How Global Markets Helped the Video Game Industry

Few industries have benefited from streamlining global trade and e‑commerce as the video game industry. If you were a kid in the 1970s and 1980s, your experience with video games was often mainly through an arcade machine, a piece of hardware that allowed you to play only one game at a time. Today, gamers around the world can use gaming consoles, high-end personal computers (PCs), handheld devices, virtual reality headsets, or even their phones to play a variety of games from an ever-expanding library provided by digital software marketplaces.

Some of these advances can be attributed to technological progress and advances in computing power, but they are also attributed to an increasingly efficient supply chain that makes these components affordable and accessible. Once gamers have a device, they can acquire games from developers worldwide thanks to global distribution platforms, or online software marketplaces. When they boot up their games, they can join online multiplayer experiences with players from different cities, countries, or even continents. Globalization has made video games more abundant and accessible and has opened avenues for gamers to monetize their hobby.

The increase in foreign trade and streamlining of global commerce had one very noticeable benefit for the gaming industry: the user base is bigger than ever. This expanded market made gaming the most lucrative entertainment industry, with higher revenue than the music and film industries combined (Figure 1). The rapid expansion of the gaming market has caused revenue for the industry to nearly triple in the span of 50 years, going from $59 billion in the 1980s to an estimated $183 billion by the end of 2022.

The increase in revenue and market size has also benefited gamers. A more robust gaming market has translated into increased funding opportunities for independent studios or developers. Traditional investors and venture capitalist funds are more eager to fund gaming projects because of higher revenue opportunities. Studios also can leverage their worldwide audiences by relying on crowdfunding platforms like Kickstarter, Patreon, or IndieGoGo. And as video game development has become more lucrative, more passionate individuals have had the chance to venture into game development. Indie developers’ passionate, risk-taking approach to video game development drives innovation and evolution in the gaming market, often pushing the frontier of available genres.

One example is the rise of the battle royale genre. One of the genre’s most popular games, PlayerUnknown’s Battlegrounds, also known as PUBG, was created under the direction of Brendan Greene, an avid player of the military simulation game Arma 2. While playing Arma 2 under the “PlayerUnknown” alias, Greene developed a “mod,” a term used by gamers for unofficial modifications of a game, for the existing mod DayZ that helped give rise to the battle royale genre. Greene’s mod eventually led Sony to pay him to consult in creating H1Z1, the first major standalone battle royale game ever released. In 2016, South Korean indie developer Bluehole asked Green to help develop a battle royale concept, which became PUBG. The game was an instant success, disrupting the gaming market and inspiring the creation of games like Fortnite and Call of Duty: Warzone, two of the most popular and lucrative games on the market. Massive market expansion, investor trust, and broad community support thanks to globalization and global e‑commerce quickly scaled the battle royale genre from passion project mods into multimillion-dollar trend-setting standalone games.

As with software, the increased profitability of video games has led to higher investment into hardware developments and the integration of gaming-capable hardware in nongaming-specific devices. As Figure 2 highlights, in the past 50 years, options have expanded from arcade machines to home consoles, high-end PCs, smartphones, virtual reality headsets, and cloud computing.

The explosion of the gaming industry has been tremendously beneficial for the United States. According to revenue estimates from Statista, the US gaming industry brought in approximately $68.3 billion in revenue in 2023. According to the Entertainment Software Association, the US gaming industry directly employs 104,080 people and sustains a workforce of 350,015 people when accounting for indirect jobs and other economic impacts.

The expansion of the gaming market to new regions has also led to a higher degree of cultural diversity in terms of where games are produced and where they are played. For most of the late 20th century, the industry was mostly dominated by Japanese and American firms like Atari, Sega, Sony, and Nintendo. However, the market has seen an increase in studios being founded in other countries and regions. And these studios can keep up and effectively compete with established ones, as reflected in the lineup of games that have either been nominated for or won the Game of the Year award since the launch of the Game Awards in 2014. While the United States and Japan continue to assert themselves as game development powerhouses, Canadian, South Korean, and European studios have emerged as contenders and winners for the award (Table 1).

Gamers are also likely to connect with people from different cultures when playing online multiplayer games. Spending metrics indicate that more countries are spending more on gaming. Global gaming spending is increasing beyond the three highest-spending countries—China, Japan, and the United States—with regions like Africa, Latin America, and Southeast Asia seeing the highest rates of growth (Figure 3). According to revenue estimates, from 2017 to 2023, 16 of the 20 countries with the highest average year-over-year increases in gaming revenue were in Africa. The continent tripled its gaming spending during that time. South America and North America (excluding the United States) also saw significant increases in revenue in this same period, with increases of nearly 150 percent and 130 percent, respectively. Asia (excluding Japan and China) also had similar growth rates, with gaming revenue increasing by nearly 130 percent in this period.

