If this sounds familiar, your economic reporting is broken. Not because the dashboards are wrong but because they’re measuring the wrong thing.

Premium currency tells you what players spent or earned, not how those purchases have impacted their progression. Whether it is platinum pieces in Everquest or gems in Clash of Clans, games are monitored by the granting, spending, and wallet sizes of these currencies. But premium currency doesn’t capture the full game design. Player progress isn’t measured by their wallets and the gains and drains of a single currency.

SUoV: Tying the Entire Game Together

The Single Unit of Value (SUoV) is the metric every action, reward, drop, sink, and SKU in your game gets normalized to. Pick one canonical unit and force everything else to express itself as a multiple of it. Now every design decision has a price tag and every LiveOps event has a measurable impact on the same ledger.

The four steps to implementing an SUoV:

1. Identify the SUoV. Ask three questions: What does a churning player say they wanted more of? What does your highest-spending whale spend their last dollar to get? What’s the noun players use when they describe progress to each other? That’s your unit. It’s rarely the premium currency. It’s usually one layer downstream: what the currency buys.

2. Price the entire game against it. Every reward source (pack, mission, event, login bonus, store SKU) gets an expected SUoV output. Every sink (crafting cost, upgrade cost, time gate) gets an expected SUoV cost. Backfill historically, the prior year’s data is the cheapest baseline you’ll ever get.

3. Set thresholds for healthy generation and drain. Per week, per content piece, per cohort. This is the band where last year’s revenue and retention were where you wanted them.

4. Run LiveOps against the unit, not against revenue. Designers price rewards in SUoV. Economy team sets pack loot tables in SUoV. PMs root-cause in SUoV. Revenue becomes a consequence of SUoV health, not the leading metric.

Case Study: Madden 23

I joined EA Orlando as Lead PM mid-cycle on Madden 23. The product was tracking 7-figures below revenue forecast and heading towards 8-figures. The previous PM was monitoring premium currency flow, exchange rates, and average team OVR; three separate dashboards, no single view of whether the economy was healthy. Nobody could answer the basic question: why is spending dropping?

Madden 23’s Ultimate Team game mode is a combination of a trading card game and traditional American football. It had 3 different currencies, 14 to 18 different card packs live at any given time, and multiple pieces of content that reward cards. A card has a list of stats with the most important being the card’s OVR, or overall rating. The game year starts with cards in the 70 OVR range and by end of year cards have 99 OVR.

This creates an interesting problem where cards become less valuable as the game goes on, and the buying power of currencies is always better saved until an outlier OVR exchange appears in the form of special packs or special events.

Naturally, the previous PM tracked the premium currency as the base unit in the game, measuring its ability to generate OVR via premium packs, and the exchange rate between it and the two other currencies as a basis for their purchasing power. But it struggled to connect the earning and spending to the player’s motivation to continue to spend within the game.

I needed a better solution than monitoring multiple disparate metrics for historical abnormalities: create a new SUoV for Madden.

Step 1

What is the biggest motivator for players? Why do players want currency? Why do players want to open packs? Why do they engage with events? They want high OVR cards for their team. Specifically, they want cards where their OVR is within 1-2 points of the leading edge OVR, which the highest OVR cards can carry.

The SUoV is leading edge cards generated. From here you can tie together the buying power of all 3 currencies, the power generation of all live packs, the value of completing content, and best of all, this metric stays relevant when OVR increases every few weeks.

Step 2

I implemented the SUoV as the underlying unit of measurement across currency rewards, pack openings, and engagement rewards. You need to track the SUoV gains and drains across the game and create a historical ledger of SUoV values for the content.

In Madden Ultimate Team, not much changes from year to year. So Madden 22 and 21’s historical SUoV gains and drains are extremely valuable for creating thresholds for what is healthy in Madden 23.

Step 3

Using existing and historical data, I created acceptable thresholds for each week, for each piece of content across Madden Ultimate Team. The issue became apparent, a single non-premium pack was generating an insane amount of leading edge OVR cards. Through a complicated web of currency exchanges, players were exploiting this card generation by turning the leading edge cards from this pack into other leading edge cards to fill out their NFL team roster.

Step 4

Over the next two months we repriced the offending pack against the SUoV target band, drained the over-generated leading-edge cards through targeted sinks, and rebuilt premium content with SUoV-anchored loot tables. Madden 23 closed 8-figures above forecast for the year. Madden 24 ran on it from day one.

What Does This Mean for Me?

Stop reporting on premium currency as if it’s the economy. It’s a single piece of a larger puzzle. Pick the unit your players are actually playing for, price the entire game against it, and run LiveOps from there. The teams that do this catch problems three weeks before the revenue chart does.

The video game industry is hitting a growth ceiling and it is more difficult than ever to launch and sustain a new IP. At the same time, the games industry often confuses strategy with taste, vision, or feature ambition. Playing to Win is the book we need now more than ever. Go from “people will love my vision” to “my game can actually survive in the market.” So buckle up, put on your learning cap, and get ready to finally play to win.

Playing to Win: How Strategy Really Works

Playing to Win was written by A.G. Lafley, former CEO of Procter & Gamble, and Roger Martin, former dean of University of Toronto’s Rotman School of Business. Yes, the guy who led Tide and Pampers is going to teach you more about succeeding in video games than any GDC talk or game dev influencer.

The crux of the book is that businesses succeed or not based on their strategy and how well each employee understands and executes that strategy. If a game doesn’t have a compelling direction and position in the market, it can’t succeed. Furthermore, even if a game does have an amazing direction and well thought out business strategy, it doesn’t mean anything if the developers that bring the game to life don’t understand and execute that strategy.

To have a sound business strategy, Lafley and Martin identify 5 strategic choices that must be satisfied in order:

1. What is our winning aspiration?
   Define the company’s success state. Generally a measurable outcome such as revenue or position in a market.
   Fortnite’s aim to become a “metaverse” platform that merges gaming, social, and user-generated content (UGC).

2. Where will we play?
   Determine the specific markets, customers, channels, and product categories.
   Roblox’s where to play is a platform model built around user-generated experiences.

3. How will we win?
   Determines the unique way the company will compete and succeed in its chosen playing field. Differentiation and pricing power are examples of a winning thesis.
   One of Valorant’s differentiators is its investment in anti-cheat, Vanguard.

4. What capabilities must we have in place to win?
   Identifies the specific skills and resources needed to execute “how to win”.
   Supercell’s independent “cells,” team autonomy.

5. What management systems are required to support our choices?
   Establishes the processes and systems to ensure the other four choices are consistently made and supported.
   Supercell’s willingness to shut down projects that do not meet its bar.

“But my game studio is going to win the Hero Shooter market by releasing a 4 out of 10 iteration of Valorant/Overwatch/Deadlock/etc.”

Exactly. Most game studios truly struggle to define these 5 steps. Or they can define them, but they aren’t accurate or realistic. Lafley and Martin provide a framework to outline how a company achieves its goals and gains a competitive advantage in a marketplace.

Who should read this?

Like with 7 Powers, you are not going to suddenly level up as a developer and become the next indie darling or auteur AAA director by reading Playing to Win. To be honest, most of the book uses CPG products like mops or diapers as case studies. Instead, this book is going to give you tools to identify and focus on the meaningful actions to achieve whatever you define as success: gross revenue, award nominations, job offers, or the ever-elusive “artistic expression”.

Startup Founders

• Want to laser focus your pitches and execution on what actually matters vs optimizing vanity performance? You will learn how to bridge the hockey-stick winning aspiration you are selling with the sober operational plan that investors want to see acknowledged.

Indie Devs

• Buy this book so you are no longer entering crowded markets like roguelike or platformer armed with nothing but “good gameplay” and a prayer. Figure out who you are making games for, which differentiators they actually care about, and what you need to be better at than the dozens of other indies shipping into the same market.

AAA Dev

• AAA teams rarely fail because they cannot execute, they fail because they execute at massive scale against fuzzy strategy. Playing to Win helps teams communicate and embed a real “how to win” thesis into culture, process, and decision-making. The goal is not just to build a polished looter shooter. It is to build one with a clear path to winning its audience in a brutally competitive market.

Publisher

• Go from sorting through pitches and hoping one hits to having a framework for identifying strategic quality early. Learn how to craft a strategy based on a budget and industry landscape, helping identify which games have the ability to execute a winning thesis.

• Position every project with a winning thesis and a focused marketing plan. Determine what is required to deliver the winning thesis and how to structure milestones to support how to win.

Gaming Executive

• This is the most useful audience for the book. Studio initiatives, team structures, portfolio reviews, and operating rhythms should all reinforce the same strategic choices. Playing to Win gives executives a way to align organizational design and decision-making around a coherent path to winning instead of letting every function optimize for its own local goals.

Investor

• Learn to develop an investing thesis that links the technology, genre, or business model you are investing in with the studio capabilities and management systems of the startups you are considering. Connect your individual investments to the fund’s investment thesis.

Should I buy this?

For the price of the next disappointing Oscar-bait you regretfully bought a ticket to, you can learn how to change the trajectory of your next big game. The game industry has been playing to stay employed, it’s time for us to start playing to win. Your games are lacking a framework to connect your outcomes to the structures and processes that deliver them. This is the unsexy stuff that works on every product from toilet paper to fighting games. This is not a creativity book. It is a survival manual for making games that can actually break through.

There was a point in the interview that made me perk up as it perfectly articulated why video games struggle with younger demographics. Thompson and Ball point out that attention was a greenfield in the 80s, 90s, and 00s and video games were the dominant medium for interactive entertainment. But now games are losing the attention economy to multitasking hyper sticky services with lower barriers to entry.

…it turns out there was more latent attention to be grabbed, which is the payoff for me making a prediction market bet is not just the time I spent researching and making the bet. It’s the underlying, always in the back of my mind, this bet’s out there with the unexpected notification, “Oh, it hit”, or, “Oh it lost”, or whatever it might be, which a video game still you have to be focused on, it doesn’t get the sort of latent thrill that these other aspects do.

MB: I love this point, Ben. You’re spot on because one of the things that I hear a lot from the ecosystem now is that what we often believed was one of the unique strengths of the industry, massive attention, singular attention, is in many ways the Achilles heel, because when you take a look at the time of use, you say Americans engage with 30 hours of content per day, and that’s because we’re multitasking.

The one challenge here is I can be on TikTok and Twitter and Polymarket while watching television, but I can’t actually have both hands on controller in a live multiplayer match while multitasking. Gaming is actually one of the few things that drives you all the way in, to the exclusion of others, and therefore if any of them happens to trigger your brain in a distracting way, which could just be you just lost 100 bucks, it could just mean you won 1,000 bucks, or it can be the OnlyFans star that you subscribe just told you a new pay-per-view video is available. Guess what? A lot of those people are gone, and they can multitask in other ways, but not that.

The other thing that I think is separate here is a lot of ink is spilled over online sports betting, which I think is unequivocally a pandemic in the United States, but to put this in perspective, online sports betting had roughly net losses in the United States of $17 billion last year across 35 states, I think. iGaming, which is real money gaming, mostly slots, but some poker, some craps and blackjack, was $11 billion. 11’s a lot less than 17, but it’s only legal in seven-

AAA gaming is a single threaded experience that requires a user’s full attention to play: two hands on the controller while constantly absorbing visual and audio communication to process decision making. Immersion is the ultimate goal of most AAA games.

On the opposite end there is the multithreaded service stack where each individual service strives to be as stick as possible for as little effort as possible. The stack forms one makeshift Voltron-service that renders all other forms of entertainment that require attention ineffective. Lack of immersion is a feature not a bug.

The Multithreaded Stack

I am calling this the Brain Rot Stack: multi-threaded interactivity as a minimum stack of 3 services where the stack has at least one of each:

• Always On Stream Longform content on a main screen (1)

  • Sports, low stakes television (i.e. reality show), spectacle films, game streams

• Asynchronous Stakes Services with delayed gratification and variable reinforcement (3)

  • Sports betting, prediction markets, dating apps, social media posting, texting (2)

• Infinite Feed Traditional doom scrolling and infinite content providers

  • TikTok, Instagram, Reddit, X, Only Fans, YouTube, online shopping

The stack is powerful because the layers compound into an air tight experience that leaves no second unserved.

Example Brain Rot Stack:

1. Television with an NBA game on

2. Prediction market making bets on the game

3. Texting in a group chat

4. Checking X for posts about the game and betting advice

5. Scrolling on TikTok

1. 83% of Americans report using mobile devices while watching TV
   https://research.mountain.com/insights/an-exploration-of-second-screen-use-by-tv-viewers/

2. Sports betting revenue climbed to $17B in 2025
   https://finance.yahoo.com/news/u-sports-betting-revenue-soars-204000976.html

3. Variable reinforcement schedules are extremely powerful
   https://www.gwi.com/reports/second-screening-infographic

Dopamine per Minute: Single Threaded AAA Games vs the Multithreaded Services Stack

Let’s put the Brain Rot Stack’s attention capturing advantages to measurement. I’m going to define a metric to measure which entertainment product produces the most rewarding moments per minute. Single threaded AAA games vs multi-threaded interactive service stack.

Reward Moments: a discrete event that reinforces engagement via one of:

• Progress (rank up, objective complete)

• Social validation (message, reaction, chat)

• Variable reward / uncertainty resolution (loot reveal, bet resolves, notification result)

• Skill feedback (kill, clutch, combo, highlight-worthy play)

• Novelty (new clip, new post, new headline)

I’m going to put 15min of AAA gaming against 15min of multithreaded stacked services and see how gaming fares against the new king of interactive entertainment. I’m employ a weighted system as not at moments are equal:

1 = micro-hit (like, short clip, minor in-game reward, normal kill)

2 = medium (round win, notable highlight, meaningful message)

3 = peak (rank promotion, rare drop, bet win/loss, major plot beat)

Let’s take a look at the AAA contender: a modern COD match

Reward Moments: round start/end, kill, death, objective tick, reward screen, loot reveal, rank update, teammate message, etc.

