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The games industry is about to triple, leaving linear entertainment in the dust.
For those of us who care about the art and business of videogames, it's easy to get depressed these days. There are nonetheless very good reasons to conclude that the industry is likely to triple within the next 5-7 years.
I’ll outline that logic below, recognizing that any projection involves forward assumptions that are almost certainly wrong in the details, but defensible in the aggregate.
If those assumptions are directionally correct, the implications are profound. Within a few years, the videogame industry will dwarf every other segment of media and entertainment, including film, TV, and music.
A TOP-DOWN LOOK
Let’s start by agreeing with the thoroughly consensus view that AI is at least as profound a change for nearly every global industry – not to mention society at large – as the Internet was.
So it would help us to look at the history of videogames during other major waves of technology introduction, specifically how the industry responds to major technology shifts. Here’s a summary:
The videogame industry started in the late 70’s, and perhaps its greatest feature is how well it responds to the introduction of new tech. Since its inception the industry has gone through 4 phases:
Each wave was based on a very different set of technologies but they each share important commonalities that we would do well to keep in mind:
The history of major technology waves in games is worth remembering as we think about AI. Most of the current conversation focuses on cost savings. What’s less discussed for now — and far more seismic — is the growth it unlocks. The emphasis on growth potential vs. cost savings deserves its own future blog post. For now I can say that we saw that growth firsthand at Nexon. We began investing seriously in AI in 2017, and both the creative and the financial results were profound, across both new game development and live operations. From that experience, I believe the industry is capable of seeing the kind of growth we did, and likely far more.
BOTTOMS UP
The logic above is classic top-down thinking. It's a useful starting point, but not enough on its own.
A skeptic might reasonably ask: Aren’t we near market saturation? Is there really room for more players, more hours per day, more money spent per user? And with competition from Netflix and TikTok, how much headroom is really left for games?
So let’s flip the perspective. What would we need to believe — from the bottom up — to conclude that this industry could triple in the near future?
There are roughly 3 billion gamers across all categories, and on average they spend roughly 44 minutes playing per day, which adds up to 800 billion hours per year. The average revenue per hour of all those players is about $0.25. That is a lot of players and a lot of time per day. Can those metrics really grow?
Let’s run the numbers. If the global gamer base grows from 3B to 5B — driven by continued smartphone adoption and more people playing games on those phones — and average daily gameplay rises from 44 to 60 minutes, we’d reach 1.8 trillion hours of playtime per year. Then assume revenue per hour increases modestly from $0.25 to $0.33. Put that together, and you get a $600B industry. Modest shifts in the core assumptions lead to a massive jump in total market size.
Are those assumptions reasonable? Skepticism is appropriate, but these are well within historical precedent.
The user growth assumption is the hardest to defend, at first glance. Global population is about 8.2B, and about 4.7B people already own a smartphone. So yes, saturation is approaching, but not imminently. And not all smartphone owners play games yet; far from it. Historically, once people have the hardware, adoption follows. Going from 3B to 5B gamers isn’t guaranteed, but it’s likely if even a modest share of the remaining smartphone users start playing.
Average daily gameplay tends to rise over time. At Nexon, we saw that the longer someone played a game, the more likely they were to increase their daily playtime, up to a natural limit. That gives newer cohorts more headroom than mature ones. And right now, there are a lot of new gamers.
The same pattern holds for monetization. The longer someone plays, the more likely they are to spend. It often takes time to make that first purchase, but once the game becomes a hobby, spending follows. And for many, it’s a cheaper hobby than almost anything else.
Emerging markets follow the same curve. When I joined Nexon 15 years ago, revenue per user in China was a fraction of Japan’s. Today, it has caught up dramatically. We’ve seen this pattern repeat: gamers in developing markets start with lower spend, but as infrastructure improves and engagement deepens, monetization rises — just like it did in more mature markets.
GUT CHECK: USER EXPERIENCE, PLATFORMS AND PLAY STYLES
So, top-down technology trends and bottoms-up metrics both point in the same direction: massive growth. But there’s one more gut-check: user experience. Are we really saying billions of players are going to buy gaming PCs and sit at desks to play Call of Duty?
Of course not. The iPhone and Android devices in our pockets are now workstation-grade machines, even if Apple and Google don’t yet treat them that way. Your kid’s iPhone 13 has more GPU power (measured in teraflops) than an Xbox One, and far more than a Nintendo Switch, both of which are still considered perfectly respectable consoles. And their networking capabilities are just as advanced: powerful enough to run fully immersive, massively multiplayer online games. Nexon has done this for years with MapleStory and Dungeon Fighter. Epic does it with Fortnite. Moore’s Law has turned the “low-end” device in your pocket into a high-performance game console.
The idea that mobile equals “casual” made sense a decade ago, when phones lacked the graphics and networking muscle for deeper play. That’s no longer true. Mobile devices are now incredibly powerful, and gamers are gravitating to using them that way. Just as we stopped carrying bulky Canon or Nikon cameras, most people now game — and take great photos — on the device that’s already in their pocket. Millions of kids (mine included) play Fortnite daily on hand-me-down iPhones.