User penetration rate estimates, which measure the proportion of potential customers that have made at least one purchase, confirm this tendency as well (Figure 4). Africa continues to establish itself as the fastest-growing market in gaming, with increases of nearly 130 percent of its gaming population in the last six years. North America (excluding the United States), Asia (excluding Japan), and South America also have seen significant increases in their gaming populations, with all of them presenting increases in user penetration rates of 50 percent or more in the same six-year period.

Ultimately, what these statistics show is that video games have become a prime example of how globalization has removed physical and cultural barriers, connecting individuals worldwide. When gamers go online to play multiplayer games, they are likely to run into players from other cities, states, countries, or even continents. In the physical world, it is likely that some of these players would not be able to converse due to language differences. They could also be in various age brackets. However, these things do not matter in the gaming world. In-game communications systems and other types of in-game expression allow players to coordinate and play together. Age and cultural differences are not often acknowledged or are put aside to complete the team’s objective.

As with other goods and services, global video game distribution has benefited from the transition to digital commerce. Digital goods trade has experienced a tremendous rise in global markets and has helped gamers in the United States and abroad (Figure 5). App stores and other online marketplaces for digital goods have streamlined international trade of software. Digital markets removed numerous barriers that were holding the gaming market from its full potential, like the dependence on physical media, shipping costs, and regional locks.

One of the most significant improvements with digital marketplaces is that gamers do not have to worry about new popular games selling out. Before the move to digital stores, gamers would have to line up for hours to acquire a recently launched game. Today, gamers worldwide can rest assured that the game they want will be available for purchase on their preferred digital store, often with the option to pre-download the game so that they can start playing it as soon as it is launched. Digital stores have been particularly beneficial for gamers in developing markets. Often, gamers in these markets would struggle to find physical copies of new games, as the costs of shipping physical media worldwide made these games prohibitively expensive. Additionally, if retail stores in developing countries miscalculated how well a game would sell, gamers had to wait weeks, even months, before they could buy newly released games.

Digital commerce has also benefited small and indie developers, as their sales no longer depend on finding a manufacturer and the number of physical copies sold. Instead, they can pocket more profit and focus on how they sell online. In the physical media era, if a new release was to become suddenly popular, there could be a significant lag between the moment a game would sell out and when stores could restock the shelves with new copies. Retailers abroad would also add to this backlog, as they would have to place massive orders to compensate for an unexpected rise in demand. This wait could kill momentum for a game, slowing potential new sales. Nowadays, if a game suddenly becomes popular, developers can fully capitalize on that virality by selling as many copies in as many countries as possible, as was the case with games like the pandemic-era hits Among Us and Fall Guys.

Having a worldwide and largely frictionless userbase has also allowed developers and publishers to experiment with different business models that have made gaming more affordable. Ad-supported games let players download and play the games for free, tapping into a userbase of millions of potential gamers. Developers can leverage these userbases to sell ad space that brings revenue that matches or even surpasses what they would have made under a traditional sales model. The freemium model is another type of business model in which games are available to download and play for free but offer optional in-app purchases. Freemium games have been particularly effective in developing countries, as they provide a significantly more affordable option for gamers in countries where exchange rates make paying for a full-priced game financially prohibitive.

The transition to digital marketplaces offered gamers another significant improvement: buying a copy of a game to find out that it locked to a specific region is now mostly a thing of the past. For most of video game history, games could only be played on consoles that had the same region lock as the physical media. In other words, gamers with a US region-locked console could not play games with a Japanese or European region lock, and vice versa. These region locks were initially implemented due to compatibility issues between consoles and televisions. However, they remained as video game companies saw them as a tool to control how their content was distributed across the world and to make sure that their games complied with the various regional and national regulations. While the control provided by region locks was a significant benefit for firms and allowed them to offer regional discounts, the locks often annoyed gamers who inadvertently purchased an incompatible copy of a game.

For example, imagine you are a South American resident visiting a European or Asian country and discover that retail stores have a better video game offering than in your home country. If you were to acquire a copy of a video game while on your trip, it is likely that said copy would be incompatible with your console, as the console you own would probably have an Americas—NTSC‑U—region lock, while the game would have an NTSC‑J/C or PAL region lock. Additionally, as it is unlikely that anyone in your city has a Europe- or Asia-compatible console, there is no option to resell this game in a secondary market. Customers who made this mistake usually ended up with an expensive and disappointing paperweight.