Video Example:

Let’s take a look at the Multithreaded Service Stack: NBA + Kalshi + texting + X + TikTok

Reward Moments: highlight play, a new x post/clip, text send/receive, meaningful odds update, bet made/resolves, video scroll, etc.

Video Example:

Weighted total (for 15min):

• AAA Gaming 129

• Multithreaded Service Stack 280

Weighted Reward Moments per Minute:

• AAA Gaming 8.6

• Multithreaded Service Stack 18.6

It’s not even close! Yes, CoD is more interactive and rewarding than watching an NBA game, but stack wins because it runs multiple reward channels concurrently and keeps reward moments even when you’re ‘not playing.’

When I was a teenager growing up with PS1/N64 and PS2/Game Cube, video games were infinitely more engaging than the onslaught of multi-cam sitcoms airing when I got home from school. I imagine a teenager today feels the same way about boring old AAA games when compared to a stack of sticky services.

Attention Wars: How Games Can Compete With and Overtake the Brain Rot Stack

The last two decades of AAA have been chasing the combination of realistic rendering with the on-rails experience of a spectacle film. This is amazing for a 35 year old with a war chest of discretionary to spend on expensive PCs or consoles and $70 experiences. But for the <25 year old segment of the industry these experiences are too singular and contained.

Developers need to create interconnected stacks of game systems and mechanics to reclaim video gaming’s rightful throne as the most interactive experience available.

• Core Gameplay The main gameplay

• Reinforcement Asynchronous actions, asymmetric payoffs, social touchpoints

• Engagement Glue Feed and connected layers

Asynchronous actions (resolve later; reactivate players)

Players commit to an action now while the outcome resolves later (even if they’re not playing).

This creates “latent thrill”, uncertainty resolution, and provides a reactivation point for players.

• Life Sim Love Letter: Send a love letter from one character to another and wait for the response

• RPG Companion Missions: The classic “send your allie away” style mechanic where allies can alter places or conflicts before you show up

• Extraction Revenge Contracts: Put a bounty on players that wronged you and wait for the contract to be fulfilled with evidence of the action

Asymmetric payoffs (small input, big emotional resolution)

Low-effort actions that trigger variable but sometimes big outcomes.

Raises reward density without requiring a full session.

• FPS Contract Picks: Pick 1 of 3 contracts (e.g., ‘pistol only’); payout can roll into a high-tier reward if you overperform

• MOBA Prop Bets: Offer predictions (e.g. first kill) with player-specific odds that can be publicly wagered on before the match

• Match-3 Daily Bonus Move: One ‘bonus move’ a day that can cascade into a jackpot on board clear.

Social touchpoints

Provide effortless communication for each component from narrative to specific content.

Make social validation a constant micro-layer without demanding synchronous play.

• UCG Creator Masterclasses: Live events by the most popular creator on how to build and grow a community

• Narrative Player Podcasts: Allows users to submit podcasts about latest episode recaps and dishing analysis

• Gacha Pull Posts: A reddit style feed where every premium pull grants one action such as a post post or like

Feed-like discovery (keep them in your ecosystem)

A “what’s happening now” feed inside the game: clips, builds, challenges, meta shifts.

Prevents the leakage: “I’ll just check TikTok / X” becomes “I’ll check the in-game feed.”

• RPG Economy Watch: Market trends and hot items in a CNBC style news report that covers the different economies and factions in the game

• 4X War Room Recap: Daily recap of major battles, map changes, and notable alliance changes for the server narrative

• Fighting Move of the Day: Players submit clips to a community video feed where viewers can view, rate, and rank clips

Connected Layers (rewards spread across multiple channels)

One action produces multiple forms of reinforcement (progress + social + novelty).

Mimics the “stack compounding” effect while staying inside the game.

• FPS Clutch -> Clip -> Kudos -> Unlock
  A clutch triggers an auto-highlight clip; teammates react with one-tap kudos; crossing a reaction threshold grants a visible title/intro and bonus mastery XP

• Racing PB Lap -> Ghost Challenge -> Rival Attempts -> Recap + Rewards
  A PB creates a ghost challenge sent to connections, rivals attempt asynchronously, deadline for challenge passes and recap of attempts are created and rewards are granted

• MMO Dungeon Clear -> Loot Reveal -> Party Photo Card -> Guild Shoutout
  Clear triggers guild loot reveal, auto raid photo card with members and loot, guide members react on guild feed highlights, dungeon contributes to weekly guild goals

• Fighting New Tech Discovered -> Clip Submission -> Community Verification -> Training Module
  Discovering a new tech prompts a clip, community verifies/labels it, verified tech unlocks a training module and badge for discoverer

Don’t think of this as “make games more addictive” but instead as an evolution of interactivity; like going from Super Marios Bros to Sonic the Hedgehog 2 or OG Street Fighter 2 to Marvel vs Capcom 2.

Video games in 2026 need to offer a breadth of experiences that can offer parity attention stacks with modern entertainment consumption patterns. To capture the younger generation you can no longer ship single threaded experiences meant to simulate and immerse. Games need to contain their own Brain Rot Stack within them, hooking players with layered systems and leaving no oxygen for doom scrolling.

We talked about the part people usually smooth over: the weird jobs, the layoffs, the side projects, the stretches where your career makes no sense on paper, and the amount of work you do before anyone gives you a title that sounds impressive.

That was a lot of my path.

I’ve worked on top-tier games. I’ve also worked on games so bad everyone basically knew the ending before launch. I’ve taken jobs because they were interesting, because they were adjacent to games, and sometimes just because I needed to pay my bills and keep moving.

Looking back, that path makes more sense than it did while I was living it.

That was one of the big themes of the conversation: a lot of careers in games only connect in reverse. The random role, the scrappy company, the side project you made at night, the thing that felt like a detour, later, that becomes the proof that you were serious and the story that gets you the next shot.

We also talked about product management in games, which is still one of the muddiest jobs in the industry. My simple version is this: product’s job is to help games make better business decisions. Metrics matter. Modeling matters. Judgment matters. Influence matters. But games are still art, which means sometimes the hardest part of the job is knowing when the numbers are enough and when they aren’t.

That tension is the job.

Anyway, it was a great conversation. If you’re trying to break into game PM, already in games, or just curious how these careers actually unfold, you might get something out of it.

Watch here:

Thanks again to The Party is Full for having me on.

We have all seen the stories, the latest World Model demo from Google sent game publisher and game engine stocks tumbling with Unity (NYSE: U) as the poster child of impact, down 35% since the public reveal. You can prompt Project Genie “I’m a caterpillar storming the beaches of Normandy during WWII” and something will be generated to that effect. It’s the end of gaming. It’s GTA VII before we get GTA VI.

A week and thousands of hot-take LinkedIn posts later, it’s time to really analyze what World Models will or won’t change in the video game industry. Are world models real-time frame generation videos cosplaying as games? Is this the future of entertainment? Why are the smartest investors pulling out of game stocks?

Project Genie’s introduction truly creates “Wow” moments

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What are World Models and Project Genie?

World Models are video generation models trained to simulate a consistent world. They generate videos frame-by-frame of a simulated environment and can be driven by input from the user. The original use case for World Models was training automations and robotics. Need an autonomous vehicle model to train on specific dangerous situations? World Model. Need robots to learn to solve whatever it is robots are doing to overthrow humanity? World Model.

World Models simulate consistent virtual environments by producing frame-by-frame videos that can respond to input or change.

Project Genie is the latest public demo from Google’s World Model: Genie 3. Genie is described as a world generating model that provides interactive simulation. Genie’s main purpose is to train AI Agents to navigate 3D worlds. Project Genie allows users to generate and explore virtual worlds similar to a video game. It has 3 phases:

1. World sketching Use text or images to create a world, a character, and describe how you want to explore the world.
   “I want to be a banana exploring a frozen tundra gliding on ice skates in 3rd person perspective.”

2. World exploration Navigate the world in real-time using predefined controls: w, a, s, d or arrow keys for movement and space for jumping/actions.

3. World remixing Build on top of your generated world or curated worlds through prompts that allow you to modify the character and environment.

Project Genie is a publicly facing interactive demo that allows users to use text or image prompts to create a character in a virtual world and use movement controls to explore the world.

Are game studios and game engines cooked?

No, not anytime soon. World Models are currently real-time video generation models that need carefully curated training to present reactions to player inputs that resemble video games. World Models have a few obstacles in the way of broad usefulness:

1. Insanely expensive to run for generating and rendering the simulation

2. Have to be trained on (likely) millions of hours of video game footage

3. Can only maintain the simulated world for minutes before losing consistency or exceeding the context window

You can recreate BotW for a $250 Google AI Ultra subscription

Game studios will continue to leverage whatever technology is optimal to craft amazing worlds. Players prefer to leave it to expert game developers to create the latest and greatest virtual worlds to explore and inhabit. The goal posts for video game greatness are constantly moving. The second the models catch up, that becomes the baseline and game makers will find a new way to differentiate their creations.

Game engines have more to benefit from these models than lose. If World Models do become a cost effective way to produce visuals, game engines lower one of the largest barriers to getting aspiring game developers to produce video games, wildly increasing their potential customer base. World Models could be used to speed up content creation, imagine training a local model on a preset of environment rules the art team has carefully curated and let the World Model generate 50 options for designers to explore and determine their favorite.

Genie is “interactive video,” not “interactive systems.” It will accelerate prototyping and content workflows before it replaces engines.

Who’s cooked?

Honestly, if anyone is cooked it is investors in this technology today. Right now I am stealing Scott Galloway’s prediction that AI companies today will struggle to hold significant margins in the future based on model performance alone. This means if these World Models do become a big deal, every major foundational model player will be able to replicate that success and create a race to the bottom for customer pricing. If we could look behind the wizard’s curtain we’d see the unit economics make little sense long term, cost per minute of interaction vs subscription price paid for access.

Google’s Project Genie demo reminds me of OpenAI’s Sora video service. It requires an expensive subscription, the content is quickly turning into forgettable memes, and the service likely loses more money the more users engage with it.

There doesn’t seem to be a viable path for sustained margins and profitability in utilizing World Models for consumer entertainment.

What I’m excited about World Models?

Enough bashing Project Genie and World Models, what is exciting about them?

World Models won’t displace video games in the short term but can create amazing interactive experiences. My immediate thought is bespoke walking simulators for music. Instead of using text or images as the world creation context, use music. Create a playlist and explore a world that changes based on the key, tempo, rhythm, melody, and timbre of the song.

Another use is rapid prototyping. Exploring art direction, perspective, thematic wrapper, etc. quicker than ever before through modifying a preset world based upon a game in pre-production. Turn reference images or mood boards into real-time visuals for immediate feedback.

I’m also excited about solving the problems of finite context windows and lack of persistent states. Currently, World Models suffer from:

• Compounding errors or drift, when a small mistake continues to expand and ruin a simulated world

• Limited memory, where high processing costs drive context windows to be limited in relation to other models

• Lossy tokenization, the detailed visual and structural information are lost in compression

• Lack of persistent state, models are dynamically interpreting the world not relying on hard coded truths

Imagine being able to have a World Model that can efficiently read rules or world properties in some sort of RAG for World Models, allowing you to enforce rules, have the world utilize game systems, and create persistent states such as a narrative or player progression. This is the true unlock to breaking away from dream-like experiences to new forms of interactive medium.

Again, Genie is currently “interactive video,” not “interactive systems.” It will accelerate prototyping and content workflows before it replaces engines.

To kick it all off:

7 Powers: The Foundations of Business Strategy

I know, it’s an insanely dry title that reads like a textbook you were forced to buy in undergrad. Have no fear, this book will change how you think about products, companies, and positioning in overall industries if you let it. Please brace yourself to stomach a barrage of consultant speak but I promise you, this will be worth it in the end.

7 Powers is a strategy framework for evaluating a business’s ability to create persistent differential returns. In normal speak that’s “how can we identify patterns in successful business so that we can describe why they succeed over their competitors?”. Hamilton Helmer argues that over his 200 strategy consultant projects, he’s been able to identify 7-powers that give companies an enduring competitive advantage.

This book is the DARLING of silicon valley VCs. I first became aware of 7 Powers listening to Ben and David on Acquired (podcast). Helmer probably owes them commission for glazing 7 Powers every episode. But since I’ve been constantly inundated with powers over a 4 hour podcast about toilet paper companies, I’ve noticed these powers popping up in articles, blogs, and videos by some of the brightest minds in tech, VC, and PE. Clearly the people with all the money love this, so we need to understand why this book is essential reading for VCs.

The TL;DR 7 powers:

1. Scale Economies Lower unit costs at higher volume let you underprice competitors or earn superior margins

Shared central teams at a large publisher

2. Network Economies Your product gets more valuable as more people use it, pulling in even more users

UCG ecosystems with 2-sided marketplaces

3. Counter-Positioning You adopt a new model incumbents can’t copy without sabotaging their existing business

Freemium business taking shape in the 2010s

4. Switching Costs Once customers adopt you, leaving becomes painful (time, money, risk, workflow, data)

Player progress and identity tied to a single live service game

5. Branding Durable preference built through trust and meaning, so customers choose you even when alternatives exist

Nintendo’s logo

6. Cornered Resource You lock up a scarce, valuable asset others can’t access on comparable terms

Patents, talent, resources

7. Process Power Embedded, hard-to-replicate ways of operating (systems, culture, know-how) compound advantage over time

Well oiled content pipelines and release cadences

And these 7 powers tend to emerge during certain phases of the business:

That’s great but what does this mean for games?

