298. Inside the gaming industry: what every business leader should know

The gaming industry generates more revenue than music and film combined. It is the birthplace of innovations now used across entertainment, advertising, and AI.

It is a fantastic sector for non-technical founders to flourish.

And most business leaders know almost nothing about it.

In this episode, Sophia Matveeva speaks with Jen Glennon, editor at Polygon, one of the leading publications covering the games industry, for an accessible and surprising introduction to a sector that is reshaping technology and culture.

Listen to learn:

• How gaming became the world's largest entertainment sector, with projected revenues of $564 billion in 2026
• Why Fortnite makes $6 billion a year from a free game — and what that model means for every business thinking about digital monetisation
• Why Mark Zuckerberg's metaverse missed what gaming had already built —— and why that's a lesson in understanding markets before you enter them
• What the Hollywood studio model tells us about how gaming companies are built, funded, and acquired

Timestamps:  

• 00:00 - Introduction: The high-risk, high-reward nature of gaming
• 02:52 - Why the gaming industry is so huge
• 04:45 - Who actually plays games? Demographics revealed
• 06:08 - Gaming as innovator: AI and creative tech
• 08:02 - Innovations from gaming: Unreal Engine and visual effects
• 09:12 - Paths to founding gaming companies
• 12:19 - Funding models: Kickstarter vs venture capital
• 14:19 - The exit strategy: Getting acquired
• 16:03 - Geographic hubs: California, Japan, and emerging markets
• 18:00 - Revenue models: Micro-transactions and whales
• 19:47 - Mark Zuckerberg and the metaverse: Lessons from gaming
• 21:36 - Closing and resources

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Transcript:

[00:00:00] Jen Glennon: A studio is only as good as its last game that it's put out. There's a kind of infamous game made by Sony in the last couple of years called Concord. They spent hundreds of millions putting this game out there and it just flopped and they killed the game after a month. You can't play it anymore. The player counts were so low that it wasn't even a matter of like, okay, let's move on to a new project. They just like closed the studio and laid everyone off. So it is a very high risk, high reward.

[00:00:33] Sophia Matveeva: Hello and welcome to the Tech for Non-Techies podcast. I'm your host, Sophia Matveeva. If you're a non-technical founder building a tech product or adding AI to your business, you're in the right place. Each week, you'll get practical strategies, step-by-step playbooks and real-world case studies to help you launch and scale a tech business without learning to code. And this is not another startup show full of jargon, venture capital theater or tech-bro bravado.

[00:01:05] Here, we focus on building useful products that make money without hype and without code. I've written for the Harvard Business Review and lectured at Oxford, London Business School, and Chicago Booth. So you are in safe hands. I've also helped hundreds of founders go from concept to scalable product. And now, it's your turn. So let's dive in.

[00:01:33] Hello, smart people. How are you today? I've been wanting to do an episode on the gaming industry for ages, and I'm so pleased to have finally brought one to you. I'm not a gamer yet, but I find the industry fascinating. It's actually the perfect place for non-techies to flourish, as you'll hear in just a few minutes. And if you're more of a creative type and you want to work at the intersection of the arts and technology, the gaming sector is right where it's at. And also the money. There is a lot of it. So according to Statista,

[00:02:12] revenue in the games market worldwide is projected to reach $564 billion this year in 2026 with a growth rate of almost 7% year on year. And lots of people are playing games. User penetration is forecasted to be 34% in 2026, so this year, and is projected to increase to 37% by 2030. So basically we're getting to close to 40% of people playing games. So maybe I will become a gamer after all. And I found that despite the industry's enormous size and huge impact on innovation, the business press just really doesn't cover it that much. And I think it's because many journalists still assume that gaming is a sector that makes products for teenage boys and is basically not this serious sector. It's not the serious thing to focus on, but

[00:02:52] as you will learn today, the games industry is actually the birthplace of a lot of the innovation that we use every day. And it's a place where smart, creative people make their fortunes. So I think it's worth learning about. And also it's quite fun.

