00:00:00
okay so this is fun got a question for
00:00:01
my American friends how does a $1,000
00:00:04
PS5 PRO Sound or maybe even a $400
00:00:08
switch and I guess if you're Nintendo
00:00:10
you're going to be a little bit more
00:00:11
spooked about the switch to now those
00:00:13
are not numbers that I have pulled out
00:00:15
of some nether region at least one on me
00:00:17
know those are from the uh worst case
00:00:19
predictions of the American Consumer
00:00:21
technology Association we like games we
00:00:24
would like to buy games and that's kind
00:00:26
of spooky and you know what's real funny
00:00:28
George Lucas once again is right how
00:00:31
wrong we were when we eye rolled at the
00:00:33
Phantom manises trade negotiations just
00:00:36
this time right it's not corporate grade
00:00:38
it's not price hikes to cover failing
00:00:39
products no this is the potential impact
00:00:42
of the trade war on gaming now we did
00:00:44
see a little bit of that last time we
00:00:46
went through this fun period it's a
00:00:48
little more spicy now and once we
00:00:50
actually get into the details that's
00:00:52
where things are different to last time
00:00:54
because beyond the obvious price
00:00:55
increases to say gpus or consoles there
00:00:58
is a hidden cost and that hidden cost is
00:01:00
the rapid decline of the physical games
00:01:03
Market that's a decline that the big
00:01:05
Publishers well you know the big console
00:01:08
people absolutely want to happen but for
00:01:10
a lot of us those discs represent
00:01:12
ownership they represent freedom and
00:01:14
this will be bad for those discs now
00:01:16
it's not all doom I'll be able to share
00:01:17
how some companies have at least taken
00:01:19
steps to try and avoid the worst impacts
00:01:22
on your wallet but that's in the here
00:01:24
and now and big picture A lot of
00:01:26
troubling Trends are actually set to
00:01:28
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right so the big picture is the USA
00:02:43
China Canada and Mexico are all locked
00:02:45
in a stand off over implementing trade
00:02:47
tariffs and this is a damn volatile
00:02:49
situation like literally since we first
00:02:51
wrote up this script there have been
00:02:52
more tariffs it's really is fun now the
00:02:55
core principle right is that a tariff is
00:02:56
a tax that is charged on imports from an
00:02:58
affected country so so imagine a GPU
00:03:01
that is manufactured in China in order
00:03:03
to import that from China to the United
00:03:05
States the company doing the importing
00:03:07
will have to pay an extra 20% tariff
00:03:10
right and to be very clear because I
00:03:11
have seen a lot of confusion over this
00:03:14
that's the company buying it into the
00:03:16
USA that pays the Tariff not the company
00:03:19
in China who manufactured the GPU right
00:03:22
so big picture the point here is to make
00:03:24
foreign-made Goods more expensive for
00:03:27
you to purchase in your local region
00:03:29
because whoever is buying those goods in
00:03:31
to sell to you has got to pay a 20%
00:03:34
tariff for example the whole point is
00:03:36
that's more expensive so that you will
00:03:38
buy local which in this case would mean
00:03:41
you're buying Americade computer
00:03:43
hardware consoles and physical games but
00:03:45
the problem is uh those aren't really a
00:03:47
thing and uh this stuff's not all a
00:03:50
theory we've actually seen the impact of
00:03:52
this already the first impact was felt
00:03:54
on gpus so the RTX 50 cards right that
00:03:57
whole series they went up in price
00:03:58
because of these tariffs the retailer in
00:04:00
ueg basically confirmed as much in a
00:04:02
tweet well tweets that they've now
00:04:04
deleted which is a bit weird and they
00:04:05
later told Tom's Hardware that the
00:04:07
increases were quote due to a number of
00:04:09
factors that are unfortunately out of
00:04:11
our control which to me does read
00:04:13
tariffs but there are other things I
00:04:15
mean the GPU Market is pretty damn
00:04:17
volatile and chaotic Invidia didn't ship
00:04:19
enough cards anyway a lot of accusations
00:04:21
of paper launches so this whole
00:04:23
fluctuation in GPU prices kind of passed
00:04:25
under the radar cuz basically we're all
00:04:27
kind of pissed at Nvidia now even if if
00:04:29
gpus were previously exempt from tariffs
00:04:31
until now no one is really surprised by
00:04:34
expensive gpus in the current market so
00:04:37
gpus expensive not really a surprise but
00:04:40
the worst impact on your wallet could
00:04:42
very much be yet to come so here's the
00:04:44
deal manufacturers were allegedly
00:04:46
stockpiling newly produced gpus before
00:04:49
the new year right with anything that
00:04:51
was already in the US exempt from these
00:04:53