Reading Hamilton Helmer isn’t going to teach you how to implement A* or optimize UV meshes, this is a high level business strategy framework that is more concerned with decisions made at the “what type of game company should we be?” level than the “should my souls-like have invincibility frames during their roll?” level. But there are takeaways for every level of the game developer stack.

Startup Founders

• 7 Powers is the bible for pitching a defensible company. This will separate you from “we are jaded AAA devs who worked at Ubisoft and want to make our dream game” to “you’re going to be known in the office as the moron that passed on the money printer that walked in the door 2-years ago.”

• Also, and more importantly, you learn how to pick a power to be your core competency. Where is your company going to be truly at a competitive advantage? When do you develop that competitive advantage? What are the power factors that lead to outsized margins?

Indie Devs

• Learn to Counter-Position to the max. 98% of indie devs main competitive avenue is Counter Positioning. Master how to build a business where the incumbents are damned if they do, damned if they don’t follow you.

• Branding is your long-term aspiration. FromSoftware, Rockstar Games, Naughty Dog, all invoke imagery of games and make a promise of quality. How do you position yourself and your games to be a comprehensive brand?

AAA Dev

• Your mission is very easy, understand your company’s power and leverage it. The better you understand the dynamics behind your studio’s success, or lack there of, the better you can make those small decisions that add up to a record setting game. Also, speaking executive is not a bad way to position yourself for a promotion.

Publisher

• You also have a simple takeaway, fund games with powers and help games you already funded find powers. Armed with this new knowledge you can identify which of the 50 en vogue genre games being pitched can actually turn into a sustaining business.

• With the publishing business itself you have Branding and Process available to you. Turn your publisher into the next target acquisition of big tech or sovereign wealth funds.

Gaming Executive

• 7 Powers is going to help you identify and cultivate powers. Help your games or services secure powers and leverage those powers as hard as possible.

• Know when competitors have powers and learn how to play around them.

Investor

• One application is to invest in a portfolio of a single power. Invest in a bunch of live service games with high Switching Cost. Find a basket of studios Counter-Positioning one of the black hole games.

• Find Cornered Resources. Literally the best power to early stage invest in. Cornered Resources are like land, they aren’t making more of it.

• Juice Network and Scale Economies. These are the obvious growth players or follow-on round targets.

Should I buy this?

7 Powers is a mere 200 pages, much less if you ignore the economic-ish formulas, and can be had for less than $20. For the cost of two beers in Seattle you can gain the ability to break down business with the best of them. Learn to take actions beyond crafting great gameplay and sick art direction. I implore anyone to read this book and not be able to clearly think about the strengths and weaknesses of their business and their competitors. If you want to stop pitching “a fun game idea” and start pitching a money printer, read it.

Today I’m publishing that guide: The Game PM Field Manual, a free, hands-on manual for Game PMs.

Whether you’re a PM moving into games or you’ve shipped multiple titles, this is meant to be practical: frameworks, examples, and stage-by-stage playbooks.

What you’ll get

• A clear picture of what Game PM is (and isn’t) in a studio, and how it differs from Tech/Consumer PM

• A usable approach to metrics (metric types, retention vs engagement vs stickiness, funnels)

• Spreadsheet modeling basics for product decisions (forecasting, scenarios, sensitivity)

• How to run experiments/A-B tests (guardrails, interpretation, common failure modes)

• Playbooks by stage: pre-production → production → GTM → global launch → live ops → sunset

• A career section on breaking in and climbing the PM ladder

What’s inside (8 sections)

1. Introduction

2. Role of a PM in a studio

3. Responsibilities of a game PM

4. Metrics and their use

5. Spreadsheet modeling for PMs

6. Experimentation and A/B testing

7. Playbooks by development stage

8. Career management in game PM

Read it

Download PDF: The Game PM Field Manual.pdf

Read on Google Docs: The Game PM Field Manual (Google Docs)

Read Online: The Game PM Field Manual

Excerpts

The Xbox layoffs weren’t about bad management or greedy shareholders, they were proof that player habits broke game funding. In early July we saw the all too familiar headline: Microsoft is laying off 9,000 employees. After years of forming and acquiring game studios, the crown jewel of which was the $69B acquisition of Activision-Blizzard-King, Xbox is having their 3rd major layoff in 18 months.

When Phil Spencer, the CEO of Xbox, announced “Our platform, hardware, and game roadmap have never looked stronger” during the recent July layoffs, the normal storm of outrage, anger and memes filled the internet as gamers and developers alike looked at Xbox as greedy overlords who canceled their hyped upcoming games and slashed roles in the name of profit maximization.

In a way, Microsoft is the main character for the transition the game industry is undergoing. After decades of consistent growth, the game industry received a once-in-a-generation growth acceleration from the 2020 COVID-19 lockdowns, which in turn caused a massive influx of investments into games aided by the incredibly low Fed interest rates. In 2024, suddenly those investments looked like liabilities and managers started cutting their losses.

But to find the underlying issue of why the video game industry is so tough in 2025, we’ll have to start with the biggest symptom: the July Microsoft layoffs.

Microsoft

The question to kick off this investigation: Is Microsoft a bad publisher?

A great question to ask is whether the game studios and consumers are worse off with Microsoft owning these studios. Although Microsoft has a questionable legacy of managing acquired studios (Ensemble, Lionhead), the best candidate to answer this question is none other than RPG heavy hitter Bethesda. Created in 1986, acquired by Microsoft in 2021, Bethesda is a publishing juggernaut known for the Elder Scrolls, Fallout, and Doom series. Bethesda gives us a good post-acquisition runway to compare to the legacy independent publisher performance.

First, let’s look at the release rate pre- and post-acquisition. 

There is certainly a drop in output but nothing particularly alarming; the mainline game output is similar pre- and post-acquisition. Another strawman argument is to point at Redfall and Starfield as indicators of Microsoft’s poor leadership leading to quality drop-offs, except we have the woefully executed Fallout 76 (52 Metascore and 28 User Score) and the launch performance of Deathloop (Arkane’s worst-performing UK launch) as pre-acquisition missteps.

The argument for Microsoft is Xbox leadership greenlighting 9-figure games only to cancel them. There is a business reality to the layoffs from acquisitions, the cost incentives of acquiring and owning multiple game studios is in the central functions (HR, IT, Tech Ops, marketing, etc) and the diversification required by an independent studio is not the same diversification needed by a top 5 worldwide publishers. Laying off non-development staff and non-mainline games, as horrible as it sounds, is the alpha in acquiring and operating a group of game studios. If you want to direct hate for those layoffs, throw it at the leadership and shareholders of the acquired studios for accepting the buyout knowing layoffs were an inevitability for their staff.

If laying off non-development roles is given a pass approval solely from the reality of generating value from acquisitions, giving Xbox leadership a pass on greenlighting 9-figure games only to cancel them a few years later is more of a grey area. AAA game development is a long, arduous process. The entertainment industries move at a breakneck pace and a lot can change in the 5+ year development most AAA games require between conception greenlight and launch. What made sense during the mega-growth years of 2020-2022 no longer makes sense in the market realities of 2025. Saving $100 million in remaining development budget and marketing, as well as the brand perception hit of launching a hyped game that ends in a commercial disappointment, can be the correct business decision. Sunk cost fallacy is real and smart leaders make resource maximizing decisions. The truth is we don’t know the state of the game, how development went, and what was required to ship a competitive game.

Am I giving Xbox leadership a pass? Xbox leadership has proven it has poor portfolio management and capital allocation discipline. The Game Pass business model allows Xbox a degree of hand waving when justifying major acquisitions, through shifting success metrics and recurring revenue models that distort greenlighting, but has yet to prove out on a long-term basis. 

If we’re not dumping the blame solely on Xbox leadership then who can I direct my internet rage towards?

AAA Game Studios

As much reddit digital ink has been spilled on Microsoft as a game publisher, I see almost no blame being put on the game studios themselves. Microsoft doesn’t want to cancel games they’ve funded development in, Microsoft wants to create profit generating assets.

It’s never been more difficult to compete as a AAA game. On the cost side you have 100+ developers and years of development, racking up 9-figure costs before shipping. These games must compete in mature spaces with incumbents who have sometimes been dominant for over a decade. With development times lasting sometimes 5+ years, the player preferences, business strategies, and trends in the industry can look foreign to the environment the game concept was greenlit in.

Game studio leadership can’t be let off the hook for conducting a slow-moving train wreck. If The Initiative had 150 people, between developers and contractors, working on the Perfect Dark Reboot, it’s up to them to ensure the unit economics and market competitiveness remain throughout development. They signed up for a development budget, timeline, and market positioning that involves producing quality and hype. Unfortunately, game teams can’t just “deliver a great game” in 2025 and hope to survive.

Microsoft doesn’t want to cancel a big investment they publicly announced at the end of 2020. It’s the game studio’s responsibility to keep their games competitive during development and give publishers confidence they will deliver a hit game, on time, and deliver returns.

Roblox, Fortnite, TikTok, and Cheap Entertainment

This leads me to the next cause to investigate, the often free alternatives to buying new video games. Roblox has an estimated 380 million monthly active users (MAU) and has effectively captured most of the under 16 market. Fortnite is constantly introducing culture-relevant content with integrations that range from Marvel crossovers to Sabrina Carpenter skins and dances. TikTok is a dopamine vending machine that drives attention spans so low other entertainment apps appear slow and boring.

One of the biggest issues with these modern attention black holes is their cost of engagement to users and its impact on developers. Yes, free entertainment isn’t a new business model, but after the bets on new content during the pandemic, we’re seeing how truly sticky and retentive the incumbents are.

Taking the roughest of estimates you can see the value proposition facing gamers today. Buying a $70 AAA game to play roughly 15 hours before quitting is an incredibly expensive cost per hour of engagement compared to the dominant games. It’s easy to see why Roblox is the preferred option for the under 16 gamers, you have over 40 million experiences to play and effectively pay nothing for playing them.

With the paradigm shifting from players churning through multiple AAA games a year to engaging in a single games-as-a-service or platform, it leaves new games less players and hours of engagement to fight over for. This coupled with the investment boom from the pandemic and you can see why so many publishers are reevaluating their current and future investments.

New Games in 2025

The issue ultimately facing Microsoft is the same across music, film, and video games: the need for new entertainment has never been lower. A lot of video game genres don’t need or can’t support new games. Incumbents such as Fortnite and League of Legends would continue forever if they had their way, and new challengers often find market size for these genres is mostly made up of single game fans that don’t try other genre entries. There isn’t a 100+ million player MOBA market, there is a 5 million player MOBA market and a 100 million player League of Legends market.

The takeaway is game funding, target markets, and long-term business strategies need to change with the times or companies risk being another footnote alongside THQ or Acclaim Entertainment in the history of games. $300 million missteps that take years to identify and course correct impact an unmeasurable amount of lives. Through layoffs and funding droughts, the game industry has lost many talented developers who likely will never return to an industry they once poured their everything into.

What are the strategies that will unlock success in 2025?

1. Capital efficiency:

   Make AAA games with more focused scope, smaller dev teams
   Most games don’t need a true open world environment, endless side quests, tons of minigames, and a laundry list of non-critical features. Games need a focused scope, budget, and development timeline while delivering an excellent core experience. Define your target market and how you win that market (differentiator) and laser focus on executing that to perfection. Create experiences exponentially above and beyond their peers that your game becomes the Nirvana Nevermind to hair metal’s excess.
   

2. Portfolio Diversification Opportunities:
   Play in areas where players burn through multiple titles
   Don’t go head-to-head against a longtime games-as-a-service incumbent with an incremental “game X + one feature” title. Identify areas where genre fans play multiple similar games a year such as roguelike, survival, horror, and simulation instead of the deceptively lucrative MOBAs, hero shooters, tactical shooters, and battle royale genres where players are sticky to a single title.
   

3. Hit-Rate Economics at Lower Costs:
   Take the Innovator’s Dilemma approach to building a giant
   What does Roblox, League of Legends, Counter-Strike, and many other industry giants have in common? They didn’t launch to an immediate 100 million MAU supported by a 100+ person development team. These titles weren’t created at a professional production studio but were made by small passionate teams who fiercely catered to an underserved niche, fostering a dedicated fanbase and snowballing success over time. The next League of Legends will be made by a small team that makes something adjacent to MOBA but for an underserved player segment, then increases quality and mass appeal over time. Building something truly differentiated and strengthening product-market-fit over time is how to build a games-as-a-service giant. The sooner more publishers realize this, the sooner we’ll stop seeing 100+ dev teams being laid off for throwing $300 million at the next Genshin Impact.

In this series I want to highlight the most exciting and promising startups within the video game industry based on innovation, potential impact, and my general excitement about the startup.

It’s June of 2025, the Seattle sky is flipping a coin every day to decide whether it wants to resemble Tatooine or Mount Doom. It’s time to take a deep dive into the future of the video game industry, and look at the startups that are going to shape digital entertainment for the years to come.