[00:03:08] Why the gaming industry is so huge

Today, you will hear from Jen Glennon. She is an editor at Polygon, a publication covering the gaming industry. She'll give you some color on why the industry is so madly successful, the types of people who tend to thrive in it, which I think you'll find interesting, and how gaming is impacting tech innovation and culture today. By the way, also a dog is going to make an appearance during this episode, but it's not too distracting. So just don't be surprised if you hear a bark. It's in the podcast. It's not around where you actually are, most likely. And by the way, if you enjoy what you're learning on this podcast, then please make sure to hit the subscribe button and leave the show a rating and a review. Leaving a review takes about 10 or 20 seconds and really it makes a very big difference to me and my team. So thank you in advance. And now let's learn from Jen.

[00:04:02] Why is the gaming industry so huge?

Jen Glennon: Well, I think now more than ever, it's more accessible than it's ever been. Think of any electronic device you use every day. Your phone, your laptop, your TV. All of those things can play games easily and play games well. They can play the most advanced games. They can play the simplest games. There is something for everybody, from your grandma who wants to play Wordle or Words with Friends to your nephew who wants to play Mario Kart. Like it's available to everyone and easy to access from any device.

[00:04:33] Sophia Matveeva: And so is everyone playing? Because I think a lot of the audience are going to think, well, gamers are 17 year old spotty boys sitting in their parents' basement. Is that still true?

[00:04:45] Who actually plays games? Demographics revealed

Jen Glennon: That's still a significant demographic, but surprisingly the biggest demographic is people in their 30s and 40s. It's people who grew up playing the original PlayStation in the 90s or the Nintendo 64. That is the biggest demographic for games. And surprisingly, the gender split is pretty equal. It's 40% female, 52% male worldwide. I think the tendency is to assume that games are for men, and that's just overwhelmingly not the case.

[00:05:13] Sophia Matveeva: So before we started recording, you were telling me that Nintendo has just launched a movie and it's doing pretty well. And so does this mean that gaming is kind of spreading to other industries?

[00:05:25] Jen Glennon: Yeah, absolutely. I mean, we've already seen HBO did an adaptation of PlayStation's game called The Last of Us. It's still ongoing. There's a third season coming up, but this was starring Pedro Pascal. It was nominated for Emmys. I forget if it won anything, but it was a critically acclaimed TV show that, you know, made the awards circuit. There are plenty of examples of game adaptations to, you know, the big and small screen that have flopped, but they're better than they've ever been. And this Super Mario Galaxy movie that came out last week, it's already made $350 million worldwide. It will probably crack a billion. It's going to be one of, if not the biggest films of the year.

[00:06:08] Gaming as innovator: AI and creative tech

Sophia Matveeva: So when we think about the gaming industry, from the perspective of business leaders who are outside of the tech industry, who are outside of gaming, how would you say the gaming sub-sector of tech is seen by the other tech companies? Are they kind of the innovators or are they the followers?

[00:06:28] Jen Glennon: It's an anomaly. I think they're both innovating in the sense that AI in some form has existed in the games industry since probably the 90s, if not earlier. So there's a certain comfort level and fluency with the generative automated tech in games. But I think it's also seen compared to, you know, your social media platforms or traditional development spaces as like the artsy fartsy weirdo bunch because it is right at the inner center of technology and art.

[00:06:58] Sophia Matveeva: And what about all the money? I mean, it makes a lot of money. How does it? Is the rest of the tech sector also kind of looking at it like thinking, okay, they're weirdos, but they're also really rich. How do we become like them?

[00:07:10] Jen Glennon: Right now is a very tough moment for gaming. There have been a lot of layoffs since, particularly since like 2024 post-COVID. Like a lot of areas in the technology sector, there was kind of vigorous and aggressive hiring and big ambitious projects undertaken when interest rates were very low. And then the marketplace changed because people weren't at home all the time playing video games. If anything, once people weren't at home all the time, the last thing they wanted to do in their free time was sit in front of a screen. So there is still a lot of money to be made in video games, but I think we're in a period of contraction. The scope of projects and the scale of projects is shrinking a bit for the time being.

