Video games: the industry’s big bang moment

Amidst a social crisis and spectacular acquisitions, the gaming market is attempting to reinvent itself, creating investment opportunities.

Here's a little quiz. What is the most expensive film in history? While sources disagree on the subject, it is most likely Star Wars: The Rise of Skywalker, directed by J. J. Abrams and released in 2019, with an estimated budget of around $500 million. While this is an impressive sum, it is still less than the amounts invested in the production of many video games. The highest-quality titles, known as triple-A games, regularly exceed half a billion dollars in production costs. 

Currently, the most expensive game of all time is Rockstar Games’ Red Dead Redemption 2, whose development, including marketing, is estimated at $800 million. This record will be broken next year with the release of the highly anticipated Grand Theft Auto VI, now announced for 19 November 2026 after multiple delays, with production costs estimated at between one and two billion dollars. With this unprecedented amount, GTA VI will become the most expensive entertainment product ever created, illustrating the striking power of video game publishers, which is incomparable to their counterparts in the film industry.

The gaming industry can afford such investments because it is a heavyweight. A serious heavyweight. According to a report by the Boston Consulting Group, the global video game market generated $221 billion in 2024, more than the film and music industries combined. But there is a catch. After years of double-digit growth (+13% per year on average between 2017 and 2021), the sector is now stagnating (+1% per year between 2021 and 2023), while development costs continue to rise at a frenetic pace. According to estimates by the Boston Consulting Group, these costs are expected to increase by 8% per year between 2022 and 2028 for triple-A games, which is more than the expected growth in console game revenues (+3%).

What is causing this slowdown? “During COVID, the video game sector experienced hypergrowth. Many people bought equipment and game sales skyrocketed,” recalls Otmane Jai, head of investments for the MJ & Cie family office. “Now that the COVID frenzy is over, the sector is coming back down to earth” This view is shared by Stéphane Rappeneau, co-founder of the Weird Loop studio and professor of game economics at the Sorbonne University: “In the midst of the pandemic, the financial world realised that everyone was gaming and that this sector could be a good investment. As a result, capital flooded in, leading to the creation of numerous studios and an explosion in supply.” Just before the pandemic, the Steam platform, which distributes PC games online, published around 8,000 new games per year (in 2018 and 2019). This figure exploded in the following years, reaching 18,583 in 2024. 

“During the pandemic, studios rushed to develop new games. This led to market saturation,” confirms Walid Azar Atallah, senior portfolio manager at Thematics Asset Management. But more games being available also means less revenue per title and more commercial failures. The game Concord, developed by Firewalk Studios – a subsidiary of Sony – will remain one of the symbols of the end of the euphoria. The development of this ambitious first-person shooter was long and costly: eight years and $400 million, including marketing. Unfortunately, when the title was finally released on PC and PlayStation 5 on 23 August 2024, it was met with a disastrous reception and anaemic sales. On Steam, Concord never exceeded 697 concurrent users on PC. By comparison, Battlefield 6 – a first-person shooter from Electronic Arts with a budget of around $400 million – peaked at nearly 750,000 concurrent players on Steam in its launch week last October. Just 15 days after Concord’s launch, Firewalk Studios withdrew the game from sale and Sony refunded the few customers, resulting in a colossal loss.

And Concord is not the only failure in recent years. Such disappointments are becoming more common. The result of a $200 million investment, the pirate game Skull and Bones, which was supposed to become Ubisoft’s new hit franchise upon its release in August 2024, never exceeded 2,615 simultaneous players on Steam. The studio shamelessly presented this title as the first AAAA game – four As to symbolise unrivalled quality and justify a steep price tag ($80). But the game failed to win over the gaming community, bringing Ubisoft to the brink of bankruptcy, with current data showing that only 300 people play it simultaneously each day.

Production costs are rising, but there is less capital to finance them; revenue per title is falling, not to mention flops... The return to reality is brutal. “With the post-COVID bubble bursting, private capital fled to more promising sectors such as artificial intelligence and defence,” continues Stéphane Rappeneau. As a result, after the boom years linked to lockdowns, the sector has had to tighten its belt. It has been a difficult period marked by a historic social crisis. According to the website Obsidian, which tracks job losses in gaming, the video game industry saw 8,500 redundancies in 2022, followed by 10,500 in 2023 and 14,600 in 2024.

