The gaming industry, once a showcase for the competitive ferment of an innovation-driven tech marketplace, has matured to the point where its biggest players have mostly learned to stay out of each others’ way.
The big picture: A rapidly broadening player base and antitrust regulators’ uniquely laissez-faire attitude towards gaming acquisitions have let the biggest companies establish their own lanes and keep interlopers at bay.
Flashback: The video game industry’s infancy through the ‘80s and ‘90s was marked by intense competition during successive waves of change.
- Atari lost its early dominance thanks to lackluster game quality, and let Nintendo corner the household console market.
- Sega caught a tailwind in the late ‘80s, touting higher-end technology and edgier branding to counter Nintendo’s family-friendly reputation.
- A host of upstart manufacturers in the late ’80s and the ‘90s, including Hudson Soft’s TurboGrafx-16 and the Neo Geo, added to the fierce competition.
- Nintendo vs. Sega gave way to Microsoft vs. Sony vs. Nintendo. Exclusive games, partnership deals and fan sentiment helped determine which of these giants would win the fight to dominate each new generation of console.
State of play: Today, Microsoft, Sony and Nintendo each enjoy their own market, striving to feed the bottomless appetites of their players rather than engage in head-to-head competition.
- Sony went on a studio spending spree over the last decade and has leaned into selling its PlayStation 5 on the strength of exclusive games that are slowly released on the console.
- Microsoft has blazed another trail with services such as the Netflix-like Game Pass, allowing users access to a host of games for a monthly fee, and streaming platform Xbox Cloud Gaming. Notably, both services reach beyond Microsoft’s flagship Xbox consoles, inviting users to play its games on a number of devices and consoles.
- Nintendo has stuck to its guns, eschewing many modern gaming trends including robust online experiences and ambitious hardware advances. Instead it has cultivated brand loyalty around its longstanding franchises, like Mario and Pokemon, and continued to tout its all-ages appeal.
In what some see as an anti-competitive trend, a huge wave of mergers and acquisitions has marked the last few years in gaming. Two of the biggest acquisitions in gaming history occurred early this year: Microsoft’s $69 billion bid to buy Activision Blizzard, and Sony’s completion of its $3.6 billion purchase of Destiny maker Bungie.
- Game studios are also rapidly being scooped up by a few behemoth holding companies, including Tencent, based in China, and Sweden’s Embracer Group.
Between the lines: While console makers and game studios still compete for minds, hearts and dollars, exponential growth in the population of players has given big companies flexibility to establish their own markets.
- More console and PC game players are added every year as new people discover the industry. And worldwide adoption of smartphones has created millions more game players and the market to match.
Of note: Demand for new games seems greater than suppliers can currently meet. The rest of this year offers a sparse release calendar, a slowdown. that’s been widely bemoaned.
Yes, but: Fortnite-maker Epic Games has proven to be a disruptive force for competition.
- After Valve’s Steam marketplace dominated the PC gaming landscape for years, the Epic Game Store launched as a rival to the most powerful platform.
- Epic’s landmark suit against Apple was also a direct challenge to the iPhone maker’s tight control of its App Store and the ways app and game developers can make money there.
The bottom line: Gaming has its own “big three” giants — but unlike Big Tech’s market leaders, they’ve largely escaped the glare of the regulatory spotlight.