[00:07:55] Sophia Matveeva: So what are some of the innovations that we're all using that have actually come out of the gaming industry?

[00:08:02] Innovations from gaming: Unreal Engine and visual effects

Jen Glennon: Probably the most obvious one to me is if you watch like any kind of Disney, Marvel, Star Wars movie, a lot of the visual effects for that are done in what is technically a game engine. It's called Unreal Engine 5 or the previous and prettiest iteration was Unreal Engine 4. But it's made by a company called Epic Games based in North Carolina. They make this game engine, which is very widely used throughout the game industry and for visual effects in movies. They also make the game Fortnite, you know, I'm sure everyone has heard of it. It's massive. It made $6 billion in revenue last year alone just for this one game that's, you know, maybe eight, nine years old.

[00:08:44] Sophia Matveeva: And so who typically are the founders of gaming companies? Are they developers? Are they designers? Like what are their backgrounds? Because our audience, really the main segment are non-technical founders. So people who want to start a tech venture who don't have a technical background. Some of them might have gaming ideas. And so I'm wondering, if you want to work in gaming and you want to be a founder, generally what are the paths that people go through first?

[00:09:12] Paths to founding gaming companies

Jen Glennon: There's a very vibrant and eclectic indie space in games. There are people who have made enormously successful, multi-million dollar, billion dollar games that are just one person. An example of that is Stardew Valley. It's a farming simulator. It costs about $10 to $15. You can play it on your phone. You can play it on pretty much anything. And you build a farm, raise animals, that sort of thing. It's enormously popular, made by just one guy. And it sold 50 million copies. Those people can, you know, like it can be an independent visionary. Oftentimes it's like someone who's a game director who will have like an overall vision. They will then, you know, found a small studio that may have between, you know, a small studio to my mind would be anywhere between like one and 50 people. Studios are then often acquired by like larger companies to become part of like an in-house game portfolio like what Microsoft has.

[00:10:14] Sophia Matveeva: You mentioned game directors and is that basically like a film director, like somebody who has a creative vision? But then instead of, I don't know, Gwyneth Paltrow or whoever, they would have a bunch of developers and designers. Is that how it would work? Yeah.

[00:10:31] Jen Glennon: That's pretty much exactly how it works. Probably the best example of this is Hideo Kojima. He made the Metal Gear series and the Death Stranding games. He's worked with Guillermo del Toro, who's been featured as a character in several of his games. He routinely comes to the Tribeca Film Festival every year where he talks about kind of the influences of film on his games work. The role of a director for a game studio or a game project is very, very similar to what it is in movies and TV. You know, the personality types can be very similar as well.

[00:11:09] Sophia Matveeva: So if there's a director, are there also the equivalent of actors? Who would that be?

[00:11:16] Jen Glennon: There are a lot of games that feature like, you know, Hollywood actors that you or I are familiar with. For instance, this director, Hideo Kojima, Elle Fanning was in his last game. So they, you know, put all the kind of funky little motion capture sensors all over her face and used her likeness and her physical performance for the game. This is commonly done for actors who aren't maybe as household names in the same way, but yeah, I mean, there are actors who perform for games, whether it's just lending like their voice or, you know, a digitally captured performance.

[00:11:56] Sophia Matveeva: And in terms of how these game studios develop, do they typically go the usual kind of tech startup route that there's some sort of prototype, then there's a friends and family round to fund that prototype, then a seed and so on. Is that kind of the financial growth that essentially requires venture capital or are they mostly self-funded?

[00:12:19] Funding models: Kickstarter vs venture capital

Jen Glennon: It can require venture capital. A lot of independent publishers will go through platforms like Kickstarter, you know, to kind of generate interest in the project, show like early builds or footage. Often it's kind of what game developers will do is create a demo of what's called like a vertical slice of a game. It shows off all the different aspects of it, like, you know, the art style, the interactions, those sorts of things. So usually it's getting a demo out to then generate funds to fundraise. But oftentimes with other studios and kind of the games that all of us are most familiar with, they'll be owned by a larger company like a Microsoft, a Sony, and then they'll be funded internally.

