How to Forecast the Future of the Games Industry
Plus, Professor Fei-Fei Li and Adobe's Scott Belsky sound off on the limitations of AI for creative work
Matthew Ball would like to show you some charts.
The entrepreneur and best-selling author of The Metaverse has released his annual report on the state of gaming, this time as an omnibus 221-slide presentation.
At the heart of Ball’s presentation is a question: Why has gaming’s growth stalled out so dramatically in recent years, even compared to other forms of entertainment?
As Ball puts it early on in his report, the “post-pandemic pullback” isn’t sufficient to explain the industry’s troubles.
And here, Ball offers a novel but well-supported hypothesis. He argues that from 2011–2021, the games industry enjoyed a historically anomalous set of advantages—including the explosive growth of mobile, innovation in live-service business models, and new genres and social features—that are beginning to be exhausted.
Ball also offers some surprising data points to support his case. For instance, did you know that over the last four decades, gaming has been getting consistently less expensive compared to other forms of entertainment?
The industry’s habit of only raising prices once per decade has put it on a far more deflationary trajectory when compared to the movie theater business (which has remained surprisingly stable in real dollars) or concert tickets and TV streaming, both of which have steadily become more expensive in real terms.
However, Ball also believes there’s a case to be made for a return to growth. New devices and UGC platforms, new game genres enabled by emerging tech like AI, and new pricing and revenue models offer a multiple of paths forward for the games industry.
The report is well worth reading in full, but for those who want the topline takeaways, this week we reached out to Ball and discussed a few of his findings.
Below are three surprising data points from Ball’s report that stood out to us:
Takeaway #1: The Roblox kids may never graduate to console
Let’s get oriented with a quick chart showing just how big Roblox is.
The numbers are staggering. The monthly active user numbers available suggest that Roblox is bigger than the entire console ecosystem (Nintendo, Xbox, and PlayStation) combined.
For years, game developers in the traditional AAA ecosystem have hoped to see signs that “the Roblox kids” will eventually graduate from the platform and move up to “more serious” platforms like consoles.
But so far, that doesn’t seem to be occurring.
Nintendo aside, the console ecosystem has had stagnant growth for the last two console generations:
Nintendo’s success with the Switch is commendable, but it has mostly grown the size of the “console” market by cannibalizing their own handheld market.
This implies that most of the growth of the console market is really just Nintendo consolidating its platforms.
Ball says that he believes that many young Roblox players will continue playing games as they age up. The question he raises, though, “Is how many of them stick with Roblox-specific gaming versus migrating to other titles.”
Another way of asking this is: What if the Roblox kids never ask for a games console for Christmas?
It’s hard to predict, and Ball points out that if even a small percentage of Roblox’s 400 million monthly active players convert to console, that could offer a lot of growth. But his bet is that those who do migrate away from Roblox will stick to either mobile or PC.
Says Ball: “If you’ve spent years playing the most popular (and probably soon, highest grossing) game in history, which all of your friends can play, and none of this required spending a dollar on content let alone a console… the idea of paying $500-600 on hardware just to have the chance to buy a game is probably crazy.”
Takeaway #2: While PC has grown, the number of winners has stayed the same.
The number of new-release games on Steam making over $100,000 each year has not grown, and in fact has fallen from a peak of around 1,000 games per year in 2016.
This implies that although the number of games and players is continuously going up, the total number of “winners” remains stable, even if those winners are winning in a more dramatic fashion.
Ball argues that this can in part be blamed on basic supply-demand dynamics. He points out that there were about 11x as many titles released on Steam in 2024 as there were in 2024, while spend has “only” gone up 6x.
“Moreover, over 60% of this growth is via microtransactions/DLC,” he says, “which naturally concentrates towards the most popular, successful, and highly live-operated titles.”
And, of course, new releases aren’t only competing with new releases. There are now over 100,000 games on Steam, an unprecedented back catalogue that is always accessible and which long-established publishers continue to leverage with aggressive sales.
Ball also points out that another dynamic is at play, which is that the evolution of social gaming and social discovery of games has concentrated attention on the biggest games.
“These effects,” he says, “result in a power law distribution whereby the top titles are bigger than ever, but the rest of the tail is relatively unchanged.”