First, due to the fact that 10 year old companies raising Series E rounds with 100+ employees still market themselves as a startup, I feel it’s necessary to define what I’m considering as a startup:

• Less than 5 years old

• Hasn’t raised a Series C (Pre-Seed -> Series B)

• Less than 100 employees

The criteria I’ll be ranking these companies on:

1. Impact how much could the startup change the industry

2. Innovation how novel or innovative is the product

3. Prospect how likely the company is to succeed

4. How Interesting I Find the Startup because it’s my list

Sans Strings Studio

If Punch-Out!! had a baby with Sesame Street and Adult Swim.

https://sansstrings.studio/

Category Game Developer

Innovation Real-time puppetry, narrative-driven physics gameplay, and unique humor

Started 2023

Fundraising Pre-seed (a16z Speedrun Incubator)

Key Investors a16z Games

Sans Strings Studio is an exciting new game studio that blends puppetry with a novel end-to-end animation pipeline to create something truly visually unique in the game industry. Their debut title Felt That: Boxing made waves at Summer Game Fest 2025, with its unique humor, jaw dropping visuals, and real-time claims to the rendering.

The studio was founded in 2023 by ex-Adobe VP and creator of Substance 3D Sébastien Deguy and UE digital puppetry expert Ryan Corniel and is backed by a16z Games via the Speedrun Incubator. With both founders' track record of creating impressive novel visual technology and support signals from a16z Game’s Speedrun backing, I don’t expect this to be an “actual gameplay footage” misrepresentation from legendary E3 trailer debuncles.

Summer Game Fest 2025 featured a lot of impressive new studios, from Section 9 Interactive’s Depth of Abyss, to Team Clout and ILL, and finally Beethoven & Dinosaur’s “Mixtape”, were all high contenders (with B&D being disqualified by being founded in 2019). But video games are visual-first spectacles, with visual innovation often marking generational advancements more than gameplay, hardware, or services. Felt That: Boxing could be the first wave of many new groundbreaking visual styles.

The major risk is that Sans Strings Studio does not have a game developer founder, so even if the impressive visuals are achieved in real-time gameplay, the game will turn out more of a tech demo than an engaging groundbreaking title. Another risk is timeline, with no release date and no gameplay footage, this single title studio may be wrapped up in development for years before we can fully judge their potential.

I am of the mindset that art is the single most important discipline at a game studio, and art direction has the largest impact on communicating production value and quality. Felt That: Boxing has such a striking and powerful visual, some might argue not seen since Doom or early cel shaded games such as Jet Set Radio, that it makes even my cynical mind light up with excitement for the future of games.

nunu.ai

An AI agent that can test your game and break world records.

https://nunu.ai

Category Testing Automation

Innovation AI agents that automate end-to-end game testing

Started 2024

Fundraising Seed Round, $6 million

Key Investors TIRTA Ventures, Andreessen Horowitz

nunu.ai is trying to make good on a decades-long promise of augmenting traditional manual game testing with intelligent AI agents that simulate player behavior and test gameplay loops at scale. If they are successful, game studios will have 24/7 testing available across all platforms and be able to perform massive multiplayer tests without the need for open Beta tests.

AI agents can traverse environments, trigger edge-case bugs, test UI responsiveness, and catch regressions that would take human QA hours or days to identify. Game teams can plug in nunu.ai for real-time feedback as they develop. Think about a future where a designer checks in changes and instantly receives feedback on functionality, difficulty, and other qualitative gameplay properties. nunu.ai’s agentic ai testing is miles ahead of traditional testing frameworks with low level automated code tests or testing middleware that provide automated functional and regression testing.

nunu.ai has partnered with Roboto Games to test their title Stormforge, claiming a 50% reduction in QA costs while requiring 5 hours to integrate. Another claim is automating the full 30 minute tutorial in Hogwarts Legacy, solving puzzles and completing combat scenarios.

There are a few risks to nunu.ai, starting with the accuracy of its testing. AI agents may be able to complete tutorials but can they test edge cases or make nuanced decisions players might make? Another risk is how generalizable can nunu.ai make its testing agents. Can they truly have the same agent for a fighting game as an RTS? Finally is the pricing. Enterprise prices are not publicly available and so it’s difficult to compare to other cost cutter measures such as outsourcing QA to a specialist service.

Nobody will find it controversial that I believe QA and testing are on the short list for disruption from modern AI advances. nunu.ai could be the first step in humanless playtesting, empowering games to ship faster and at higher quality.

Kepler Interactive

If your local co-op grocery store was a can’t miss publisher.

https://kepler-interactive.com

Category Game Publisher

Innovation Developer-owned co-op publisher model

Started 2021

Fundraising Funding Round, $120 million

Key Investors Netease

Kepler Interactive is a new publishing model created and operated by 7 independent studios: A44, Alpha Channel, Awaceb, Ebb Software, Shapefarm, Sloclap, and Timberline Studio. Each studio has an equal say in Kepler’s operations and shares in profits.

Unlike traditional publishers who part or all of development in turn for a percentage of revenue and ownership of the IP, Kepler operates more like a co-op. Studios keep their IP, maintain creative independence, and share financial upside through the parent company.

Kepler found early success with Sloclap’s Sifu and Awaceb’s Tchia, gained momentum with Ironwood Studios’ visually stunning Pacific Drive, and recently drew industry acclaim by putting the RPG world on notice with Sandfall Interactive’s Clair Obscur: Expedition 33. But it’s Sloclap’s recent live-service soccer game Rematch that could be the breakout tentpole game for Kepler Interactive.

The publishing space is heating up. Blumhouse Games is applying its lean horror film model to games, and Aonic is running a mid-tier studio acquisition arbitrage strategy with studios like nDreams and Otherside Entertainment in its stable. In an increasingly competitive space where publishers are deploying a variety of business models, Kepler’s cooperative structure and creative freedom stands out.

Risks include asymmetry in success across studios, where hitmakers end up subsidizing underperformers and could produce tensions around governance. Also NetEase’s $120M investment brings resources but also questions of long-term independence.

I am really interested to see if this indie empowerment model can scale. Clair Obscur: Expedition 33 is competitive against RPGs with 10x its development budget and Rematch potentially becoming the Rocket League of ball sports. If Kepler manages to keep their studios aligned and continue to publish games that display high production values with low development price tags, they may prove that indie doesn’t have to mean small.

k-ID

The compliance infrastructure for a fragmented regulatory world.

https://www.k-id.com

Category Compliance Infrastructure

Innovation Global, real-time age recognition and compliance layer for games and online platforms

Started 2024

Fundraising Series A, $45 million

Key Investors Andreessen Horowitz, Lightspeed Venture Partners

In a world where LLMs, Gen AI, and blockchain still dominate the headlines, k-ID is tackling one of the least buzzworthy problems in the game industry: age verification and compliance. k-ID helps games and digital platforms ensure they are safe and compliant for players of all ages. Their SDK lets studios instantly identify user age and apply appropriate content filters, permissions, and policies automatically across 200+ global regions.

Most developers struggle with regional compliance, juggling COPPA, GDPR-K, and local laws with patchwork solutions. k-ID offers a unified compliance engine that makes age-based access and data handling a seamless part of game logic. In an increasingly fragmented regulatory world, k-ID is betting that they are the SDK everyone will need.

Their founders are seasoned vets with the experience to tackle this unique problem. CEO Kieran Donovan is a former attorney specializing in data protection and online safety regulation, CLO Timothy Ma is the former head of international privacy and data protection at Tencent, CGO Julian Corbett is a former VP at Take-2 and advisor at Tencent venture labs, and CSO Jeff Wu held leadership roles at both Google and Meta. The veteran founders coupled with the backing of a16z and Lightspeed, k-ID has the validation and green light to scale when needed.

I predict compliance is on the list of every problem no developer, big or small, is excited about solving. In a fragmented world of shifting laws and minors online, k-ID wants to be the Unity of compliance infrastructure. The interesting potential is for game developers to dynamically serve their based on the age level: deliver a single M-rated game that can be scaled down to a T-rated experience.

Pragma

The backend engine for any game, on any engine.

https://pragma.gg

Category Backend services

Innovation A full backend engine, not a collection of managed services. Full flexibility, control, and customizability.

Started 2020

Fundraising Series B, $22 million

Key Investors Greylock, Insights Partners

Pragma positions itself as a backend engine for video games. There are a number of startups that focus on managed backend services, but Pragma gives developers local end-to-end source access to their services, allowing game teams to extend, modify, or branch to customize Pragma’s products for their game.

Competitive backend providers like PlayFab or Nakama offer a collection of services via APIs where developers plug into hosted features like matchmaking and accounts, but don’t have access to the underlying architecture. Pragma provides the source code for all backend services and allows teams to run the entire stack locally. It encourages studio-controlled deployments, making it closer to infrastructure than SaaS.

PlayFab is like Unity’s Asset Store: powerful plugins, but you don’t own the core.

Pragma is like the Unity engine itself: you compile it, extend it, and build on top of it.

The biggest risk to Pragma is adoption. It lacks a flagship success story. It is partnered with Frost Giant (Stormgate), Lightforge Games (Project O.R.C.S.), and One More Game (SwapMeat), but these games are either unreleased or canceled.

Pragma is interesting because it empowers studios to build ambitious online games without needing a 30-person backend team. Teams can simulate game loops, do full-load testing, and integrate with in-house tools. If successful, Pragma could redefine backend services the way Unreal redefined game engines.

Looking into the future of games

What unites these startups is a shared vision of the next-generation game stack. From nunu.ai’s AI-powered QA, to Pragma’s backend engine, k-ID’s compliance infrastructure, Kepler Interactive’s co-op publishing model, and Sans Strings Studio’s real-time puppetry pipeline, each one tackles a core piece of modern game development. If you want to know what the next decade of game development looks like, start with the five startups quietly building it right now.

This is the companion article to previous article: Slaying the Incumbent: Roblox

In 2020 I made the ill-fated decision to go to business school under the guise that I wanted to become a bulge-bracket investment banker in the TMT industry groups. I somehow tricked Goldman Sachs SF and Morgan Stanley Menlo Park to bring me to their super days and when I was not absolutely bombing the interviews, I kept bringing up Roblox’s upcoming planned public listing valuation and how they achieved such a high multiple. Roblox, the low-fidelity UGC platform that few in traditional publishing circles took seriously, was going public at an estimated valuation over $40 billion? That dwarfs the valuation of the largest video game IPOs and M&As up to that point. Although a life of wearing suits and 3am bedtimes wasn’t in the cards for me, I still wonder how Roblox seemingly came out of nowhere to execute the largest public listing in video game history.

How did Roblox achieve such a high revenue multiple in its valuation? What were the comps for Roblox? Was the valuation justified? Does a game company need to be profitable? What is a Direct Public Offering (DPO) and why did Roblox opt for that over a traditional Initial Public Offering (IPO)?

The Lead-Up

After the slowburn of finding product-market-fit, Roblox really started to take off by the end of 2016 reaching 30 million monthly-active-users (MAU). This was a combination of building out a proper developer studio (Roblox Studio), enhancing the underlying engine, and retaining developers through the Developer Exchange allowing for real-world payouts and virtual economy stability.

Pre-DPO, Roblox had raised over $855 million in fundraising from their Series A in 2005 all the way to their Series H in 2021. The anomaly round was the Series E in 2017. After a 6 year gap in fundraising, Roblox raises a round at over a 10x post-money valuation from solidifying its flywheel and changing the narrative from “Roblox is a game with user created levels” to “Roblox is a UGC platform with proprietary internal tooling, multiple monetization systems, and a full fledged creator economy”. The platform transformation exploded Roblox’s MAU from 6.8 million in 2011 to 30 million in 2016. This was the beginning of their growth run that would last through the DPO.

There were a few factors that led to a decision to go public. First, private capital, VC and PE firms, were growing impatient with their investment in Roblox. Generally, VC firms are expected to return capital from funds raised on a 10 year scale. Another factor was Roblox’s mounting quarterly losses. Roblox has never turned in a profitable quarter and their losses scale with active users and engagement, which were both on a meteoric rise at the time. Finally, Roblox’s deep moats of a proprietary engine and tools, developers earning meaningful revenue, and the flywheel of converting players to creators were paying off and Roblox was snowballing active users to becoming the biggest game of all time.

https://backlinko.com/roblox-users

Finally, we have to talk about COVID-19. While it accelerated the growth of the entire game industry, Roblox may have sustained this growth more than any other game and became the king of blackhole games, enveloping players and not letting them escape. Roblox’s momentum during the first year of COVID was historic and Roblox had never looked as attractive to institutional investors as it did by the end of 2020.

The Deal Itself

Roblox ended up not having an Initial Public Offering (IPO) but instead opted for a Direct Public Offering (DPO). In a traditional IPO, a firm hires a bulge bracket investment bank as an underwriter, they file an S-1 with the SEC, executives go on a roadshow to build demand with investors, the firm issues new shares for the underwriter to sell to the public, finally the underwriter sells the newly issued shares to institutional and retail investors on secondary markets.

In a DPO, the firm does not issue new shares but instead shareholders list their existing shares on secondary markets. The firm does hire an advisor and files an S-1, but there is no roadshow or underwriter before the shares hit the secondary markets. Roblox opted for a DPO to provide liquidity for early employees and investors. Also with a DPO, Roblox would not have to issue new shares, diluting existing shareholders, or pay the underwriter through the spread between the price the underwriter pays and the price the initial offering is set at, typically between 5% to 8%.

Unlike an IPO where a price discovery process takes place, during a DPO the company sets a reference price. That reference price is a guide or suggestion as to what the shares could price at upon market open, as the actual price is determined by existing shareholders selling and buyers interested in purchasing. At the end of the first day of listing, Roblox closed with a market cap of $45.2 billion, $15.7 billion above their Series H valuation 6-months prior.