[00:13:08] Sophia Matveeva: Because I'm just thinking about the funding model. Essentially, it's like a hits business like Hollywood, right? And funding hits, that's really risky. I mean, investing in startups is risky in general, but a hits business is going to be even more risky than, you know, creating a product that essentially you just keep on making the same product, but you keep on iterating to make it better. Would that be a fair assessment?

[00:13:33] Jen Glennon: Yes, it is a fair comparison and it is very much like a studio is only as good as its last game that it's put out. There are studios, there's a kind of infamous game made by Sony in the last couple of years called Concord. It was like a shooter, a live service shooter, which is the sort of thing where it's people log in every day and play with their friends. Kind of was a little bit late to a trend. They spent hundreds of millions putting this game out there and it just flopped and they killed the game after a month. You can't play it anymore. The player counts were so low that it wasn't even a matter of like, okay, let's move on to a new project. They just like closed the studio and laid everyone off. So it is a very high risk, high reward business in that respect.

[00:14:19] The exit strategy: Getting acquired

Sophia Matveeva: Is there also the same kind of trajectory of exit of gaming companies? So can a gaming studio founder essentially keep on creating hits and then get acquired by Microsoft and become a gazillionaire?

[00:14:33] Jen Glennon: Yes, that is very much a pathway forward. There are a lot of companies that, you know, purely want to remain independent and a lot of the more successful indie brands and games are made up of people who were in-house at like major studios previously. So there's kind of, it kind of works both ways. But I think with a lot of, you know, small independent studios, the goal is to eventually be acquired and have the sort of stability that comes from working under a big umbrella like Microsoft or Sony where you can take a riskier project and not necessarily have to lay everyone off if it doesn't work out.

[00:15:12] Sophia Matveeva: Interesting. So it's more like the Hollywood model rather than like the rest of the tech sector, because in the rest of the tech sector, there are basically really big companies that dominate. And then when you're a startup, your aim is to basically get acquired by either the big companies or big traditional businesses as soon as possible in general. I mean, yes, some companies do IPO, but that's really, really rare, especially now.

[00:15:35] Jen Glennon: Yeah, I think the Hollywood studio system is the best analogy here. It's not the case in games that every independent studio wants to be acquired eventually. Many of them do, but many of them also don't. And that's still a viable path forward for indie creators.

[00:15:53] Sophia Matveeva: And so last question, where geographically is the hub of gaming? Is there such a thing? Is there like a Silicon Valley of gaming?

[00:16:03] Geographic hubs: California, Japan, and emerging markets

Jen Glennon: Yeah, it's probably the Bay Area and Los Angeles a bit. And then it's Japan. It's kind of equal between California and Japan. China is really emerging as a huge player in the gaming space in the last like 10 years. There are companies like Tencent who, you know, hold stake in Sony, in Nintendo, like, you know, kind of have a finger in every pie. And increasingly Saudi Arabia is a major player in the gaming space, kind of quietly, but they are putting a lot of money into the industry.

[00:16:37] Sophia Matveeva: Well, I was actually about to mention that because we did some work with the Saudi Digital Academy and last time I was in Riyadh, they were talking about the big programs that they have for founders who want to develop games. I've never seen that kind of investment in the gaming sector in any other tech ecosystem. So I found that quite cool and quite interesting and quite unusual. I don't know, do you know why they've chosen gaming as a thing to invest in?

[00:17:04] Jen Glennon: I mean, I think it's because it's kind of universally popular. It's also, you know, like we were talking about earlier, it's very accessible because you can do it on mobile devices. You don't necessarily need to have a giant TV and an expensive device connected to it in order to play games now. So it is kind of a worldwide connective phenomenon. And also it's extremely lucrative. A lot of mobile games are free to play, but in order to really get the fullest experience out of them, you've got to pay incrementally. And that's where a lot of those, Fortnite, probably the biggest game in the world, is free to play, but stuff like cosmetics and add-ons and all these other, you know, little enhancements that you don't have to have, but are nice to have. Like that's where they make all their money.