Combine all these factors, and “we have a much, much larger divisor for spend.”
Takeaway #3: Fortnite retains best on the Switch
Even as Fortnite enters its 9th year on the market, it remains one of the most powerful cultural forces in all of entertainment. Just two months ago, in November 2024, the game broke its all-time player count record when 14.3 million concurrent players logged in for a live concert event featuring Snoop Dogg.
Its continuing success no longer comes as a surprise, but we were interested to see the following chart from Ball’s presentation that splits out the game’s longterm (D120) retention by platform:
That the Nintendo Switch is the best-retaining platform for Fortnite comes as a surprise for anyone who has played the game on the device. Even compared to most phones, Nintendo’s handheld is not the optimal way to play Epic’s battle royale.
Ball puts it more bluntly: “Fortnite does not play well on the Switch,” he says. “You basically choose between awful textures at 30 FPS, or just pretty bad textures at 20 FPS.”
So why is the Switch the best-retaining platform for Fortnite?
In a conversation with the speedrun newsletter, Ball offered four possible explanations:
First, there are no other battle royales on the platform—no COD Warzone, Free Fire, PUBG, etc. It makes sense that Fortnite would have above-average player retention on a platform where they face no direct competition compared to hyper-competitive shooter/BR platforms such as PC, PlayStation, Xbox, etc.
Second, if you’re a younger player—maybe 16, 13, or so—odds are higher that Switch is your only device for Fortnite play, and thus you’re more likely to retain on it than a user who has several access pathways.
Third, Switch overindexes to younger players, which means it would overindex to players who may not even be allowed (by their parents) to play another BR (or shooter)—even if they have other devices.
Fourth, Switch ranked fourth by lifetime players acquired (after PlayStation, then PC, then Xbox, and beating iOS and then Android). A smaller volume of players makes it more likely to outperform overall averages—though certainly, it doesn’t guarantee it.
Ball considers the success of Fortnite on Switch to be emblematic of broader trends that lifted the success of the Switch itself as well as of Roblox, another famously low-fidelity game. He points out that Roblox still supports the iPhone 5S, which debuted in 2013.
“That’s how focused Roblox is on device support,” he says, “partly because so many of its users are on hand-me-down devices.”
Read Matthew Ball’s full State of Video Gaming in 2025 presentation here.
Fei-Fei Li and Scott Belsky on the Creative Possibilities and Limitations of AI
Last week at speedrun 004, our founders were treated to talks from two tech legends: Dr. Fei-Fei Li (of World Labs and Stanford University) and Scott Belsky, the Chief Strategy Officer at Adobe.
Both speakers grappled with the limitations of AI and its proper place alongside human creativity.
In the clip below, Dr. Li articulated a fascinating critique of current GenAI tech with her argument that “creativity requires controllability.”
“This is why some of the current GenAI technology is deeply unsatisfying. Because it doesn’t give that controllability. It almost wants to leap forward and say forget about all this—let’s just give you the image you want, the video you want, or the 3D world you want. And I think that’s the wrong way of thinking about it.”
—Dr. Fei-Fei Li, Cofounder of World Labs and AI Researcher & Professor at Stanford University
Thinking along similar lines, Adobe’s Scott Belsky stressed the crucial importance of personal taste when producing creative work.
“My thesis for the next ten years is that taste will outperform skill. Because skill is going to be offloaded to compute.”
—Scott Belsky, Chief Strategy Officer, Executive Vice President of Design & Emerging Products at Adobe
🗞️ News From the Future
🤖 Axios sparked speculation about an AI breakthrough when it reported that OpenAI CEO Sam Altman has scheduled a closed-door briefing for U.S. government officials in Washington on Jan. 30. Altman followed up on X to tamp down the hype.
🌍 The African games market is nascent, but some countries (particularly Nigeria and South Africa) are beginning to have breakout hit mobile games, GI.biz reported.
💼 There are currently over 400 open jobs listings across our portfolios. Join our talent network for more opportunities. If we see a fit for you, we'll intro you to relevant founders in the portfolio.
That’s it for this week. If you haven’t already subscribed, it’s time to lock in. And we’ll see you next Tuesday.
love seeing the takeaways from the 200+ page report. 👏