Dynamics of the game industry

Video Games

The video game industry has evolved from a niche entertainment market into a dominant global force, surpassing the combined revenue of the film and music industries.[1] This evolution has been marked by radical shifts in how games are published, monetized and consumed, creating both unprecedented opportunities for creators and significant challenges for players.

Though much smaller than video games, other forms of gaming are also significant and growing in size. The global market for board games reached $22 billion USD in 2025, divided roughly equally between strategy, puzzle and war games.[2] Collectible card games such as Pokémon earned just under $30 billion worldwide,[3] while tabletop role-playing games like Dungeons & Dragons brought in roughly $2 billion.[4]

Publishing models and revenue streams

Historically, the video game industry operated primarily on physical premium sales, where consumers paid an upfront cost "in exchange for the limited experience included in the game."[5] While this model still exists, allowing for valuable incentives like pre-order sales to generate "revenue prior to actually being finished with the product," it faces high vulnerability to internet piracy.

The rise of the internet enabled two significant continuous revenue models:

Subscription-based models: These turned the game into an "on-going experience." Initially, games like World of Warcraft leveraged both an upfront premium price alongside a monthly subscription fee. This model is heavily reliant on network effects, where a growing player base increases the perceived value of the game. [6]

Freemium and item-selling based models: This strategy has become dominant, particularly in the mobile sector, which accounts for the majority of game advertising revenue. The premise is simple – "give the game away for free, then make money by selling things inside the game."[7] This approach allows companies to almost entirely remove the revenue ceiling per user. [8] In 2023, approximately 80 percent of gaming revenue came from microtransactions.[9]

Monetization controversies and design tensions

The implementation of microtransactions generates critical design tensions between maximizing player enjoyment and fulfilling business requirements:

  • “Battle Passes” are a relatively new and popular mechanism structured as a tiered system where players unlock content by leveling up. These have seen "relatively less controversy" than loot boxes due to the transparency of rewards and the sense of achievement they offer.[10]
  • Cosmetics are visual content, such as skins, that don’t impact game dynamics. They’re considered the "most accepted type of in-game items due to their non-invasiveness regarding gameplay and balance."[11]
  • Freemium games are often "designed to create pain points that can be relieved with money." [12] This includes artificial difficulty spikes that suddenly make a game "nearly impossible to beat without power-ups."
  • In-game currency systems are designed to blur the actual cost of content,[13] making it difficult for players, especially children, to track their spending and understand the value of money.[14]
  • Loot boxes randomize items, some of which are cosmetic and some of which may affect gameplay. Experts, including psychiatrist Daniela Lobo at the Centre for Addiction and Mental Health in Toronto, state that they act as a "gateway to gambling": in Ontario, almost one-quarter of students in Grades seven to 12 reported engaging in gambling while gaming, which included buying loot boxes or participating in skins betting.[15] Loot boxes obscure cost versus reward, often prompting purchases based on the hope of receiving a rare item despite the low chance.[16]
  • Online multiplayer games can create strong social bonds, leading players to maintain subscriptions and spend money to stay competitive or support their team.[17] Children may feel pressure to spend on cosmetic items, even though they don’t affect gameplay, because they worry about looking like they can’t afford them.[18]

Industry challenges and future trends

The industry faces significant challenges related to the immense cost of game development and market saturation.

The expense of developing a major AAA title often exceeds $200 million.[19] This necessity for massive returns means that to achieve tight margins, companies must sell at least 25 million units. This pressure drastically reduces risk tolerance, leading to concerns that innovation will "drain away from the higher end of games."[20] As one analyst notes, the consumer is "not necessarily getting exposed to the most dynamic and interesting development in the game space."[21]

A major challenge for new titles is competing against established behemoths like Fortnite and Grand Theft Auto 5 (which launched in 2013 but remains one of the top 20 bestselling games) because these titles have successfully "funneling in players and keeping there with social hooks," locking in their audiences.[22]

In terms of design, there’s growing interest in procedural storytelling, where algorithms generate "a coherent narrative from your own impulsive, seemingly chaotic actions."[23]