Comparing Roblox to the few game industry IPOs in the years surrounding its DPOs, with M&A still being the preferred exit in the game industry, shows Roblox’s valuation towering over mega-hit developers, rollup umbrella companies, major mobile publishers, and award winning independent developers. Why do you think that is? Roblox isn’t being compared to other game companies for growth metrics, it’s being compared to SaaS companies, social networks, and online marketplaces. Game developer and publisher valuations are beholden to the quality of their content or at best, their content’s ability to retain users in their live service games. With a platform, content is developed by creators and incentivised by consumers. Once a platform like Roblox solves the cold start problem, the challenge of launching a platform that relies on both creators and users without having either at the beginning, their growth can be explosive while incurring much lower cost-per-content than traditional developers. The market fully understands this and values Roblox as a platform that has solved this most difficult problem and is now scaling to unknown heights.

Roblox’s 2020 revenue, the year before the DPO, was $923.89 million yet when Roblox DPO’d in 2021 they garnered a 50 times multiple for their valuation. Roblox’s closest peer is Unity’s 2020 IPO, garnering Unity a 25 times multiple for previous year’s revenue. On top of being awarded platform multiples, Roblox’s revenue nearly doubled between 2019 and 2020. The final piece to the massive multiple awarded to Roblox is that Roblox provided one of the earlier exposure for public market investors to the Gen Z audience. Roblox was the Gen Z proxy on the public market.

What Happened Next

Roblox’s narrative was attached to Facebook’s 2021 rebrand to Meta and all the metaverse hype by the market. Roblox became a proxy for metaverse enthusiasm in the public markets, often lumped into ETF holdings or analyst reports alongside Meta post-rebrand. This sent its stock on a rollercoaster until settling in late 2022 under the guise that Gen Z was aging out and Roblox’s growth didn’t pan out to justify it’s massive DPO valuation. From then Roblox quietly strengthened its moats, broadened its playerbase, and retained top game developers on its platform. The market took notice in 2025 when growth led to the platform reaching a record 380 million MAU through compounding retention, and the stock started to recover.

Roblox market cap 2021-2025

Institutional investors poured into Roblox through the secondary markets. As of today, top shareholders are the who's who of investment firms from Vanguard to Blackrock, mostly as a by-product of indexing or balancing investment products such as ETFs. Roblox has the benefit that the largest institutional investors help stabilize Roblox’s stock by holding large blocks and trading less often than retail investors. This investor mix signals that Roblox is treated not as a high-risk growth story, but as a credible blue-chip long hold within the Gen Alpha and Gen Z tech index.

The final post-DPO story is Roblox’s profitability or lack thereof. Roblox has never had a profitable quarter since its DPO, with losses averaging $217 million per quarter. Roblox faces rising costs as it re-invest revenue into developer tools to compete with game engines (Unity, Unreal), drives player retention away from other platforms (Steam, iOS), and pays out rising developer revenue shares to keep top creators within its ecosystem. Trading off profits for reinvestment is not an unusual strategy for platforms in their growth stage such as Amazon in the 2000s. At an estimated 380 million MAU (Coolest Gadgets), questions about how high its audience can grow raise concerns about its active user growth story and with the metaverse no longer looking like a near reality, Roblox’s earnings rely on driving transaction for its user base higher than ever to offset their spend.

Roblox’s net losses didn’t scare institutional investors away for the same reason Tesla’s or Amazon’s didn’t in their early years, they were building long-term moats not harvesting short-term profits. Like Amazon investing in logistics or Tesla investing in battery scale, Roblox is building a creator economy flywheel that compounds value over time. It’s a platform bet, not a product bet and the public markets gave Roblox a multiple in line with SaaS not traditional gaming publishers. In the platform framing, $900 million in quarterly revenue with $250 million in quarterly losses isn’t failure, it’s deferred margin in exchange for creator lock-in and user retention.

Impact on the Industry

Roblox’s direct listing is the largest public offering in video game history, dwarfing the IPOs throughout the history of video games. Roblox’s dominant platform strategy is rewarded by the public markets, paving the way for other video game firms to develop their own flywheel to receive generous revenue multiples in their valuations. Future studios can’t just IPO and expect a great valuation because they develop great games, they need to meaningfully implement strategies from enterprise SaaS, social media, and online marketplaces. Investors increasingly ask “What’s your flywheel?” or “What’s your creator economy?”.

This explains the rise of UGC infrastructure platforms like Overwolf, mod.io, and even Fortnite Creative’s expansion into economy tools. Roblox proved UGC can be a platform not just a feature within a game and Roblox’s DPO proved that investors reward long term thinking with delayed returns within the game industry.

Lessons & Takeaways

Roblox made game industry valuation history by not building a better game or shipping a more polished product, but by creating a platform with defensibility, scalability, and ultimately monopoly economics. Developing a platform takes time and fundraising with Roblox raising over $850 million in 9 rounds over 16 years before returning capital to investors. With the success of Roblox’s DPO, investors have a benchmark for making long term bets on platforms. Roblox was afforded nearly 10 years to refine their product-market-fit while most game development studios are funded for one, maybe two games before they are uninvestable. Following in Fortnite’s footsteps, expect more of the largest games-as-a-service products to emerge with two sided platform-like structures.

Slaying the Incumbent is a series about analysing genre kingpins: how did they get there, what makes them so dominant, and how can they be dethroned.

If Roblox is a game, it’s the most played game on the planet. If Roblox is a platform, it’s the most used dedicated gaming platform on the planet. A Roblox player has over 40 million games at their disposal. Last year, Roblox generated over $3.6 billion in revenue across 40 million+ games, most of which were created by independent teams. In an industry where GTA V, Fortnite, and Minecraft are heralded as games-as-a-platform titans, Roblox quietly became the juggernaut platform in the video game industry.

Despite these numbers, it’s often left out of strategy decks because it looks like a toy to those judging production values alone. How did Roblox dominate the UGC game industry? Why isn't Roblox the gold standard for platform design, UGC scale, or ecosystem economics? And most importantly, who can dethrone Roblox from games-as-a-platform throne?

The Predecessors: Who They Dethroned & Why

User-generated content (UGC) has a long lineage in gaming. In the 80s, titles like Pinball Construction Kit, Excitebike, and Wrecking Crew included level editors. The 1990s introduced more advanced tools, including scripting and asset imports in StarCraft’s “Use Map Settings” games, and the rise of supported mods in games like Doom and Half-Life.

The 2000s saw the rise of pure UGC games like LittleBigPlanet and Dreams, but these platforms failed to scale creator monetization. Later, games like DOTA2 and CS:GO tapped into community content for skin-based loot boxes, but kept creators in tightly curated, asset-only lanes. Even Minecraft’s DLC store, which has generated over $500 million to date, limited creators to selling small add-ons without enabling full-scale businesses.

Roblox changed that. It unified what others isolated: creation tools, monetization, advertising, and discovery, into one fully integrated ecosystem. The result isn’t just a game or a marketplace, but a self-sustaining UGC platform. In 2024 alone, Roblox generated $3.6 billion in revenue. It is the first ecosystem in gaming to mint teenage millionaires.

Roblox didn’t just dethrone UGC games. It bundled the engine, the store, an economy, and the audience into one vertical stack where competitors split them apart.

The Perfect Storm: Why Roblox Won

Roblox didn’t win because of technical superiority or an innovative economy. It won because it solved the hardest platform problem: the cold start. Launched in 2006, it took nearly a decade before Roblox gained traction. I interviewed at their HQ in 2012, six years after launch, and few in the industry including myself viewed it as a future industry titan. But over time, Roblox built a closed-loop creator economy, optimized for low-friction development, provided parent-friendly monetization, and obtained sticky retention from players and developers. That persistence gave them the deepest moat in games.

Like most two-sided platforms, Roblox serves both creators competing for user attention and users searching for the next hit experience. Its economy revolves around Robux, a premium currency that powers virtual item purchases and in-game transactions. Players can subscribe to Roblox Premium for a monthly Robux allowance, discounts, and access to advanced features like item trading. Developers monetize through revenue share from premium experience sales and a Developer Exchange that allows them to convert Robux into real-world income. The result is a closed-loop economy: fiat enters via player spending, circulates through platform-native systems, and exits through vetted creators with minimal leakage.

Roblox’s creator output thrives because the tool suite, Roblox Studio, and the asset store, Creator Store, lower the barrier to entry so low that children can build, test and publish games with no code and no funding. Such a low barrier to entry begets volume, an estimated 40 million games of volume (compared to an estimated 89k on Steam). Such a massive volume begets hit games, top Roblox games record over 10 billion visits. With hit games begets more developers pushing quality, top Roblox developers earn over $20 million annually. And so the flywheel spins.

Roblox’s monetization is designed with both players and parents in mind. With 45% of users under age 13, Roblox Premium subscription acts as a “safe drip” of currency that avoids impulsive spending. Meanwhile, parents can purchase assets and tools to support their child’s game development creativity, positioning Roblox Studio not just as a toy, but as a digital learning tool. For older players, the marketplace and asset trading system deepen retention and unlock status-seeking behaviors.

The cold start problem is what killed Roblox’s competitors. Meta’s Horizon Worlds has unlimited funding but no organic creator base. New UGC platforms like Core or Liminal launch without meaningful user demand. Even Fortnite, with its massive audience, hasn’t matched Roblox’s self-contained ecosystem. Roblox’s advantage wasn’t just tools, it was time. A decade of compounding creator activity met a once-in-a-generation pandemic surge, and the platform never looked back.

Why They Are Still on Top

Roblox is the platform burgeoning creators go to dip their toes in the game development waters. Roblox has retained all creators below the indie game level production because they are the only platform where significant revenue is generated for that level of game. Creators also retain because Roblox has cornered the younger video game demographic, having higher MAU than Nintendo. Having the healthiest creator resource allows Roblox to update their art, supported devices, and technology to keep ahead of competitors. This all cultivated with Roblox’s massive warchest through its fundraising ability and the largest IPO in video game history.

Roblox has become the default launchpad for aspiring game creators. By offering the only platform where games below the indie level can generate meaningful revenue, Roblox has retained developers that might otherwise focus on smaller efforts like game jams or mobile experiments. In 2024 alone, creators earned nearly $1 billion, more than some midsize game publishers. That kind of economic upside creates creator lock-in: developers don’t leave the platform that funds them and no other UGC platform can create millionaires with such minimal investment.

Roblox owns the under 13 gaming demographic. While most of the industry targets teens and adults, Roblox became the de facto platform for children, amassing an estimated 130 million MAU under 13. For developers and advertisers, that makes Roblox one of the most efficient platforms for building lifelong brand affinity with a younger demographic. For creators, it’s a renewable audience eager for fresh content and experimentation.

Roblox isn’t standing still. What began as low-fidelity voxel playgrounds now supports a range of visual styles and game types that rival AA-tier productions. Roblox Studio has matured into a development platform that supports multiplayer, persistence, scripting, monetization, and now AI tooling. This breadth of tools enables a breadth of games, from RPGs to educational games, to be developed natively for Roblox, and gives Roblox the genre surface area that platforms like Fortnite Creative still lack.

Finally, Roblox’s financial war chest puts it in a league of its own. With over $870 million raised pre-IPO and a historic $45.2 billion direct listing, Roblox now commands a $50 billion market cap, far outpacing its closest competitor, Fortnite Creative’s Epic Games. Roblox’s listing on the public market gives it access to equity financing not available to Epic Games. This capital advantage fuels creator tools, infrastructure, and marketing spend that reinforces its moat. Outside of Tencent and Microsoft, no other gaming company operates with that level of financial leverage.

The Challenger: Who (or What) Can Dethrone Them?

Incumbents aren’t toppled by incremental gameplay improvements. Most genre-defining franchises are eventually unseated not by feature-for-feature clones, but by innovations in audience reach, technology leverage, or monetization design. These are the three forces of disruption.

• Audience Innovation
  Redefining target audiences by utilizing targeting strategies

• Technology Innovation
  Reinventing how games are built and played by utilizing emerging technology

• Business Model Innovation
  Reimagining how games generate revenue by utilizing alternative pricing strategies

Audience Innovations

Roblox has dominated the children and young adult demographics on the player side. On the creator side, Roblox has cornered the developers below the indie production value line and successfully converts a lot of players into their estimated 2.5 million creators. Roblox creates network effects that are family friendly and easy to learn but hard to leave. Though they seem immovable in their market position, their own moats can be a prison that limits their total addressable market, as platforms that target children rarely are compelling to adults.

• Undifferentiated Targeting Roblox’s biggest advantage, its stranglehold over the younger demographics, is also its biggest disadvantage. Younger demographics generally don’t have disposable income and what purchases they can make are generally capped by their parent’s guidance. Creating a broader appealing ecosystem unlocks higher LTV players, which unlocks higher incentives for creators to push quality, which unlocks brand spend looking to appeal to high value users. A competitor can work its way down the age demographics similarly to how YouTube dominated general video media before creating a kids specific feature.

• Segmented Targeting Roblox is a platform that tries to unlock as many different experiences as possible. This broadness allows for a competitor to hyper target a high development depth vertical such as RPGs, Gen Z focused narrative games, or social adventure games better than Roblox can with its broad suite of tools and assets. Become the platform for non-professional developers for a single vertical and once that vertical is conquered, start to expand to adjacent game-types.

Technology Innovation

Roblox has built a robust native technology stack including multiplayer support, developer analytics, and simple scripting that locks developers into its ecosystem of tools and assets. On the user side, Roblox has built an economic architecture that supports currencies, exchanges, quantity limited items, and item trading. This technology differentiates Roblox development and locks in both users and developers, but it also limits Roblox’s advances to its own scope.