Many companies have also closed their doors due to lack of profitability. In May 2024, for example, Microsoft announced the closure of four studios that developed games for the Xbox console: Arkane Austin (Redfall), Tango Gameworks (Hi-Fi Rush, saved by Korean publisher Krafton in August 2024), Alpha Dog Games (Mighty Doom) and Roundhouse Games (absorbed by ZeniMax Online Studio). In October 2024, Sony pulled the plug on Firewalk, the American studio behind the Concord crash, as well as Neon Koi, a specialist in mobile games. And more recently, in February 2025, American media giant Warner Bros Discovery did the same by closing three other studios, including Monolith Productions, known for developing several major titles such as Middle-earth: Shadow of Mordor and its sequel Shadow of War, two games based on The Lord of the Rings.

Meanwhile, independent companies are currently teetering on the brink of collapse. On 14 November, French giant Ubisoft – owner of numerous successful franchises such as Prince of Persia, Assassin’s Creed and Just Dance – asked Euronext to suspend trading and postponed the publication of its quarterly results. While Ubisoft shares were trading above €80 at the height of the pandemic, they were worth only €6.77 when trading was suspended.

So, is it game over for video games? No, say the experts we consulted. “With 3.6 billion players worldwide, the video game sector is a robust industry that is expected to return to growth of 4 to 5% per year over the next few years,” says Otmane Jai. And it appears to be already recovering. Since 1 January, only 4,400 redundancies have been recorded (as of 18 November), compared with 14,600 for the whole of 2024. “The sector has overcome the excesses of the pandemic. It is now being boosted by favourable structural factors,” says Andrew Ye, investment strategist at Global X. “The accelerated development of AI, the democratisation of subscription models, hardware renewal cycles and regulatory easing in Asia seem to be creating real momentum. However, this is controlled growth, not irrational exuberance. Publishers have optimised their costs. Risk-taking still exists, but they are placing greater emphasis on profitability.”

This view is shared by Amaya Gutiérrez, head of investment and portfolio advisory at Rothschild & Co: “Of course, the gaming sector faces challenges, but we also see opportunities. There are pockets of growth, particularly in China, where acceptance of video games is growing, benefiting companies such as Tencent. And, on a global level, the console market also offers promising prospects, given the success of Nintendo’s recently launched Switch 2.”

At the same time, new business models are developing rapidly, notably user-generated content (UGC), used in particular by Roblox and Fortnite (Epic Games), which allow developers to sell their creations on these platforms. “We are at a key moment in history. Video game companies need to reinvent themselves and innovate, particularly by using artificial intelligence,” continues Otmane Jai. “The question is who will come out on top. I think it will be the big players with a lot of cash. This gives them the ability to innovate and the opportunity to buy smaller studios in difficulty at attractive prices.”

This consolidation began several years ago. Among notable acquisitions, in 2022 Take-Two (GTA) took over Zynga (FarmVille) and Microsoft put $69 billion on the table to acquire Activision Blizzard. Japan’s Sega, creator of Sonic, bought Rovio Entertainment (Angry Birds) in 2023, and China’s Tencent, which owns Riot Games, publisher of the global hit League of Legends, acquired a 25% stake in Ubisoft’s new subsidiary, which brings together the French company’s three main franchises (Assassin’s Creed, Far Cry and Rainbow Six) for €1.6 billion in March 2025. As for Electronic Arts (EA), known for its EA Sports FC (formerly FIFA), Battlefield and The Sims franchises, it announced last September that it had accepted a takeover bid for $55 billion. The buyer is a consortium comprising the Saudi Arabian Public Investment Fund and US investment firms Affinity Partners and Silver Lake.

“Consolidation is not over,” predicts Otmane Jai. This is good news for the markets, as consolidation in the sector will enable cost rationalisation and synergies. Since 1 January, the VanEck Video Gaming and eSports ETF, which brings together the main players in the sector, has already risen by 34% (as of December 1st).