The Canadian video game industry recently shrunk, with a nine percent drop in the number of operating companies. While the industry "remains strong and stable," this decrease mostly affected smaller, independent studios with fewer than 25 employees. The structure of the industry shows that foreign companies employ 88 percent of the workforce, demonstrating how dependent it is on international investment. Small developers, consequently, are "fighting over scraps in terms of funding."[24]

Globally, the entertainment landscape is seeing convergence, with video games becoming more cinematic and streamers like Netflix leading the "gamification" of TV with interactive shows, as "animators these days grew up with visual codes from the gaming world."[25]

Popular genres

Video games today exist in a "bewildering mass of interconnected genres" and sub-genres:[26]

  • Adventure games: This is a highly preferred genre, listed as the top choice for both Gen Alpha (42%) and Gen Z (43%) players.[27]
  • Arcade: A popular genre, favored by 37% of Gen Z players. [28]
  • Battle royale: A highly popular multiplayer genre for both Gen Alpha (40%) and Gen Z (42%). The popularity of this type "underscores the importance of socializing in games and gaming culture."[29]
  • Cozy games: A newer subgenre marked by a “relaxing nature” and typically more "constructive than destructive" challenges. They’re meant to help players unwind and don’t require "extreme skill," as it’s "virtually impossible to lose."[30]
  • Deck builder / card battler: A genre that utilizes elements from traditional card games and collectible card sets. Players’ characters are "represented as cards with abilities and values," which are played "against a rival’s collection in a turn-based battle." The goal is to build a collection by starting with a limited number of cards and earning more "as they go on."[31]
  • Dungeon crawler: A derivative of the role-playing game (RPG) that emphasizes "fast-paced exploration and combat, and accumulating endless shiny things" rather than narrative or character tinkering. Gameplay involves moving through "labyrinthine enclosed environments, battling enemies, picking up items and money, solving puzzles and unlocking doors."[32]
  • Fighting games: This sub-genre is notable for its historically diverse casts of characters, which "have done extremely well about shying away from strictly straight white male casts." The genre also retains strong "arcade roots," often emphasizing in-person local community and culture.[33]
  • Massively multiplayer online role-playing game (MMORPG): A genre that gained significant traction with the rise of the internet. It’s characterized by "high switching costs" after investing time in character development, creating a "lock-in effect."[34] These games feature open worlds and can theoretically have a "never-ending experience."[35]
  • Match games: A type of casual game that involves matching tiles and items, such as Candy Crush. Most popular with older gamers.[36]
  • Metroidvania: A portmanteau genre name (from Metroid and Castlevania) "usually applied to 2D games in which the world is explorable in all directions." The design requires players to "mentally map their progress and backtrack when necessary" to access areas unlocked by later items.[37]
  • Platform games: Games in which characters move through a usually two-dimensional world, frequently jumping or otherwise moving between horizontal levels (platforms). Super Mario Bros is one of the archetypal platform games.
  • Puzzle games: These games frequently "incorporate spatial-reasoning skills."[38]
  • Racing games: A popular genre for Gen Alpha (41%). This multiplayer genre is highlighted for its ability to encourage socializing in games.[39]
  • Roguelikes: This genre originates from the 1980 game Rogue and features modern takes that include "permanent death (or permadeath)," and environments that are "continually chang[ing]" with each playthrough. Gameplay centers on exploration, combat and item collection, where death is seen as a step "towards better understanding the game". This genre is also tied to the concept of procedural storytelling (algorithmic generation of narratives).[40]
  • Role-playing games (RPGs): A broad category; Dungeon Crawlers are a derivative of the RPG. They’re often popular with 2SLGBTQ+ players because they frequently feature character customization tools that allow players to "select pronouns, shape their bodies and select a vocal range”; in some cases, games of this type may even be “a form of gender-affirming care.”[41]
  • Sandbox games: Games such as Minecraft that "often have no ultimate end state or goal—it is up to the players themselves to decide on their own goals."[42] They offer "a profusion of verbs at any moment" and minimal "authorial push down a single path," placing players "much more in the authorial role."[43]
  • Shooters: A broad genre that usually involves killing enemies in a three-dimensional world. Linear military shooters such as Call of Duty often afford players "little interactivity and agency”[44] and have often been discussed in the context of conveying "hegemonic militarism" and Americentrism, [45] though ones that take a more realistic approach may lead players to question the depictions of combat they’ve seen in other media.[46] A “looter shooter” is any shooter game defined by the need to collect "ever better and more useful weapons, ammo and clothing from your vanquished foes." Discoverable items are ranked, and the low chance of finding rare items is a "major motivator for play."[47]
  • Survival game: Described as one of the "bleakest gaming sub-genres," challenging players "to live for as long as possible in an inhospitable environment, gathering resources and fighting off danger until your character escapes or succumbs.”[48]