• Integration Strategy Roblox needs to develop its own tools internally and that keeps it from leveraging the wide range of specialized B2B and developer-focused products. Creating an integration model where developers can leverage their favorite tools and services into their UGC development seamlessly would unlock technology Roblox wouldn’t develop in another decade. Rather than waiting for Roblox to build new features internally, integrations allow the platform to evolve at the pace of the broader tech ecosystem. From the latest LLMs to modern social media coupling, developers could create modern cutting edge UGC experiences that would make Roblox look dated by comparison.

• Metaverse Strategy Roblox is a bunch of disparate experiences where you have to join them through a central lobby system. Creating a persistence connected world where players never leave the game to travel to different experiences would make good on the longtime promise of a metaverse from sci fi novels such as Snowcrash and Ready Player One. The economics of pricing and how a shared currency is earned would provide developers guardrails on how to develop their own world to lure experience seeking players in. This strategy would make Roblox look like the technology of yesterday just as Roblox makes advanced level editors look outdated. With a focus on creators making compelling games, this strategy can succeed where more ambitious and less focused metaverses such as Meta’s Horizon Worlds failed.

Business Model Innovation

Roblox has mastered the closed loop ecosystem with its premium currency and how it enters through users at a single point and exits through developers at a single exchange. This allows Roblox to hyper control their economy both from a company yield standpoint and by limiting how player spend ends up as developer liquidity. But with this control comes constraints in both how players can support their favorite creators and how creators can offer compelling purchases that enhance their player’s experiences.

• Direct Support Strategy Allow players to directly support their favorite creators through tools defined by the creator that unlock special supporter benefits. This is a common feature on social media platforms such as Twitch and Youtube, as well as funding platforms like Kickstarter or creator support platforms like Patreon. Developers can further build a relationship with their players, increasing player retention and building their audience through their evangelical fan’s word of mouth. Players can support their favorite developers by providing more consistent income and build a relationship with that developer through unlocked features, communication, supporter-only content, and physical merchandise.

• Decentralized Economy Strategy Rather than having a central currency tightly controlled by the platform holder, allow developers to create their own currency and value it in an open market against other developers. Creators can band together under one currency like the European Union, or send their currency through an inflationary spiral by over-minting new coins while not having enough sinks to offset the generation. This hands over more controls to developers to not only craft their experiences but the entire ecosystem within their games. For players, this creates an interesting depth that once understood, enables more reasons to choose an experience besides what’s hot right now. This would allow a subset of players to correct the market through similar tools available to market makers today. There is a risk of manipulation and speculation not unlike the currency crypto market, but it would add to the drama and interest in the platform.

Roblox’s strength is their dominance with the children and young adult market, their developer locking native technology stack, and their closed loop economy that gives them control over the inflow and outflow of premium currency. These strengths also represent structural constraints. Targeting a broader market, giving developers the ability to integrate their preferred technology, connect experiences across a single persistent world, and allow developers to own their relationship with players through funding options would not only entice the most successful Roblox creators but also give players an experience that makes this platform feel like a new evolution of UGC platforms. The platform that dethrones Roblox won’t compete game-for-game, it will reimagine what a UGC platform can be in a fully connected, creator-first economy.

What This Means for the Industry

Roblox has shown the game industry that turning players into creators and leveraging the creativity of your community can build incredible platforms that dwarf the biggest publishers and console makers. By targeting an underserved demographic, reducing friction in development, building a trusted economic loop, and continuously evolving its technology stack, Roblox didn’t just create a hit game, it became the most-played platform in gaming and the largest IPO in industry history.

Its success has reshaped the strategies of competitors like Fortnite, which now invests heavily in UGC to replicate Roblox’s creator-driven model. Roblox also demonstrated that category-defining platforms aren’t always built on cutting-edge tech or viral marketing, they're built through persistence, long-term capital, and structural innovation.

The question now is whether Roblox can continue scaling up to meet the expectations of an older, more demanding audience or whether a new platform will emerge to do to Roblox what it once did to modding communities and advanced level editors. Will Roblox age up and become the YouTube of games or be replaced by a platform native to Gen Alpha’s needs?

How AAA publishers can reclaim innovation by scouting and scaling the next generation of developers

Most large-cap publishers are focused on sequels and studio acquisitions, often overlooking the real source of future hits: raw creative talent. The biggest opportunity in games isn't in owning decades old IP to iterate on, it's in spotting the next great IP’s creator before everyone else does.

UGC creators are building games with over 100 million MAUs, often without traditional industry experience. Indie teams are generating outsized returns with no marketing spend and little funding. The next billion-dollar franchises aren’t being built inside AAA, they’re being prototyped on the margins.

To stay competitive, publishers need a repeatable system for scouting, investing in, and scaling talent before they break out. The alpha isn’t in protecting IP they own, it’s a system to recruit and develop great developers within their umbrella.

AAA Games has a pipeline problem

The average age of AAA game leadership is rising. Creative control is concentrated in the hands of veterans who came up through outdated org structures. Tenure in leadership roles often spans 10–15 years, reinforcing conservative greenlight processes. The pandemic accelerated this trend, as studios became more risk-averse and dependent on proven talent. 2025 will see Aaron Garbut (51) heading Grand Theft Auto VI, Hideo Kojima (62) directing Death Stranding 2, and Hugo Martin (50) as the creative director of Doom: The Dark Ages.

Junior developers, often the source of fresh IP in past generations, are stuck. With rising development costs and pressure to de-risk every project, they’re rarely given the freedom to pitch, innovate, or lead. With this defensive strategy, Avowedis the sole AAA new IP release or planned release of 2025.

For decades, AAA games were shaped around the tastes of the youngest generation. Today, that connection is broken. Gen Z players don’t see themselves in legacy franchises aging out of relevance. They crave novelty, speed, and identity. Sequel fatigue is real, and the average AAA portfolio is stuck in a loop. Death Stranding 2 will be the first sequel to a sub-decade-old IP released in three years, an indication of just how sequel-stuck AAA has become.

Where the Alpha Is Hiding

In an era where a single hit IP can generate decades of sequels, the upside on early IP bets is massive, but publishers are looking for their creators in the wrong places.

Large-cap publishers are overlooking a generation of creators already competing for and winning attention with fresh, hook-driven IP. Creators with years of experience creating IP aren’t already packaged in a AAA studio, they’re on UGC platforms or indie storefronts.

UGC platforms, such as Roblox or Fortnite Creative, are hyper-competitive low-cost incubators of hook-driven experiences. With the comparative low cost of entry for development, creators have to grab users attention and immediately captivate them with the experience. Aimo389 can solo-develop a Roblox hit known as Jailbreak with over 7 billion plays. 3D artist and digital fashion designer Kyasia Watson was earning over $100k a year working part-time at the age of 22-year on UGC platforms.

Indie developers often compete against massive studios without funding, teams, or infrastructure. But by focusing on niche experiences the mainstream ignores, they’ve created hits. Despite competing against established AAA IP, they’ve built breakout hits such as Minecraft, acquired by Microsoft for $2.5 billion, and Stardew Valley, grossed over $500 million. This proves capital efficiency and creative innovation are mispriced.

AAA studios have slowed new IP as increased costs lead to risk aversion. Talented developers who want to develop new IP and leave their mark on the industry leave for mobile, AA, indie, and VC-backed studios. Large cap publishers are investing in aging veterans with IP decades old as a risk minimizing strategy. The future isn’t milking aging franchises until they collapse, it’s building a pipeline to identify and scale the next wave of enduring IP.

The Publisher Operating Model of the Future

Publishers need to disrupt their own talent pipeline if they want to stay relevant to the coming generations of gamers. The platform and distribution landscape has changed over the last decade and the talent pipeline needs to reflect that and take advantage of it. Publishers need to engage developers on their platforms, adopt a VC portfolio mindset to reduce risk, and design a talent liquidity system to elevate creators not projects.

Build the Talent Funnel

It’s time for large cap publishers to disrupt their own leadership pipeline by creating a talent pipeline that recruits talented developers from all levels of the video game industry distribution stack.

With the current structure, developers need to spend over a decade inside a AAA studio before they are given the chance to lead their first game or create their first IP. That is like not letting a film director direct their first film until they’ve spent a decade working as a key grip. In music and film, creators start with the smallest stakes and increase in budget and scale as they prove themselves, eventually graduating to blockbuster films and major label records.

Christopher Nolan wasn’t just handed the Batman franchise and a $150 million budget, he started off filming three shorts before heading his first feature film “Following” ($6k budget). After impressing critics, Nolan directed “Memento” ($5-9 million budget) and attracted Guy Pearce to star in it. Receiving critical praise and award nominations, Nolan directed “Insomnia” ($46 million) to prove he can head a hollywood production with an A-list cast. Before taking on a blockbuster franchise, Nolan had already proven he could tell stories, lead teams, and deliver results.

Publishers need to create a structured path for talent to move from UGC to Indie to Flagship IP games. The same way film makers and songwriters prove themselves with smaller hyper competitive projects and graduate to bigger and bigger projects if they prove successful. Publishers need to create a pyramid of competition where only the best talent rises to lead a AAA game. Which songwriter would you trust with writing the next top-40 hit, one who has written 3 songs in their career or one who has written hundreds until they mastered crafting hooks, melodies, and lyrics?

Adopt a Venture Portfolio Mindset

Venture capital funds invest in stage gate processes, knowing only a small subset of initial investments will succeed and an even smaller subset will return significant capital. VCs place small initial bets at Seed stage, then double down in later rounds on the most promising startups to capture outsized returns and defend their ownership.

Following a VC fund, for every 10 UGC games a publisher might fund they would fund 1 indie game. Another upside is a savvy large cap publisher can collect a tremendous amount of market data. This portfolio strategy provides a number of benefits:

• Reduces over-reliance on forecasting success

• Encourages innovation and risk-taking

• Unlocks value by spotting talent before it’s obvious

Design Talent Liquidity Systems

Even with the right bets and scouting, most publishers lack a way to elevate talent once they’re in the system. Liquidity isn’t just for capital, it should apply to talent too. This isn’t a system where developers “make their dream game”, instead it’s where developers sharpen their tools and learn how to run game teams.

Although developers will have autonomy and ownership, they also need milestones and constraints. Budgets, team size, and hard delivery dates must be enforced so game leaders can master delivering when the budgets are a few thousand dollars so they don’t miss when running teams with $200 million budgets.

As a publisher, you need to measure how fast you elevate creators, not just projects.

Build internal tools and culture to identify, test, and promote high-potential individuals.

At each stage, look for directional indicators, such as shares and organic acquisitions, on top of raw business performance.

The winners in the next decade won’t just ship great games, they’ll graduate great game leaders.

Questions Executives Should Be Asking

To future-proof your large cap publisher, you need a pipeline for discovering, elevating, and shipping with next-gen talent. These questions are designed to pressure-test your readiness.

Scouting

• Do we have a “scouting team” like A&R in music or VC in tech?

• Do we track top-performing UGC games and their creators monthly?

• What is our first-touch process for building relationships with high-potential UGC developers?

• What % of our talent pipeline originates from outside the traditional AAA ecosystem?

• Can our publishing org articulate what makes a breakout UGC hit work?

• How fast can we go from identifying a new creator to greenlighting a project with them?

Summary: Are we treating talent discovery like a competitive advantage or waiting until they’re priced in?

Internal Development

• What % of greenlit games come from creators under 30?

• How many new IPs were led by first-time directors or producers in the past 3 years?

• What’s the median time from junior hire to game lead at our studio?

• Do our best creatives have a real path to pitch new IP?

• Are we rotating high-potential staff into leadership roles?

• How many of our creative leads come from UGC or indie backgrounds?

Summary: What’s our success rate on turning high-potential developers into IP-generating leaders?

Innovation Throughput

• Would Hades or Slay the Spire survive your greenlight process?

• What % of greenlit games are original IPs?

• What’s our average time from pitch to greenlight for new ideas?

• How many bets do we make per year under $5 million in budget?

• Do we have UGC or Indie funding processes that mirror startup economics?

• How much faster can an indie ship an original game compared to us and why?

Summary: Is our greenlight process designed to launch innovation or protect the status quo?

Final Takeaway

IP is the output. Talent is the input.

In an industry where most hit IPs are decades old and creative leadership is aging away from its audience, the cost of not discovering the next generation of developers is growing by the year. Breakout franchises are still being created but they’re being built outside of AAA.

Large publishers are still investing like it’s 2015 in a world that moves at 2025 speed. Talent, not technology or IP, is now the most undervalued and strategically decisive asset in games.

The publishers that adopt a venture mindset, build systems to surface and scale emerging talent, and turn discovery into a repeatable advantage won’t just survive, they’ll define the next era of gaming.

The Deals That Defined Gaming is a series analyzing the investments, acquisitions, and capital plays that reshaped the power structures of the game industry and the people, incentives, and timing that made them happen.

On March 27th, 2025, Ubisoft announced its boldest move in over a decade: spinning off its flagship franchises. Assassin’s Creed, Far Cry, and Rainbow Six will form a new $4.38 billion entity backed by a $1.25 billion investment from Tencent. In an industry obsessed with consolidation, Ubisoft broke itself apart.

Why would Tencent fund a company it doesn’t control?

Why would Ubisoft carve out its flagship IP at the peak of industry consolidation?

And what if this is the first sign of a broader demerger wave?

The Lead-Up

​​Ubisoft’s split didn’t come from strength, it came from a decade of defensive capital strategy.

Ubisoft has spent two decades walking a tightrope between independence and investment. As one of the last major founder-controlled AAA publishers, it has repeatedly fought off takeover attempts, each one shaping the company’s capital strategy.