tariffs because it had already been
00:04:55
imported it was in a Us warehouse and
00:04:57
that means that anything newly produced
00:04:58
and then imported would be subject to
00:05:00
the tariffs and that would increase the
00:05:02
consumer prices even further so that
00:05:04
kind of sucks but for gaming especially
00:05:07
it it also sucks right and and not just
00:05:09
for PC players so that group that I
00:05:11
mentioned the consumer trade uh
00:05:13
Association they estimated these tariffs
00:05:15
could cost us consumers 7 billion more
00:05:17
dollars for consoles just quite a few
00:05:19
dollars now the impact here right it's
00:05:22
more than just your wallet it is going
00:05:23
to go across the industry almost every
00:05:26
aspect of it right now okay there is no
00:05:30
evidence to suggest that digital
00:05:31
products are going to be impacted by
00:05:33
these tariffs and that's because there
00:05:35
are various trade agreements that are in
00:05:36
place to protect digital Goods now that
00:05:39
does depend on everyone honoring those
00:05:41
agreements maybe they won't but let's
00:05:43
assume they will let's assume digital
00:05:44
will be fine because we got to talk
00:05:46
about what we know would not be fine and
00:05:48
that's physical games before doing this
00:05:50
story in one previously I had no idea
00:05:52
about this so do you know where the
00:05:53
majority of American game discs come
00:05:55
from the answer is Mexico so that's
00:05:58
basically where they are manufactured
00:06:00
and that means that if the Mexican
00:06:01
tariffs uh continue publisher costs for
00:06:04
making physical games will increase now
00:06:06
there is some good news here right the
00:06:07
estimates are suggesting that this would
00:06:09
be just under a dollar per disc now yeah
00:06:12
that's millions of dollars across
00:06:14
millions of discs it's not huge but it's
00:06:16
also not the whole story this is where
00:06:18
I'm going to cut to a analyst Matt
00:06:20
piscatella he's been in the analyst that
00:06:22
biz for like 20 plus years bit of a
00:06:24
legend works for sirana and he predicts
00:06:26
one of two outcomes from this right his
00:06:28
first prediction ERS can increase the
00:06:30
cost of physical games and also of
00:06:33
digital games to ensure price parity
00:06:36
that would be them passing the cost onto
00:06:38
your wallet but then of course making it
00:06:40
you know fair and uh increasing the
00:06:42
price of the digital games to match of
00:06:44
course those digital games not being
00:06:46
impacted by the tariffs so that would be
00:06:49
a sneaky sneaky business if they did
00:06:51
choose to do it the other thing they
00:06:52
could do though is also not really good
00:06:54
because it's just choosing not to
00:06:56
produce physical discs at all now they
00:06:58
could sell the matter as a consumer good
00:07:01
basically saying look we need price
00:07:03
parody between them we're not going to
00:07:04
do these physical things um anymore
00:07:06
we're going to protect prices for the
00:07:08
60% of the market who are playing
00:07:10
digital games they could probably write
00:07:12
up press for selling that as a good
00:07:14
thing now even if the tariffs keep being
00:07:16
delayed right because we don't know if
00:07:18
this will ultimately end up coming to
00:07:20
pass what we do know for sure though is
00:07:22
that there's a lot of uncertainty
00:07:24
uncertainty is bad for business
00:07:27
uncertainty can also be an excuse
00:07:29
there's a lot of companies doing layoffs
00:07:30
and various Things based on these
00:07:32
tariffs even though they don't know if
00:07:34
the tariffs are actually coming and uh
00:07:36
it will often seem like well the
00:07:39
uncertainty of tariffs is just an excuse
00:07:40
to do layoffs that some companies plan
00:07:42
to do anyway as for this though why
00:07:44
would you commission several million
00:07:46
discs for a game releasing in 3 months
00:07:47
if you've got no idea how much uh
00:07:49
they'll end up costing in the end but of
00:07:52
course it's not just that it's also the
00:07:53
consoles that play those discs and you
00:07:55
know it is serious when Nintendo Sony
00:07:57
and Microsoft all decide to band
00:08:00
together as friends now that's what they
00:08:01
did in 2019 whenever these tariffs were
00:08:04
proposed right they basically banded
00:08:06
together and they warned that a 25%
00:08:07
price increase would mean that a games
00:08:09
console would be quote Out Of Reach for
00:08:11
Holiday spending that consumers would
00:08:13
have to spend $ 840 million more dollars
00:08:15
on their Christmas consoles and because
00:08:18
they did that in 2019 they got
00:08:20
themselves an exception in 2025 they
00:08:23
have not got an exception and of course
00:08:25