For younger players, the top genres reflect a strong desire for exploration and social interaction:

  • Gen Alpha leans toward Adventure (42%), Racing (41%) and Battle Royale (40%).[49]
  • Gen Z prefers Adventure (43%), Battle Royale (42%) and Arcade (37%). The popularity of multiplayer titles "underscores the importance of socializing in games and gaming culture."[50]

 

[1] McGee, T. (2025) New research backs up what gamers have thought for years: cozy video games can be an antidote to stress and anxiety. Reuters.

[2] Lee, R.A., & Elad B. (2025) Board Game Statistics 2025: The Market’s Big Winners. SQ Magazine.

[3] (2025) Collectible Card Games Market. Matastat.

[4] (2025) Tabletop role-playing game (TTRPG) market overview. Business Research Insights.

[5] Diaczok, M. P., & Tronier, P. (2019). An investigation of monetization strategies in AAA video games. Unpublished master’s thesis]. https://www.tuw.edu/psychology/psychology-behind-microtransactions/
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[6] Diaczok, M. P., & Tronier, P. (2019). An investigation of monetization strategies in AAA video games. Unpublished master’s thesis]. https://www. tuw. edu/psychology/psychology-behind-microtransactions/Retrieved from https://research. cbs. dk/en/studentProjects/an-investigation-of-monetization-strategies-in-aaa-video-games.

[7] Liberty, S. (2025) I’m a Game Designer. Here’s Why I Never Play Games On My Phone. Medium.

[8] Diaczok, M. P., & Tronier, P. (2019). An investigation of monetization strategies in AAA video games. Unpublished master’s thesis]. https://www.tuw.edu/psychology/psychology-behind-microtransactions/
Retrieved from https://research.cbs.dk/en/studentProjects/an-investigation-of-monetization-strategies-in-aaa-video-games

[9] Liberty, S. (2025) I’m a Game Designer. Here’s Why I Never Play Games On My Phone. Medium.

[10] Ash, J., Gordon R., & Mills D. (2022) Between Gaming and Gambling: Children, Young People, and Paid Reward Systems in Digital Games. Longsborough University.

[11] Diaczok, M. P., & Tronier, P. (2019). An investigation of monetization strategies in AAA video games. Unpublished master’s thesis]. https://www.tuw.edu/psychology/psychology-behind-microtransactions/
Retrieved from https://research.cbs.dk/en/studentProjects/an-investigation-of-monetization-strategies-in-aaa-video-games

[12] Liberty, S. (2025) I’m a Game Designer. Here’s Why I Never Play Games On My Phone. Medium.

[13] Diaczok, M. P., & Tronier, P. (2019). An investigation of monetization strategies in AAA video games. Unpublished master’s thesis]. https://www.tuw.edu/psychology/psychology-behind-microtransactions/
Retrieved from https://research.cbs.dk/en/studentProjects/an-investigation-of-monetization-strategies-in-aaa-video-games

[14] Ash, J., Gordon R., & Mills D. (2022) Between Gaming and Gambling: Children, Young People, and Paid Reward Systems in Digital Games. Longsborough University.

[15] Ranson, A. (2025) Canadian teens are getting hooked on this gateway to gambling in online games. The Globe and Mail.

[16] Diaczok, M. P., & Tronier, P. (2019). An investigation of monetization strategies in AAA video games. Unpublished master’s thesis]. https://www.tuw.edu/psychology/psychology-behind-microtransactions/ 
Retrieved from https://research.cbs.dk/en/studentProjects/an-investigation-of-monetization-strategies-in-aaa-video-games

[17] Carter, J. (2022) Social pressure opens the doors to game addiction say State of Survival players. Game Developer.