• 2004: Electronic Arts quietly acquires a 19.9% stake in Ubisoft. Though it stopped short of a takeover, the move was perceived as aggressive. Ubisoft lobbied for regulatory protections and EA exited in 2010.

• 2015–2018: French media giant Vivendi acquires 27.3% of Ubisoft over three years, nearing the 30% threshold that would trigger a mandatory buyout offer under French law. Ubisoft fights back. In 2018, Vivendi backs down and sells to a group of “white knight” investors:

  • Tencent (5.87%)

  • Guillemot Brothers Ltd (2.7%)

  • Ontario Teachers’ Pension Plan (3.4%)

• 2022: Tencent deepens ties, acquiring 49.9% of Guillemot Brothers Ltd., the family’s holding company. While Tencent gains strategic alignment, the deal imposes strict caps on control: Tencent cannot exceed 9.99% voting rights for 8 years and cannot sell for 5.

In September 2024, AJ Investments, owner of less than 1% of Ubisoft, called on the Guillemot family to allow the sale of Ubisoft to private equity (rumored Blackstone or KKR) firms at a fair price, claiming to have 10% of shareholder support. Citing Ubisoft’s lagging performance against other top publishers following high-profile flops like Skull and Bones, Prince of Persia: The Lost Crow, and Star Wars Outlaws. As Ubisoft’s market cap hit a 10-year low, The Guillemot family was looking for a strategic buyer to help take the company private.

https://www.reuters.com/technology/ubisoft-activist-investor-says-it-has-support-10-shareholders-management-tussle-2024-09-26

The Deal Itself

On March 27, 2025, Ubisoft announced that Tencent would invest $1.25 billion into a newly formed subsidiary housing its flagship IP: Assassin's Creed, Far Cry, and Rainbow Six. Tencent committed $1.25 billion for a 25% stake in the new entity, valuing it at $4.38 billion on an equity basis, higher than Ubisoft’s current market cap.

Tencent’s price implies a $5 billion enterprise value, meaning roughly $620 million of the new entity’s capital structure will be made up of debt or preferred equity. In effect, the new subsidiary is taking on more than 50% of Ubisoft’s $1.1 billion outstanding debt, a strategic move that delivers needed relief to both companies. Ubisoft’s net debt doubled between 2022 and 2023.

https://www.reuters.com/technology/ubisoft-seen-up-13-15-after-it-sets-up-tencent-backed-subsidiary-2025-03-28

Note:

• Equity Value Represents the value of a company that is available to its equity holders
  (Equity Value = Number of Shares * Share Price)

• Enterprise Value Represents the total value of a company, encompassing all claims on its assets, including those of both equity and debt holders
  (EV = Market Cap + Total Debt - Cash)

Tencent, along with several institutional investors, believes Ubisoft’s premier IP was significantly undervalued inside the legacy business. By isolating the most bankable franchises in a more focused structure, the group aims to:

• Run a premium live-service playbook to unlock a high valuation multiple

• Improve creative and operational focus

• Gain financial transparency into franchise-level performance

For Tencent, the upside is strategic visibility. Tencent has historically has repeatedly used minority investments to gain financial access, assess operational KPIs, and eventually scale ownership in high-performing entities. If history repeats, Tencent’s 25% could be a foothold, not a ceiling.

For Ubisoft, the move provides strategic relief. The split neutralizes activist pressure, keeps the company out of private equity hands, and lets the Guillemot family retain control avoiding a repeat of the Gameloft acquisition by Vivendi in 2016.

What remains unclear is the precise cap table of the new subsidiary. Beyond Tencent and Ubisoft, questions remain: will Guillemot Brothers Ltd hold a direct stake? Are institutional investors involved? Details on governance and equity distribution have not yet been disclosed.

If this works it’s not just a spinout, it’s a model for legacy publishers under pressure in a capital-constrained era.

What Happened Next

The market reaction was immediate and sharp. Ubisoft shares dropped 15% the day after the spinout was announced and nearly 40% over the next 10 days.

In response, AJ Investments and a coalition of shareholders filed a petition with French courts to compel a shareholder vote on the deal. Their proposed resolutions would force Ubisoft to:

• Restructure it as a direct asset sale for at least $4.38 billion (the value of the deal)

• Distribute $3.29 billion from the Tencent sale directly among the shareholders, at a rate of $25.24 per share, and $1.1 billion towards the net debt

The resolutions aim to ensure shareholders directly benefit from the IP carve-out with the proposed $25.24/share capital distribution to shareholders totaling over $2.8 billion, or more than 60% of its market cap.

The shareholder group also proposed curbing the Guillemot family's voting power, framing the deal as another example of founder control at the expense of capital efficiency.

For Tencent, the upside lies in future monetization: mobile adaptations, publishing leverage, and exclusive IP rights in China. For Ubisoft, the benefit is operational clarity: splitting its most valuable IP into a focused entity with reduced debt and less exposure to constant buyout pressure.

But the bigger question remains: what does this deal mean for the game industry at large?

Impact on the Industry

For half a decade, the video game industry has been defined by consolidation. Microsoft acquired ZeniMax (2020) and Activision (2022), Take-Two bought Zynga (2022), and Sony folded Bungie into its portfolio. Embracer Group went on a buying spree, acquiring over 50 studios. Tencent and NetEase have quietly indexed the global games market with minority stakes and board-level visibility.

But Ubisoft’s move suggests the pendulum may be swinging in the other direction.

Instead of merging into a megacorp, Ubisoft broke itself apart, raising the possibility that spin-offs and demergers could be the next wave of value creation. In an era where scale often dilutes strategic focus, splitting up legacy publishers may prove more attractive than aggregating them.

For acquirers who’ve already integrated IP and technology value from past deals, spin-offs offer a second act. For industry titans with sprawling portfolios and little strategic alignments, spin-outs allow business units to focus, reduce internal friction, and unlock premium valuations.

With the private equity interest in large game publishers, consider the possibilities:

• Microsoft Studios could be reorganized by monetization model: live-service, platform exclusives, and Game Pass-native content

• Square Enix could transition to a holding company model, splitting its AAA console division from its mobile gacha/live-service business.

• EA Sports could spin out as its own publicly listed entity, tied to a distinct IP and licensing strategy

The Ubisoft/Tencent structure may even become a template: a white knight investor funds the spin-out, injects capital, and aligns strategically without taking controlling interests. For companies facing activist pressure, that’s a powerful model: liquidity, focus, and stability, without ceding the cap table.

The question now is what kind of soft power Tencent has secured in return. Operational visibility? China publishing rights? Strategic vetoes? The playbook is written but the fine print may shape the next chapter of industry governance.

Lessons & Takeaways

Ubisoft’s valuation fell far below the market value of its core IP and creative talent. In a flat-growth industry, that gap is a flashing light that invites activist investors, takeover bids, and private equity pressure. For legacy publishers, the takeaway is clear: protect your valuation or risk losing control of your structure.

While Tencent appears to be the white knight in this deal, the long-term terms of its involvement remain unclear. Will it exert soft control over Ubisoft’s future direction? What publishing rights or IP access has it secured? Tencent has historically preferred a silent partner role, like its 40% stake in Epic Games, but this deal marks an unusually deep entanglement with a struggling public publisher. That should raise questions for other founders seeking capital while maintaining control.

The deeper shift is structural. The strategic edge once gained through massive consolidation is fading. Studios and publishers are discovering that diverse business units often fail to create additive value. The result: operational drag, diluted creative focus, and market misalignment.

The game industry may be entering an era where demergers, spin-offs, and focused carve-outs become tools for unlocking trapped value.

Slaying the Incumbent is a series about analyzing genre kingpins: how did they get there, what makes them so dominant, and how can they be dethroned.

Launched in 2009, League of Legends (LoL) has been a tour de force in the game industry by inventing the modern league-based Esports scene, defining best-in-class live-ops, and running a player-friendly monetization playbook that generates over $1 billion a year. Although it didn’t invent the genre, LoL has dominated the Multiplayer Online Battle Arena (MOBA) landscape for so long, LoL is now synonymous with it. LoL has left a graveyard of competitors from IP themed clones, iterations by famous studios, and entire companies dedicated to making MOBAs to chip away at LoL’s massive user base.

But what led to this phenomenon? What was the video game industry landscape when League of Legends launched? Who did LoL dethrone? What made them so dominant for so long? How can LoL be dethroned? Who is best in position to dethrone LoL? Finally, what does their dominance mean for the video game industry? We’ll take a look at how to slay this incumbent.

Who did they dethrone?

2009 was a wildly different landscape than today’s live-service dominated industry. The iOS App Store was in its infancy, Uncharted 2 had players believing they were playing a movie, and Wii Sports was breaking game sales records. A custom map for Warcraft 3: The Frozen Throne (WC3) called Defense of the Ancients (DOTA) had been a staple of the Esport scene in Europe and Asia. DOTA, along with its StarCraft-based predecessor Aeon of Strife, invented the MOBA genre and was the only game in the genre until Demigod, League of Legends, and Heroes of Newerth were released in succession within a 13-month period.

You could argue League of Legends dethroned DOTA. DOTA was a main game in the World Cyber Games, it was more popular than the actual WC3 Multiplayer mode, and in 2008 was named the most played non-supported (aka not Counter Strike) game mod. Two things disqualify DOTA from being an incumbent before LoL:

1. One of the main developers of DOTA initially designed LoL

2. DOTA generated almost no revenue, it’s difficult to compare a passion project to a profit-driven game studio

I would argue LoL dethroned the RTS genre as a whole. RTS was a dominant video game genre in the 90s and 00s (Warcraft/Starcraft, Command & Conquer series, Age of Empires series). The first wave of MOBAs, DOTA and its spiritual successors, seemingly replaced the RTS genre by the end of the 00s.

RTS itself was dominant because of advancements in gaming technology that allowed players to field hundreds of troops during a single combat. The spectacle of massive wars controlled by players making micro decisions in the second to second and macro decisions in the minute to minute brought a novel experience not found elsewhere in gaming. However, the skill-depth barrier to play and watch soon backfired as MOBAs brought similar skill-depth with casual barrier of entry and appeal. MOBAs also latched onto the burgeoning free-to-play (F2P) business model which provided both consistent content updates and high levels of spend depth.

Why did they win?

League of Legends launched along with Demigod and Heroes of Newerth between 2009 and 2010. Following winning that generation, LoL had to defend off Blizzard, Valve, Hi-Rez, and then a slew of top-tier mobile MOBAs from North America and Asia. It seems every year there is a new MOBA that takes a shot at the king, and every year League of Legends still reigns supreme over the MOBA genre.

There are two major points to League of Legends’ success:

1. F2P first mover’s advantage

2. Accessible take on MOBA mechanics

Business model shifts are extremely powerful and the first games to successfully pull them off have a massive advantage over other titles. League of Legends launched as free-to-play from the beginning while Heroes of Newerth and Demigod were premium titles. LoL took inspiration from DOTA while attracting as wide an audience as possible by taking cues from Asian titles such as MapleStory and going F2P. This allowed players to easily recruit their friends for a match and allowed curious non-target demographics to try the latest game everyone is talking about. Being free-to-play widened the top of LoL’s funnel, effectively giving it a massive user acquisition multiple over first wave MOBA titles.

On top of having a much wider funnel than DOTA and other MOBAs, League of Legends took a much more accessible take on MOBA mechanics. LoL did away with:

• Denying - last hitting friendly units

• Neutral Camp Control - controlling the neutral camp is less important

• Streamlined Item Builds - less diverse and complex items available to purchase

LoL also provided progression goals through unlocking levels, spells, masteries, and grind currency to buy cheaper heroes. Players unlock new options seemingly every match while they level up to the max level. The combination of much higher user acquisition counts through F2P with higher retention rates through more accessible mechanics and progression unlocks during each early match gave League of Legends an exponential advantage in snowballing active user counts over Demigod and Heroes of Newerth.

*DOTA 2 and Honor of Kings are notable exceptions to League of legends outright winning. DOTA 2 offers extreme depth of options available to players compared to LoL and serves as the only serious alternative. Honor of Kings has dominated the mobile MOBA genre in China but that market has struggled to see similar player numbers outside of Asia.

Why are they still on top?

League of Legends has left a graveyard of failed challengers behind it. From IP-backed clones, major studio attempts, and entire startups built to unseat it, LoL has stayed dominant for over a decade.

The biggest advantage League of Legends has is establishing a comprehensive Esport scene first. Months before Heroes of Newerth announced its professional tour, LoL had already held its first world championship in summer of 2011. By 2013, LoL had multiple official leagues including the Championship Series in Korea, China, Europe, and North America, all of which led to the World Championships. Viewers could follow the top teams in their region, then cheer them on against the top teams from every region in a structured league and championship series.

League of Legends also has first class live-ops. LoL adds a new champion every 2-3 months, new skins every 3-4 weeks, and runs seasonal events with balance patches roughly every 2 weeks. On top of that, every year LoL changes the season, with each season containing sweeping meta and balance changes. A champion that was dominant the season one season might be less viable in the next.

*note a majority of DOTA 2 skins are community made

Finally, League of Legends is a mastercraft in transmedia. Their tournaments and influencers make League of Legends the most watched game on Twitch year after year. If you need a break from MOBAs, League of Legends has board games, auto chess, card games, and an upcoming fighting game. The trophy of LoL’s transmedia property is their Emmy award winning Netflix cartoon series Arcane.

All these strategies serve as both user acquisition and re-engagement points. If you enjoy Arcane, you can download League of Legends and play for free. If you are burnt out on losing in competitive play, the world championship can reinspire you to practice and train. There is always new content and products served over wildly diverse mediums, all positioned as either a user acquisition, re-engagement, or retention point.