There are roughly ten times more smartphones (3–4 billion) in the world than GPU-attached PCs and consoles combined (350–400 million). That means the total addressable market (“TAM”) for immersive games is on the cusp of a 10x expansion. That shift bodes extremely well for aggregate daily usage and monetization. And it is highly supportive of our thesis that the games industry is likely to see its revenue triple within the next few years.
To sum up:
THE NEXT GREAT GAMES INDUSTRY ISN’T BUILT YET
All of this means the stakes are very high. An astounding opportunity is within reach for anyone who cares to seize it.
So what do we need to address? What is holding us back? It’s worth considering four fundamental questions:
#1 Is Real Creativity Forthcoming? In every previous wave, radical new thinking led the way. Pokémon Go expanded the game map to the physical world. StarCraft brought peer-to-peer strategy combat to millions. Fortnite was so approachable it pulled in entirely new demographics — teenage girls, for one — and proved an FPS could thrive on mobile. Zynga showed that everyone is a gamer. Each of these broke the tyranny of the genre mental model.
Are we thinking different enough? Are we really pushing ourselves? We get something truly original like Pokémon Go — and our response is Harry Potter Go? Same game, different skin. Is the most creative idea we have about mixed-reality gameplay to slap another IP on the same mechanic? Minecraft shows the power of a new idea elegantly delivered and our industry’s response is…to make more voxel games? This isn’t creativity. It’s cargo-cult development.
It’s ironic that some of the most imaginative thinking about games comes from outside the industry. Outsiders aren’t burdened by legacy models or this quarter’s revenue. They simply resonate with the meaningful experiences that games deliver when done well. To them, games are more than products and profit. They want to believe. The hype around the Metaverse was absurdly overblown, but the emotion behind it was real and valid: the dream of living a “second life” in a world of your own choosing. That’s an idea with a sense of romance and adventure – one our industry needs to embrace.
We forget that everyone is a gamer. It’s a core human instinct — we all grew up playing them, making them up on the fly, tinkering. But the largest publishers in the industry still act as if the player base is fixed and the only question is who grabs market share. That might make sense if you’re selling detergent. But the games business isn’t static — it expands as a result of new ideas. And the people best equipped to shape these worlds are those focused on innovation, not shelf space.
#2 In what way are the platforms holding us back? All eyes are on the platform tax and Epic’s battle with Apple, but the constrained distribution orifice of the Apple/Google duopoloy is a deeper, more systemic blocker. Mobile devices are now consoles, but the App Store and Google Play still treat games like casual utilities. Their discovery mechanics reward the most aggressive, lowest-quality content – the weed that spreads fastest wins.
Apple claims to value quality, but their storefront design says otherwise. If they truly cared about discovery, their stores would look more like a blend of Steam and Discord: focused on deep exploration and deep community, built for players who want meaningful experiences, not just dopamine hits. A real redesign would benefit everyone: players, developers, and yes, the platforms themselves.
There are signs of progress: Apple recently announced a standalone games store, and seems to be unifying their platforms in ways that may benefit the experience of gamers, but until discovery and distribution are fundamentally rethought, the duopoly is getting in the way of progress.
#3 Do we have the structure to build the future? As I wrote in Sympathy for the Devil, large game publishers are structurally constrained from taking creative risks, and they've doubled down on outdated development models that make things worse.
In most software industries, this is where venture capital piles in to challenge the incumbents. But in games, VC has mostly been a failure, especially in recent years. The venture model works best when startups can show early traction to raise the next round. But in games, meaningful signal often doesn’t emerge until launch, or long after.
The rare exceptions prove the rule. Mitch Lasky (Benchmark) and Bing Gordon (Kleiner Perkins) made venture work in games because they deeply understand the creative and commercial process, and have decades of deep management experience to guide teams across both. To paraphrase Bill Gurley, together they’re the Bob Marley of games VC: there is no second place.
In a world of sclerotic publishers and VCs who mostly can’t fund content, the industry desperately needs a new production fountainhead.
#4 Are we good at using technology? While the games industry is built on lines of code like other software industries, it usually acts as if it thinks Hollywood is its aspirational model. That mindset makes sense when you realize the games industry grew up in Hollywood’s shadow, having a big brother with cultural dominance, a longer history, and far more polish.
And yet all the great growth waves have come from forgetting about Hollywood – with its obsession with using masses of people to build its product, with linear development, with over-scripting stories, with its all-permeating luddism – and going back to being software at core.
Software at core means never throwing a body at a problem when you can throw a line of code. It means being smartly lazy by automating anything that can be. It means leaning way into technology to empower the best and most creative people. And knowing that if we do that well, those best and most creative people will create great things that blow people’s minds, and that create much more opportunity for everyone else.
Is our industry doing that now? At its worst, the AI conversation has become a Rorschach test. Some see it as a cost-cutting tool, especially large company execs and public market investors. Others see it as a threat to jobs. These battle lines are uncomfortably close to Hollywood, where frightened constituents fight over stagnant assets.
But games should be better than that. The builders with vision see AI as a tool that amplifies them; it enables them to get closer to the craft of building and scaling highly original games. Like past waves, this one empowers the most creative people, to the benefit of everyone.
The games industry sits at the intersection of smart builders making experiences that are fun precisely because they tap into the intelligence of their customers. They assume the best from their customers. No other media form does this so directly. Turns out there’s a massive market for that and if we play our cards as well as previous generations did, it’s about to get a whole lot bigger.