[18] (2024) Fear being bullied: Children pay to become popular in video games. Science Norway.

[19] Packwood, L. (2025) The big picture of the video game industry. Games Industry.biz.

[20] Packwood, L. (2025) The big picture of the video game industry. Games Industry.biz.

[21] Packwood, L. (2025) The big picture of the video game industry. Games Industry.biz.

[22] Packwood, L. (2025) The big picture of the video game industry. Games Industry.biz.

[23] Gordon, L. (2021) Procedural storytelling is exploding the possibilities of video game narratives. Verge.

[24] Ng, C. (2025) Canadian video game industry saw 9% drop in number of companies: report. The Canadian Press.

[25] Bharanidharan, S. (2023) The craft of adapting video games. KidScreen.

[26] Stuart, K. (2021) Dungeon crawler or looter shooter: Nine video game genres explained. The Guardian.

[27] (2023) How Different Generations Engage with Video Games Today. NewZoo.

[28] (2023) How Different Generations Engage with Video Games Today. NewZoo.

[29] (2023) How Different Generations Engage with Video Games Today. NewZoo.

[30] McGee, T. (2025) New research backs up what gamers have thought for years: cozy video games can be an antidote to stress and anxiety. Reuters.

[31] Stuart, K. (2021) Dungeon crawler or looter shooter: Nine video game genres explained. The Guardian.

[32] Stuart, K. (2021) Dungeon crawler or looter shooter: Nine video game genres explained. The Guardian.

[33] Livingston, Z. (2023) How Fighting Games Became a Haven for LGBTQ Gamers. Wired.

[34] Diaczok, M. P., & Tronier, P. (2019). An investigation of monetization strategies in AAA video games. Unpublished master’s thesis]. https://www.tuw.edu/psychology/psychology-behind-microtransactions/ Retrieved from https://research.cbs.dk/en/studentProjects/an-investigation-of-monetization-strategies-in-aaa-video-games.

[35] Diaczok, M. P., & Tronier, P. (2019). An investigation of monetization strategies in AAA video games. Unpublished master’s thesis]. https://www. tuw. edu/psychology/psychology-behind-microtransactions/Retrieved from https://research. cbs. dk/en/studentProjects/an-investigation-of-monetization-strategies-in-aaa-video-games.

[36] (2023) How Different Generations Engage with Video Games Today. NewZoo.

[37] Stuart, K. (2021) Dungeon crawler or looter shooter: Nine video game genres explained. The Guardian.

[38] Brathwaite, B., & Schreiber, I. (2009). Challenges for game designers (pp. 2-5). Boston, Massachusetts: Course Technology.

[39] (2023) How Different Generations Engage with Video Games Today. NewZoo.

[40] Stuart, K. (2021) Dungeon crawler or looter shooter: Nine video game genres explained. The Guardian.

[41] Small, Z. (2023) Video Games Let Them Choose a Role. Their Transgender Identities Flourished. the New York Times.

[42] (nd) Introduction to Game Design. Meridian Stories.

[43] Koster, R. (2013) On choice architectures. Raph Koster’s Website.

[44] Pattison, J. (2025). Experiencing the Call of Duty: Exploring emotions in commercial war games. Media and Communication, 13.

[45] Belman, J., Nissenbaum, H., & Flanagan, M. (2011, January). Grow-A-Game: a tool for values conscious design and analysis of digital games. In Proceedings of DiGRA 2011 Conference: Think Design Play.

[46] Gee, J. P. (2003). What video games have to teach us about learning and literacy. Computers in entertainment (CIE), 1(1), 20-20.

[47] Stuart, K. (2021) Dungeon crawler or looter shooter: Nine video game genres explained. The Guardian.

[48] Stuart, K. (2021) Dungeon crawler or looter shooter: Nine video game genres explained. The Guardian.

[49] (2023) How Different Generations Engage with Video Games Today. NewZoo.

[50] (2023) How Different Generations Engage with Video Games Today. NewZoo.