Who can dethrone them?

Incumbents like League of Legends aren’t toppled by incremental gameplay improvements. Most genre-defining franchises are eventually unseated not by feature-for-feature clones, but by innovations in audience reach, technology leverage, or monetization design. These are the three forces of disruption.

• Audience Innovation
  Redefining target audiences by utilizing targeting strategies

• Technology Innovation
  Reinventing how games are built and played by utilizing emerging technology

• Business Model Innovation
  Reimagining how games generate revenue by utilizing alternative pricing strategies

Audience Innovations

The combination of F2P with the vast transmedia products gives League of Legends its massive audience of 100+ million monthly active users. Finding enough new players to compete with that or positioning a new game to capture LoL’s audience is going to be difficult.

• Undifferentiated Targeting It would be difficult to successfully target the entire gaming audience with a mass market competitive game like a MOBA in the same vein of a game like Chess. You would need to take the MOBA genre and make it so accessible it would resemble Wii Sports more than League of Legends.

• Segmented Targeting The best avenue for differentiated marketing while still marketing to a large enough audience to reach League of Legends numbers. One of the biggest weaknesses to LoL is the match time. League of Legends’ longest matches can stretch to 45 minutes, an eternity for Gen Z’s dopamine economy. A segmented targeting strategy built around 8–12 minute matches, crisp tactical loops, and Esports clarity could resonate with a generation raised on TikTok, not Twitch.

• Niche Targeting The plan here would be the Innovator’s Dilemma disruptor strategy:
  1. Create a niche game that targets specific customers with unmet needs
  2. Target customers that accept a lower quality product for a lower price
  3. As the disruptor improves over time, it gradually moves upmarket eventually displacing the incumbent
  Create a highly specialized competitive strategy game that targets an underserved competitive strategy audience such as turn-based strategy fans or high skill ceiling PvP strategy fans. Then slowly grow and polish that game until it appeals to a wider and wider audience. Not dissimilar to DOTA starting as a highly niche game for WC3 custom map players, and grew until it spawned a multi-billion dollar genre.

• Local Targeting Microtargeting a game to an individual or hyper-local level is another interesting strategy. Could a competitive strategy game offer individually tailored experiences? A close example would be StarCraft and WarCraft 3’s custom maps providing UGC tools for players to create micro-communities. Though this was on the back of profitable, long-running IP and coupled with a flagship RTS. Probably the riskier and most uncharted in terms of Audience Innovations.

Technology Innovation

League of Legends rose to prominence at a time when the first generation of web services as a service were released. This infrastructure shift to lower cost and complexity, from game studios needing to own physical servers to host their online services, to increased scalability and flexibility, both of which were instrumental during LoL’s rise to dominance. There have been lots of new technological shifts in the 15-years since LoL’s launch, which ones will empower a disruptor to dethrone the incumbent?

• Cloud-Native Architecture Strategy One of LoL’s biggest advantages was being built from the ground up to leverage first generation web services. Building its disruptor from the ground up to leverage centralized cloud infrastructure for compute, delivery, and scalability can unlock entirely new experiences, persistent simulations, and a seamless update pipeline. Imagine a 100v100 MOBA where all physics, hit detections, and visuals are rendered in a cloud instance, giving players mobile-level accessibility and supercomputer-grade game logic. The downside is the cost per engagement, where every marginal hour of play will incur extra costs and need to be offset with further spend.

• Generative Customization Strategy Using generative AI systems to enable players to create personalized champions and abilities, allowing each game session to feel bespoke. In a reimagined competitive MOBA, players don’t select champions, they describe them. A GenAI engine interprets player intent and assembles a playable champion with unique visuals, stats, and abilities. The meta is replaced by creativity, and character creation becomes part of counter-picks and competitive mastery. But this deep personalization introduces challenges in increased costs per game for GenAI-based character creation, balance nightmare without heavy sandboxing, and UX clarity issues around the sheer flexibility.

• Autonomous Agent Strategy Leveraging advances in artificial intelligence systems that combine neural networks with advanced search algorithms, players can send trained and customized agents to act competitively within the game. This allows players to influence outcomes through coaching, configuration, or meta-strategic inputs rather than direct control. This would combine the popular genres of idle games and auto battlers inside of a new competitive strategy game. The hurdles will be the increased server costs from every match involving multiple AI agents and the uncharted territory of incorporating complex AI systems into the core game loop.

Business Model Innovation

League of Legends has one of the most refined monetization systems in the industry: free-to-play access, a rotating champion pool, dual currencies, premium cosmetics, and crafting, all optimized for retention and low-friction spend. But that success comes with constraints. Future challengers may not compete by widening the top of the funnel but they can differentiate through deeper monetization systems, more granular segmentation, or directly incentivized engagement.

• Premium Scarcity Strategy Unlike LoL’s wide-access model, some games drive monetization by introducing controlled scarcity: not every champion or skin would be universally available. Blockchain systems offer a technical solution for limiting availability, tracking ownership, and enabling resale, where studios earn a percentage on each transaction. For example, imagine if only 100 Amumus existed in circulation. Players could acquire, trade, or sell these champion licenses, creating a market-driven economy around meta shifts and player demand. The upside is a much higher spend ceiling and studios can monetize on the secondary markets. The downside is the risk of speculators dominating the market, pricing out players from accessing their own game’s content. Also the game team would need to build trust to separate their game from the failed exploitative NFT game attempts in the early 2020s.

• Tiered Access Strategy Another path to deeper monetization is differentiated access based on player tier. Rather than selling purely cosmetic items, a future game could gate certain roles behind spend-based or prestige-based tiers. Think military ranks: lower tiers offer full gameplay with individual decision making, while higher tiers unlock prestigious mechanics and exclusive roles allowing players to make macro-decisions. This risk is from the perceived unfairness if progression feels locked behind a paywall and creating compelling experiences for every tier that keeps players retained.

• Play-to-Earn Despite reputational damage, Play-to-Earn (P2E) remains a structurally novel monetization model. P2E ties in-game activity directly to economic rewards, turning skins, champions, or currency into blockchain-tracked assets with fiat value. The model theoretically incentivizes longer sessions, goal-driven progression, and a new class of “enterprising gamers” underserved by traditional F2P models. The risks are the rise of effective AI-driven bots that can earn infinitely along with the same speculative inflation mentioned above.

The most likely path to dethroning League of Legends mirrors its own rise. A new challenger must leverage Segmented Targeting to serve Gen Z and Gen Alpha with faster matches, simplified mechanics, and Esports-ready clarity. Following the Innovator’s Dilemma and starting with a niche underserved competitive strategy audience and growing upmarket, a new game could scale the genre ladder the same way LoL toppled RTS games.

What it means for the video game industry?

League of Legends has been dominant for over 15-years, to the point where the waves of MOBAs attempting to dethrone it have effectively given up and stopped. LoL’s impact can be felt across the industry, seemingly leading the way for the live service games of the 2010’s:

• Delivered a best-in-class live-ops playbook to the video game industry

  • F2P makes games more accessible than ever before

  • Premium cosmetics can drive high enough spend to offset free distribution

  • Content cadences keep players engaged

• Developed the modern Esports league system, similar to European football’s pyramid

• The most watched game on Twitch for over a decade, as well as on Twitch’s predecessor Justin.tv

To measure the impact of League of Legends on the game industry’s overall revenue, I’m going to compare LoL’s yearly revenue to what the gross revenue would be if LoL’s hours played were translated to AAA games. The yearly active user and yearly estimations were gathered from open sources, and I made the following assumptions:

• The average LoL player plays 50 games a year

• The average LoL game is 30 minutes

• The average AAA game is 20 hours long

• AAA games cost $70

No, League didn’t cost the industry $13 trillion, but it did fundamentally reshape what the value per player looks like. Riot brought in tens of millions of new players into the game industry through their Esports, transmedia properties, and F2P business model. The downside to casting such a wide F2P net is the incremental yearly revenue per marginal player is extremely low versus a traditional $70 boxed game.

ARPU (Average Revenue per User) = Gross Revenue / Yearly Active Users

ARPH (Average Revenue per Hour) = Gross Revenue / Total Hours Played per Year

League of Legends not only dethroned RTSs and dominated MOBAs for over 15 years, it also paved the way for F2P games on PC, professionally organized Esports leagues, and award winning transmedia properties. Is it bad for the video game industry that one game has aggregated so many players and retained them for this long? On one hand those players could have cycled through more games and grossed more revenue in higher ARPH games. On the other hand, rising tides lifts all ships and the game industry benefits from tentpole games whose superpower is bringing in large amounts of non-gamers into the game industry.

League of Legends wasn’t just a genre dominating game, it was a business model shift, an Esports revolution, and a transmedia milestone. Its own rise to dominance offers a roadmap for the next contender. Disruptors won’t win by copying mechanics. They’ll win by designing for new audiences, with new technology, and through new value exchanges. Until then, LoL remains one of the biggest incumbents in the game industry.

What Happens When Your Biggest Spenders Stop Spending?

The gaming industry’s next $20 billion revenue hit won’t come from regulation, it will come from weight-loss drugs that are rewiring how people spend.

GLP-1 medications like Ozempic and Mounjaro are transforming the way people eat, drink, and spend by reducing impulsive behaviors. The modern video game industry is built around monetization strategies driven by compulsion spending. But what happens when millions of players suddenly lose the urge to make impulse buys?

What are GLP-1 drugs and why do they matter?

GLP-1 drugs mimic the hormone glucagon-like peptide-1 (GLP-1), which regulates blood sugar and appetite. These drugs increase insulin production (lowering blood sugar), reduce the release of glucagon (preventing spikes in blood sugar), and slow digestion (increasing satiety).

GLP-1 drugs don’t just reduce appetite, they rewire how the brain processes rewards. Studies show these drugs reduce compulsive behaviors, such as binge drinking (NPR 2023), by over 50% through reducing the release of dopamine while engaging in these behaviors. If this effect translates to gaming, industry’s biggest spenders could see their habits seemingly change overnight.

The $23.95 Billion Question: Will GLP-1 Kill Microtransactions?

Let’s run some back of the napkin math on the impact of GLP-1 drugs for gaming if every gamer struggling with obesity started taking GLP-1 drugs:

• Global gaming revenue: $184.3 billion

• F2P revenue (driven by IAPs): $117.7 billion (Statistica 2024)

• US obesity rate: 42.4% (NIDDK 2024) (proxy for GLP-1 addressable market)

• Reduction in compulsive behavior from GLP-1: 50%

If even half of impulsive spenders reduce their in-game purchases, that’s a potential $23.95 billion loss, or 13.5% of the entire industry’s revenue wiped out by a single class of medication.

To make matters worse, the $23.95 billion revenue hit only looks at direct spending. When you factor in the entire monetization funnel, from user acquisition to engagement to launching the digital store to IAP conversions, the impact compounds. The 50% reduction in compulsive behaviors applied to the entire purchase funnel could lead to a 93.75% reduction in total revenue from these mechanics, pushing the total industry loss to $46.78 billion (25.39% of global gaming revenue).

Who is impacted the most?

Not all game companies are affected equally. Titles relying on loot boxes, casino mechanics, and time-limited FOMO offers are at the biggest risk.

The most at risk titles are:

• Mobile F2P giants: Coin Master, Monopoly Go, Honkai: Star Rail

• Live-service AAA games: EA FC Ultimate Team, Genshin Impact, Fortnite

• Casino & gambling-style games: Zynga Poker, Slotomania, Bingo Blitz

Made even worse are studios with a high revenue concentration among whales. Some F2P revenue models see 2% of players generating 90% of revenue. If the most compulsive spenders are also the most likely to take GLP-1, studios could see their top-grossing players disappear overnight.

The most at risk studios:

• Tencent: Generates $23.9 billion annually led by F2P games (Honor of Kings, PUBG Mobile, League of Legends).

• EA SPORTS: Generates $1.9 billion annually from loot box IAPs (EA FC and Madden Ultimate Team)

• Take-Two: GTA Online’s Shark Cards and NBA 2K’s Virtual Currency drive the majority of their live-service revenue

• Zynga: Top spenders drive 90% of revenue across Merge Dragons, Empires & Puzzles, and social casino games

What should game studios do?

The F2P model was built on compulsion-driven spending but GLP-1 drugs are about to disrupt that foundation. Game companies need to adapt their monetization strategies now.

1. Diversify Revenue Streams
   Games need to decrease reliance on loot boxes, casino mechanics, and time-limited FOMO offers and diversify with value-based purchases

• Offer premium content (expansions & DLCs like Diablo 4)

• Sell permanent cosmetics (instead of randomized gacha-style skins)

• Use subscriptions and season passes (such as Destiny 2)

• Ads or brand partnerships (like Roblox and Walmart)

2. Start A/B Testing Monetization Impact Now
   The fastest way to understand GLP-1’s effect is to test spending behavior now

• Segment GLP-1 users vs. non-users: Analyze revenue & engagement shifts

• Test non-compulsive monetization: How do cosmetics & subscriptions perform?

• Prepare for a future where impulse spending is lower

Final Thoughts: The Studios That Adapt Will Win

GLP-1 drugs aren’t just changing how people eat, they’re changing how they spend. The gaming industry’s biggest monetization strategies are now under threat. The studios that recognize this shift early and adjust their business will stay ahead. Those that don’t? They’ll wake up to find their most valuable spenders have seemingly disappeared overnight.

It’s not a question of if GLP-1 will impact gaming revenue, it’s a question of how fast studios will react.