With the digitalization of video game marketplaces, the days of worrying if a purchased game is locked to a region are largely over. While digital stores still have region and even country-specific content and pricing, if a game is available for purchase in the store shown on a device, the game is compatible with that device. Importing a game nowadays is much simpler than in the days of physical media since publishers can now simply submit their game to a digital store, which vets the game to determine if it complies with any regional and country regulations and then places it in the virtual storefront.

The streamlining of video game sales has also impacted sales of physical media. To stay competitive with digital marketplaces, console makers and video game publishers realized that regional locks on physical copies of games could no longer be implemented. The latest game consoles, including the PlayStation 5, Xbox Series X, and Nintendo Switch, are all region-free, and the companies have mostly discouraged game developers from applying region locks to their games. Gamers who enjoy collecting and preserving physical copies of games now have the benefit of being able to buy any copy of a game in any part of the world and have peace of mind that it will be compatible with their console.

As gaming is now a hobby for more people in more countries, global interest in gaming-related content has increased as well, with a rise of gaming-focused content creators, livestreamers, journalists, TV shows, movies, and most notably, e‑sports. Games like Fortnite, Call of Duty, Rocket League, Apex Legends, Valorant, League of Legends, Counter Strike, and Mobile Legends: Bang Bang have amassed passionate fanbases that not only enjoy playing the game but also enjoy watching high-performance gamers pitted against each other. The last League of Legends world championship set the record for the most watched e‑sports event in history, with a peak viewership of 6.4 million viewers. The event also sold out a 16,000-seat venue in South Korea in a matter of minutes.

Widely attended events and popular broadcasts usually translate into high revenues from sponsorships, ad sales, ticket sales, and image rights. This has given place to the concept of e‑sports, where high-performing gamers can now live as full-time professional gamers. With cumulative prize pools of up to $30 million per year, professional gaming has become lucrative for those who can make it to a team in a league. E‑sports players can thank the globalized, streamlined gaming market for creating that virtuous cycle that funds their careers.

The global nature of e‑sports is strongly represented by the team rosters in the various professional video game tournaments. Teams in the major tournaments of games like Apex Legends, League of Legends, Counter Strike, Mobile Legends: Bang Bang, and Fortnite had representatives of over 20 countries in their rosters; in the case of Counter Strike, it was 34. While teams are usually headquartered in a specific country, a team’s roster is not necessarily composed of players of a single nationality. For example, Team Vitality, the current champions of the Counter Strike tournament, is a French team, but its roster was composed of French, Danish, and Israeli players. Tournaments also offer livestreams in multiple languages, ensuring that gamers across the world can tune in and listen to real-time analysis and commentary.

However, the monetization of gaming does not stop at professional competitive leagues. When global gaming audiences are paired with globalized content distribution platforms like YouTube, Twitch, Kick, or Discord, charismatic and social media–savvy gamers can also make a living as content creators. Livestreamers like Ninja, Ibai, or Shroud are the best examples of this synergy. The three of them participated in professional gaming leagues before making the jump to content creation. Ibai started as a commentator/​analyst of the League of Legends competitive league, while Ninja and Shroud were professional e‑sports players. All signed multimillion-dollar contracts with different streaming platforms, and it is estimated that Ibai is currently the highest paid streamer on Twitch.

Platforms can offer these lucrative contracts thanks to the existence of a global gaming-centered audience, as these content creators have become an important source of revenue for platforms that can sell highly targeted—and therefore, efficient—ads and profit from subscription fees. Aside from these contracts, these content creators can bring in more revenue through sponsorship deals or live events like Ibai’s amateur boxing event La Velada del Año, which has continued to shatter livestreaming viewership records every year. The global, diversified audience of the gaming world is also well represented by the most-watched streamers of 2023 (Table 2). By looking at the 25 most-watched streaming channels of the year on Twitch, one could draw two main conclusions: gaming-focused channels are the most popular on the platform, and those channels are comprised of a very culturally diverse group, both in terms of nationality and languages spoken.

The streamlining of international trade and e‑commerce has made gaming more accessible for more people all over the world. Gamers have access to more games than ever, have more ways to play them, and play them with more people worldwide. What used to be a niche hobby exclusive to a handful of countries is now a global entertainment machine with a global presence. The expansion of the industry has also provided gamers with avenues to monetize their passion, like professional gaming leagues or content creation. Globalization was the ultimate power-up that took gaming from the arcade to living rooms to practically anywhere.