there's a big problem if you're Nintendo
00:08:27
and you've got a switch to coming I mean
00:08:30
yeah it would suck for Xbox and
00:08:31
Playstation but um you know if Nintendo
00:08:34
got disproportionately impacted I'm sure
00:08:36
they wouldn't be that sad because of
00:08:37
course their follow-ups right the Next
00:08:39
Generation that's well still going to be
00:08:41
a few years and being real with you it
00:08:43
is the span of the next few years that
00:08:44
actually matters I'm pretty sure you've
00:08:46
noticed there's a little bit of a you
00:08:48
know recalibration of the whole game
00:08:50
board right in terms of the world
00:08:52
politics multipolarity all those fun
00:08:54
things that are totally out of the scope
00:08:55
of this channel but survive to say
00:08:57
is changing and now these businesses are
00:08:59
are trying to work out how they
00:09:00
basically survive and how to not price
00:09:02
themselves out of the market and they've
00:09:04
been doing that for the last 5 years
00:09:05
because they have seen this on the
00:09:06
horizon all three have moved some of
00:09:09
their production outside of China but
00:09:11
even with that the US is still an
00:09:13
absolutely huge import market uh this
00:09:15
was pointed out by Daniel am out of niik
00:09:18
Partners uh that post 2019 us Imports
00:09:21
for Chinese products were reduced in
00:09:23
real shipping terms but right console
00:09:26
Imports remained above 75% the market so
00:09:30
that actually means that console Imports
00:09:31
are still pretty damn exposed to all of
00:09:33
this risk and it does make sense like
00:09:36
rebuilding a whole infrastructure to
00:09:38
build all those consoles will take time
00:09:40
and money and that's a lot of work to
00:09:42
build a parallel production line that's
00:09:45
going to take time that's going to take
00:09:46
money money that will be passed down to
00:09:48
us and of course as the first to launch
00:09:51
Nintendo has likely made the biggest
00:09:53
move here David Gibson another analyst
00:09:56
pointed out that after 2019 Nintendo
00:09:58
started on a plan to basically do as
00:10:00
much maneuvering as they could to move
00:10:02
50% of their production to other regions
00:10:05
a big example is say Vietnam and it does
00:10:07
seem like Vietnam is a real beneficiary
00:10:09
of well companies just moving their um
00:10:11
their manufacturing elsewhere the plan
00:10:13
basically being they're still going to
00:10:14
make a shitload of consoles on China
00:10:15
it's just they'll go to other places and
00:10:17
Vietnam consoles will go to America but
00:10:19
that will not mean there is no impact on
00:10:21
your wallet because the cost of moving
00:10:23
your whole production well uh that will
00:10:25
have to be recouped somewhere let's talk
00:10:28
worst case scenarios and to be be honest
00:10:29
with you right there's some spooky
00:10:31
to come but it's actually on top of
00:10:34
that's already real spooky if you've
00:10:36
watched all of our videos may know this
00:10:37
but the tldr right is that when you
00:10:40
actually adjust for inflation premium
00:10:42
console spending has been remarkably
00:10:44
flat over the years right um last year
00:10:47
2024 actually saw a sales decline so The
00:10:51
Vibes have not been good right in
00:10:53
basically the games industry and uh this
00:10:56
could uh well change things a bit so if
00:10:58
these tariffs continue
00:10:59
estimates are that console sales will
00:11:01
drop by 57% at worst bear in mind they
00:11:04
are already kind of low in the last few
00:11:06
years and the consumer trade Association
00:11:08
thinks that it will get worse and yeah I
00:11:11
mean you've got Sony basically keeping
00:11:13
par with the PS4 generation with the PS5
00:11:16
generation I believe they may have
00:11:17
slightly outpaced it but Microsoft is
00:11:20
behind so it does seem that those
00:11:22
console sales basically are on the
00:11:23
downtrend anyway now if you start
00:11:25
slapping on 10 20 25% right of an
00:11:28
upcharge well those console sales
00:11:30
are going to go down even more and even
00:11:33
if that stuff doesn't happen the risk
00:11:35
the uncertainty will impact how much it
00:11:38
costs to do things right and that means
00:11:40
it'll be passed down to you I mean a
00:11:42
luxury good like a new console or a GPU
00:11:44
is already something that you really
00:11:45
think about before buying that you've
00:11:47
got to justify and that is harder if you
00:11:49
have 20% more cost you're not alone if
00:11:52
that is your feeling there's um analysts
00:11:54
one example juice van dreiden maybe
00:11:57
maybe that's his name I tried anyway uh
00:11:59
He suggests that even with the best
00:12:01
possible outcome right and uh you know a
00:12:03
new generation of console spiking
