The Economics of Sports and Entertainment
The Economics of the Video Game Industry
How video games became larger than film and music combined, the shift to free-to-play and in-game purchases, and the growth of gaming in India.
Video games have become one of the largest entertainment industries in the world. Industry estimates put global games revenue at around 180 billion dollars a year or more, larger than global box office and recorded music combined.
Business models
- Premium games: players pay upfront to buy a game, traditionally for consoles and PCs.
- Free-to-play: games are free to download, earning money through in-game purchases, such as items, skins or extra levels. A small share of players, sometimes called “whales”, spend large amounts and generate much of the revenue.
- Subscriptions: services like Xbox Game Pass offer libraries of games for a monthly fee.
- Advertising, especially in mobile games.
Mobile gaming
Mobile games now account for roughly half of global games revenue. Cheap smartphones and data have brought gaming to billions of people, especially in Asia.
Development costs
Major console games can cost hundreds of millions of dollars to develop and market, with teams of hundreds or thousands of people. This makes big games risky, encouraging sequels and established franchises. At the same time, small independent developers can reach global audiences through digital stores.
Gaming in India
India has one of the world’s largest numbers of gamers, mostly on mobile phones. In 2025, India passed the Promotion and Regulation of Online Gaming Act, which banned real-money online games, such as fantasy sports and card games played for cash, while promoting esports and other online games. The ban forced major real-money gaming companies to shut down those services.
A mobile game is free to download and play. Most players never pay. But a small percentage buy special characters or items, spending a few hundred rupees, and a very small number spend much more. Across millions of players, these purchases generate large revenues. The model relies on keeping players engaged for a long time.
Concerns
Concerns include in-game purchases targeted at children, loot boxes that resemble gambling, addictive design and working conditions for developers. Accessibility is another issue: features like audio cues, screen reader support and adjustable controls let blind and disabled players enjoy games, and some major studios have added extensive accessibility options.
Free-to-play games can be expensive to develop and run. They earn money through in-game purchases and ads from a minority of players, making engagement and retention central to their business.
- Global games revenue is larger than box office and recorded music combined.
- Free-to-play games earn through in-game purchases, often from a small share of players.
- Mobile gaming accounts for about half of games revenue.
- India's 2025 law banned real-money online games while promoting other online games.
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