Video game economics aren’t what they used to be

In the past, success in the gaming industry was straightforward. Make a game, generate buzz about it, and sell as many copies of it as possible. If it went well, you make a sequel and do it all again.

But, in 2024, the cost to the consumer rarely stops after they buy the game. EA's true financial engine is its "Live Services" segment — a broad term encompassing sales of extra content, subscriptions, in-game rewards, and other digital goodies. This accounted for 73% of the company’s revenue last year, fueling growth not just for EA but the entire gaming industry, which in the US is ~6X the size of the box office.

Developing a quality video game is expensive, EA spent an eye-watering $2.4 billion on R&D last year. But no matter how much you spend, the outcome is always unpredictable: many video games flop, and the competition is only getting fiercer — this year’s biggest hit is from a little known Chinese video-game studio.

See the full article here.