The Current State of Gaming—Monopolies, Money, and the Power Players

On the surface, the gaming industry appears vibrant and expansive, filled with innovative genres, a vast array of studios, and millions of dedicated players across the globe. But, dig a little deeper, and you find that a few industry giants control an overwhelming share of the revenue, IP, and even the technological platforms that underpin the majority of games. This has created a centralized, almost monopolistic ecosystem where a few players control not only the money but also the future of gaming innovation. In this blog, we’ll explore how these companies maintain their dominance and what that means for innovation and disruption in the industry.

Who Actually Makes Money in Gaming?

The global gaming industry, valued at around $200 billion in 2023 with projections to reach $268 billion by 2025, is far from egalitarian. Only a handful of companies control the lion’s share of profits and have the clout to shape the industry’s trajectory.

1. Game Studios and Publishers: The Titans of Content

The content in gaming is largely governed by major studios and publishers, often with proprietary franchises that guarantee recurring revenues. Here’s a closer look at these titans:

• Activision Blizzard: Known for powerhouse franchises like Call of Duty and World of Warcraft, Activision Blizzard (market cap: ~$62 billion) continues to drive revenue through a mix of in-game purchases, seasonal updates, and annual franchise refreshes. In FY2023, they reported over $8 billion in revenue, fueled by battle passes, microtransactions, and live-service models.
• Tencent: With control or stakes in over 600 gaming companies, Tencent is the world’s largest gaming company by revenue (over $32 billion in 2022). Their investment portfolio includes full ownership of Riot Games (League of Legends) and significant stakes in Epic Games (Fortnite). Tencent’s ecosystem spans publishing, game development, and distribution, giving it an unparalleled reach, especially in Asia.
• Electronic Arts (EA): With iconic franchises like FIFA and The Sims, EA (market cap: ~$34 billion) is another powerhouse that relies on recurring revenue through annual releases and microtransactions. EA generated around $7.3 billion in FY2022, driven primarily by in-game purchases in its sports games, where ongoing updates add continuous value for players.

2. Development Tools and Platforms: The Silent Powerhouses

Beyond studios, companies like Unity and Epic Games control the technology that powers the majority of games. Their influence is pervasive, as developers worldwide rely on these platforms.

• Unity: Powering over 50% of mobile games, Unity has become the go-to development engine for indie developers and smaller studios. They reported $1.4 billion in revenue in 2022, drawing income from licensing fees and in-game ad placements. Unity’s accessibility and robust ecosystem have made it indispensable, but it has also centralized control of mobile game development.
• Unreal Engine (Epic Games): Known for its fidelity and powerful toolset, Unreal Engine is favored by AAA studios. Epic Games, valued at $31.5 billion, not only generates revenue through licensing but also directly from its Epic Games Store. By offering competitive revenue splits, Epic has positioned itself as a challenger to distribution giants like Steam

3. Distribution Platforms: Controlling Access and Profits

Once developed, games must reach players, and distribution platforms play a critical gatekeeping role.

• Steam (Valve): Dominating the PC game distribution market with over 75% market share, Steam charges developers around 30% of their revenue. Valve earns an estimated $3 billion annually from Steam, benefiting from its monopoly-like hold on the PC ecosystem.
• Console Platforms (PlayStation, Xbox): Sony and Microsoft benefit not only from console sales but also from every digital purchase on their stores. PlayStation generated $17.4 billion in revenue in 2022 from game sales, in-game purchases, and PlayStation Plus subscriptions. This vertical integration makes them essential players in the digital gaming economy.

Engagement Dynamics: Few Games Capture Lasting Attention

While thousands of new games are released each year, only a select few manage to sustain engagement and drive long-term revenue. Fortnite, League of Legends, and Call of Duty exemplify games that dominate through frequent content updates, seasonal passes, and subscription models. These games set the standard for engagement and retention, shaping player expectations and creating models that smaller games struggle to replicate.

India’s Perspective: What’s Worked and What Hasn’t

India’s gaming sector, estimated at $3 billion with a user base exceeding 500 million gamers, has emerged as a unique market. Real-money gaming (RMG) and fantasy sports have taken off, driven by cricket and sports fandom. Companies like Dream11, Nazara Technologies, and MPL have found success by catering to local preferences, mobile-first access, and leveraging affordable smartphones.

Success Stories:

• Dream11: India’s first gaming unicorn, Dream11 has thrived by capitalizing on cricket fandom. By creating a scalable, monetizable fantasy sports platform, they’ve established a loyal user base and continue to lead the fantasy sports market.
• Nazara Technologies: With a diversified portfolio, Nazara has grown through strategic acquisitions and focus areas like gamified learning and esports. Their approach combines brand-building with category leadership in high-growth verticals.

Challenges and Failures:

• High CAC in Real-Money Gaming: With multiple RMG apps vying for user attention, customer acquisition costs (CAC) have surged, impacting profitability.
• Regulatory Ambiguity: The lack of consistent regulation for real-money gaming and fantasy sports has created a challenging environment, with companies often facing legal hurdles.

A Market Dominated by Few, Controlled by Many

The gaming market remains tightly controlled by a few players who wield control over content, technology, and distribution. For India, the path forward will require navigating regulatory challenges, diversifying beyond RMG, and capitalizing on unique cultural touchpoints to create global appeal. In Part 2, we’ll explore the transformative potential of AI in breaking these monopolies and democratizing game creation. In case you’re building in this space, connect with me here: natasha@kae-capital.com