[00:18:00] Revenue models: Micro-transactions and whales

Sophia Matveeva: How does that work in terms of revenue? Is it one of these things where it's only a tiny proportion of people who spend money that basically support the whole thing? Or does pretty much everybody spend some money, just some people spend more than others?

[00:18:15] Jen Glennon: It very much depends on the type of game. There are certain games that go for like whales and whales is used in the same way it's used in casinos, you know. So it's, there are some people who just spend a lot of money on one game. But I think in North America in particular, everyone spends a little bit of money. And that's kind of like, something like Fortnite in North America, that's where the money comes in. I think the average spend for like a North American consumer on games, and this is like buying a game for $50 or spending five bucks in Fortnite now and again is probably like $350 a year, $350 a year or more than that. Yeah. And in North America, it's higher than it is in places like Europe and Asia, predominantly because of mobile platforms and games like Fortnite, where it's just those kind of little, we call them micro transactions, like here and there, where you spend $4.99 to get a new cosmetic for your character or to get some new items to make your experience in the game a little bit easier.

[00:19:20] Sophia Matveeva: I wonder if that's where Mark Zuckerberg got the obsession with the metaverse from. Because if you're playing games all the time and you're spending money on, I don't know, stuff to make your outfit cooler, then you might think, okay, lots of people are doing this, this is the metaverse essentially, then let's take it to a wider audience, let's take it outside of gaming.

[00:19:47] Mark Zuckerberg and the metaverse: Lessons from gaming

Jen Glennon: It's exactly where he got it from, but I think he didn't appreciate the fact that there already was a very wide audience there and it was already very sophisticated and developed and it was a little late for a new entrant. Like Fortnite has been around since 2017, you know? These were already like pretty entrenched digital third spaces at that point where there were active communities and there was kind of, for the people who, a lot of people who play Fortnite just go on it to like chit chat with their friends who don't live locally. You know, it is like a social thing.

[00:20:22] Sophia Matveeva: So it was the metaverse basically. It's exactly what he was trying to create. So was the problem then that, okay, gamers already had their own metaverse and people who didn't want to be gamers, or didn't want to be in the metaverse, they just weren't going to convert?

[00:20:36] Jen Glennon: Yeah, I mean, I think that was exactly the problem. And also, frankly, like, Meta's metaverse was not particularly appealing.

[00:20:45] Sophia Matveeva: It looks a bit crap.

[00:20:47] Jen Glennon: The visuals looked dated. Games are already much, you know, look a lot nicer and more impressive than what Zuckerberg was showing off with the metaverse. I think it was also very much framed in like a productivity and meetings kind of lens, which frankly is not all that fun. I think by the time that was really a push for that company, people were tired of having meetings on Zoom. You know, the idea of having another space to have a call that should have been an email was not necessarily like something they wanted to throw money at.

[00:21:24] Sophia Matveeva: That's a really good point. Well, thank you so much for this introduction to the gaming industry. If people want to learn more about gaming, are there podcasts or books or publications that you recommend they check out?

[00:21:36] Closing and resources

Jen Glennon: You can check out the website that I am an editor for, which is polygon.com.

[00:21:42] Sophia Matveeva: Awesome. Well, thank you very much, Jen. It's been a pleasure having you.

[00:21:45] Jen Glennon: Pleasure talking to you, Sophia.

[00:21:48] Sophia Matveeva: Wasn't that fascinating? It made me wish I had taken a job in a gaming studio. Doesn't it sound like it would be a really fun way to build a career? I'd love to hear your feedback so let me know on LinkedIn or by leaving the show a rating and a review. And if you found this episode interesting, make sure to hit the subscribe button. Subscribing and leaving a rating and a review will really help the show get discovered by other smart, ambitious people like you. And on that note, thank you very much for being with me today. Have a wonderful day and I shall be back in your delightful smart ears next week. Ciao!