00:12:05
interests that console sales would be
00:12:07
dropping again as we approach 2030 I
00:12:10
suppose that would be the GTA 6 sales
00:12:12
bubble finally going away and uh us
00:12:14
realizing I don't know Gaming's dead so
00:12:17
in the worst case this actually could be
00:12:19
building up to be the weakest games
00:12:21
Market in a decade what happens to the
00:12:24
games industry as a whole in this worst
00:12:26
case scenario Well Physical games would
00:12:28
slide further and further into
00:12:30
obsolescence if you care about
00:12:31
preservation that's not good if you want
00:12:34
to uh be an absolute Bandit and borrow a
00:12:37
game from your friend instead of
00:12:39
downloading it again or you know buying
00:12:41
it um well uh rip that obviously PCS and
00:12:44
laptops would be far more expensive
00:12:46
under these tariffs so they would not
00:12:48
Escape fully but the PC market actually
00:12:50
might be uniquely more resilient because
00:12:53
you can use your PC for like more than
00:12:56
than just like what a games console does
00:12:58
and that means if if you are going to be
00:12:59
spending a bunch of money doing that on
00:13:01
your PC well that's probably where it's
00:13:03
going to go over something like a
00:13:05
console now that is of course if
00:13:07
audiences don't just um switch to you
00:13:09
know phones and tablets which would be
00:13:11
sad or maybe settle in like streaming
00:13:13
platforms like uh you know GeForce now
00:13:15
and stuff kind of hard to say digital
00:13:18
spending for PC would likely continue to
00:13:19
grow basically but that doesn't
00:13:21
necessarily mean more games and if it's
00:13:23
anything like the trends that have
00:13:24
dominated the last few years it'll
00:13:26
basically go like this less full-priced
00:13:28
premium game sales because people have
00:13:30
got to be a bit more smart with their
00:13:32
money in an economic pinch less Next
00:13:35
Generation games as developers basically
00:13:37
stay with a far larger audience they
00:13:39
stick to what they're doing you'll see
00:13:41
more free-to-play games that have got a
00:13:42
lower barrier to entry and more
00:13:44
microtransactions to monetize that
00:13:46
audience and probably more
00:13:47
microtransactions that are geared to be
00:13:49
hyper premium because the thing about
00:13:51
money is it all actually does have to go
00:13:53
somewhere right and uh as wealth
00:13:55
inequality you know changes well why do
00:13:58
you think that Riot are doing $250 skins
00:14:01
for League of Legends because um
00:14:04
buy them because they've
00:14:06
got a lot of money maybe you don't have
00:14:08
I'm now going to try to do something
00:14:09
real dangerous making predictions but I
00:14:12
actually think I'm going somewhere with
00:14:13
this right so when say an animal is
00:14:16
backed into a corner it's going to fight
00:14:18
for its life you know if a if a mother
00:14:20
thinks that the baby is is is under
00:14:22
threat it's going to just be so much
00:14:24
more you know powerful aggressive
00:14:26
whatever well whenever our games come
00:14:29
companies are a bit backed into a corner
00:14:31
they may be facing some systemic decline
00:14:33
how are they going to get more money
00:14:35
well I think I know actually I think
00:14:37
we're going to see the growth of in-game
00:14:39
advertising we recently talked about it
00:14:41
in a video that was really focused on
00:14:43
steam's policies but if you watch that
00:14:45
video you'll know it wasn't just about
00:14:47
steam it was about product placement
00:14:49
stuff that we see and say well you know
00:14:50
the kachima production games as as one
00:14:52
example and there's pressure and this
00:14:55
pressure does not necessarily have to
00:14:56
come from within the games companies EA
00:14:59
shareholders were the ones asking Andrew
00:15:01
Wilson about ads because to a game
00:15:03
publisher free money's free money you've
00:15:06
got eyeballs why don't you show an ad
00:15:08
and monetize those eyeballs and as we
00:15:11
covered in the steam video there's loads
00:15:13
of ways you can get around steam's
00:15:14
policy and while lots of this could be
00:15:16
driven by American companies dealing
00:15:17
with American problems well if ads are
00:15:20
coming that'll come to you that means
00:15:22
that regardless of where you are you
00:15:24
will be paying for the trade War if
00:15:27
American spending de increases those
00:15:29
costs have got to be recouped somewhere
00:15:31
else it's all part of a Global Network
00:15:33
that is under pressure right that money
00:15:36
has got to come from somewhere and if
00:15:38
you want to see the way that pressure
00:15:40
makes games leadership make really bad
00:15:43
calls I think you should watch this
00:15:45
video next