit. Ultimately, the games industry’s interconnected nature means
that the ripple effects will be felt worldwide. A tariff imposed in Washington reverberates in Osaka. A factory shift in Guangdong triggers layoffs in Montreal. The industry is now fully entangled in the global system and yet structurally unprepared to navigate it. Many studios and hardware makers alike are making tactical retreats, pulling their production operations out of tariff-locked inflationary zones and relocating to friendlier markets, but it’s unknown whether this will be enough. It’s not a stretch to say the console era, born in a world of cheap trade
and stable policy, is facing an extinction-level stress test. But, unlike in past generations, the threats are not technological. They’re strategic.
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