The video game industry is a fascinating, ever-evolving landscape, and the latest report from Epyllion's CEO, Matthew Ball, sheds light on some intriguing trends. Despite a booming global market, the industry faces challenges.
In 2025, the global video game content sales hit an impressive $195.6 billion, a 5.3% increase from the previous year. However, the funding story paints a different picture. Private funding took a significant hit, dropping a further 55% compared to the previous year. This decline in funding is a cause for concern, especially as the industry continues to grow and evolve.
The State of Video Gaming 2026 report highlights a three-year growth streak, with 2025 setting a new revenue record. Yet, the funding gap persists, leaving many wondering about the future of the industry.
Deals in the last quarter of 2025 totaled 40, with pre-seed investments under $100 million and early-stage funding surpassing $200 million. Layoffs, unfortunately, continued to affect the industry, with 9,200 job losses last year. While this is a 40% decrease from 2024, the cumulative four-year total of layoffs is staggering, reaching nearly 44,000.
The impact of these layoffs is felt across regions, with almost half occurring in California between 2022 and 2025, followed by 18% in the rest of the US, 16% in Europe, and 19% in the APAC region, China, the Middle East, and Africa.
Outsourcing has become a significant trend, with developers allocating 35.5% of their content investment to external partners in 2025, up from 30.6% in 2017 and 31.5% during the COVID-19 pandemic. The report notes an increasing reliance on outside partners for core creative work, including art, game design, and engineering.
Team Cherry's Hollow Knight: Silksong and Pocketpair's Palworld are prime examples of titles heavily reliant on outsourcing. Silksong had three internal credits compared to 94 external credits, while Palworld had 97 internal credits and 93 external credits, with 80 of those coming from Keywords Studios.
The report also delves into consumer spending, revealing that console spending reached $41.6 billion, a modest 2.3% increase from 2020. However, total spending on console game sales and transactions decreased by nearly 11% year-on-year. PC spending, on the other hand, grew by a remarkable 30% since 2020, reaching $40.7 billion in 2025.
China's influence is undeniable, accounting for 20% of global player spending. Matthew Ball suggests that to match global growth, game makers must succeed in China or grow their market share elsewhere by 1.6 times.
Chinese publishers have captured approximately half of the global growth in player spending since 2019, solidifying their position in the industry.
One platform that has seen tremendous growth is Roblox, becoming the primary driver of the total video game market and capturing 67% of net growth in 2025. By the end of 2024, Roblox had more daily active users than PlayStation, Switch, or Xbox, and this number increased by 69% in 2025.
Roblox's engagement is impressive, with over 10 billion monthly engagement hours, surpassing Steam, PlayStation, and Fortnite combined.
Looking ahead to 2026, Ball predicts that the five key revenue growth areas for video games will be non-core markets, advertising, direct-to-consumer and alternative payment channels, external development, and, of course, Roblox.
But here's where it gets controversial: With the industry's reliance on outsourcing and the dominance of certain platforms, is there room for smaller, independent developers to thrive? And this is the part most people miss: How will the industry's focus on growth and revenue impact the creative freedom and innovation that gamers crave?
What are your thoughts on the future of the video game industry? Do you agree with Ball's predictions? Feel free to share your insights and opinions in the comments below!
