The rise of video games has turned Fortnite into a social phenomenon, made esports a rival to the NFL for viewers, and grown button-mashing into a bigger money-maker than Hollywood. Now one veteran analyst is calling for the first industry downturn in a quarter century. Video game revenue is headed for the first decline since 1995, with sales expected to fall by 1 percent to $136.5 billion this year, according to Pelham Smithers, owner of an eponymous London-based research firm. He blames China\u2019s stricter approach to game approvals, a shortage of big console hits, and fatigue among players for battle-royale titles like Fortnite. Smithers, who began covering the industry in the late 1980s, points to the recent sharp drop in stocks like Tencent Holdings Ltd. and Electronics Arts Inc. as proof that he\u2019s right. He sees the drag lasting until at least 2020. \u201cThe various bits of the jigsaw puzzle just don\u2019t add up, so we\u2019re looking for the market to shrink in 2019,\u201d said Smithers. \u201cThe sell-off in video game stocks is primarily down to a growing realization of the risk that this view is right.\u201d Smithers is the first to admit it\u2019s a risky call, with rival analysts at Goldman Sachs Group Inc. to Nomura Holdings Inc. still seeing games as a growth-industry and Morgan Stanley remaining bullish. But he\u2019s been right with similar calls before: He gave Nintendo Co. a \u2018sell\u2019 rating a decade ago, a contrarian call at the time that\u2019s proven well founded. Plus, he\u2019s not alone this time: Research firm Newzoo recently trimmed its 2018 and 2019 revenue outlook by 2 percent to 3 percent, citing weakness in mobile games. This week, IDC said China\u2019s games market growth slowed to 5 percent in 2018, after expanding about 20 percent a year since 2014. "There is a lack of fresh, innovative blockbuster titles replacing the current, aging top titles,\u201d Newzoo founder Peter Warman wrote in a blog post in November. \u201cFor the longer term, we are now more cautious about the global growth rate of the mobile games market.\u201d Here\u2019s a look at the key arguments from Smithers: Mobile games revenue (49 percent of industry total) will fall as China, the world\u2019s biggest smartphone market, sees a 10 percent contraction due to Beijing\u2019s tighter grip on game approvals, he said. The U.S. and Japan mobile markets are also plateauing and won\u2019t make-up the difference, he predicted. Consoles (19 percent) will struggle to follow-up a record year in 2018, which saw the release of multiple blockbusters including Red Dead Redemption 2, God of War, Spider-Man and Super Smash Bros. Ultimate, he said. The aging of PlayStation 4 and Xbox One consoles will also be a drag on growth. "If the PlayStation 5 comes at the end of 2020, that\u2019s great for 2021 but bad for 2020.\u201d PCs gaming (25 percent) will slump as players lose interest in last-man-standing titles like Fortnite and PlayerUnknown\u2019s Battlegrounds (PUBG), which today have fewer users than a year ago, he said. The format has been popular since 2017. Read Also| Apple hires Samsung battery executive to help lead its own work The bearish call comes as investors ask whether last year\u2019s sell-off in game stocks is a temporary setback in a multi-year bull run or an ominous warning sign for the industry. After ballooning to almost $1 trillion in total market valuation a year ago, the 30 largest publicly-traded game publishers including Tencent have collectively since lost $247 billion, according to data compiled by Bloomberg. Besides Beijing\u2019s crackdown, investors have been surprised by slower-than-expected sales of Nintendo\u2019s Switch, regulatory scrutiny of game addiction and monetization practices like loot boxes, and uncertainty about the games pipeline at EA and Activision Blizzard Inc. Smithers predicts more weakness as the market adjusts to the new reality. \u201cI\u2019m not sure if there\u2019s been enough of a reset in some of the really expensive stocks,\u201d he said. \u201cEA still looks expensive. Capcom still looks expensive.\u201d It\u2019s not all doom-and-gloom. Smithers predicts that virtual reality-related revenue will double from $4 billion in 2018 to $8 billion by 2020. He\u2019s turned bullish on Nintendo, which he says will benefit in the long-term from the industry\u2019s shift to cloud gaming. And he\u2019s excited about esports, taking one late-night phone call from a journalist in between watching qualifying matches for this year\u2019s PUBG championship. "I\u2019ve got the esports bug,\u201d he said. \u201cThere\u2019s just nothing like it. And that\u2019s coming from someone covering the industry for three decades."