1. The “Dumb Money” Trap: Why Tourist Investors Are Getting Slaughtered in Gaming
The “Fortnite Fantasy” vs. The Bankruptcy Reality
If you are an outsider looking at the gaming industry, you probably see dollar signs and headlines about billions in revenue. You see a hit game and think, “I just need to fund the next one of those.” Stop right there. This mindset is why “tourist investors”—people who don’t understand the mechanics of play—lose their shirts.
Here is the messy truth: For every Fortnite that makes billions, there is a “Live Service Graveyard” filled with thousands of high-quality games that failed. Why? because gaming isn’t just about code; it’s about community. Valuation metrics like “Active Users” are often a trap. I have seen studios pump up their user numbers with marketing spend just before a pitch, only for those users to vanish a week later. Investing in a studio without understanding retention is like buying a restaurant because it was busy on opening night, without checking if the food actually tastes good. Don’t be the “dumb money” that funds a dying game.
2. The $55 Billion Question: Why The Saudi/EA Deal Isn’t About Games (It’s About Ecosystems)
Buying the Oil Rig, Not Just the Barrel
Everyone is fixated on the price tag of the Saudi investment in Electronic Arts (EA). They ask, “Is FIFA really worth that much?” You are missing the bigger picture. When groups like Savvy Games Group (backed by the Saudi PIF) write these checks, they aren’t just buying a game developer. They are buying a geopolitical fast-lane.
Think of it this way: Building a global gaming ecosystem from scratch takes twenty years of trial and error. Buying EA is like buying a fully furnished house instead of building one brick by brick. It is an infrastructure play. They are securing intellectual property (IP), esports infrastructure, and immediate global relevance. If you are analyzing this deal based on next quarter’s game sales, you are thinking too small. This is about converting oil wealth into digital influence. For investors, this signals that the biggest exits won’t come from creating new games, but from owning the platforms that host them.
3. Tencent vs. The World: The Hidden Strings Attached to Ubisoft’s $4B Lifeline
The “Golden Handcuffs” That Look Like Freedom
Ubisoft celebrating a $4 billion investment from Tencent sounds like a victory lap. But if you read the fine print, it looks more like a cage. In my experience, taking massive minority investment from a giant like Tencent isn’t just “free money”—it is a strategic blockade.
When a giant owns 49% of your company, you are technically independent, but practically paralyzed. You often cannot sell the company to anyone else because the giant has veto power. I call this the “Silent Conqueror” strategy. Tencent doesn’t need to buy the whole company to control it; they just need to buy enough to make sure no one else can. For founders, this is a warning: If you take the easy money now, you might be destroying your ability to have a massive exit later. You are trading your future freedom for present-day survival.
4. The “Hollywood” Delusion: Stop Treating Game IP Like Movie Rights
Why a Hit TV Show Doesn’t Mean a Hit Stock
Since The Last of Us on HBO became a hit, every investor deck I see claims their game has “transmedia potential.” Let’s be real: A TV show is a marketing commercial, not a business model. For every Mario Movie success, there is a Borderlands disaster that loses millions.
Here is the math: Even a successful movie generates a fraction of the revenue of a successful live-service game. A movie makes money for two months in theaters; a game like Call of Duty makes money every single day for a decade. Valuing a game studio based on “Netflix potential” is financial suicide. It is like valuing a car company based on how many t-shirts they sell. It’s a nice bonus, but if the car (the game) doesn’t run, the t-shirts don’t matter. Focus on the game, not the glitz.
5. Regulatory Hell: Why Consolidation is Hitting a Brick Wall (And What It Means for Your Exit)
The Door to Easy Mega-Mergers Has Slammed Shut
Two years ago, the strategy was simple: Build a studio, get big, and sell to Microsoft or Sony. That window has closed. The regulators in the US (FTC) and Europe (EU) have woken up. They looked at the Microsoft-Activision deal and decided they don’t want three companies owning the entire industry.
What does this mean for your money? If you are investing in a mid-sized publisher hoping for a quick flip to a tech giant, you are about 24 months too late. The scrutiny is intense. Deals that used to take six months now take two years and millions in legal fees. We are entering a “frozen” period. Instead of massive buyouts, we are going to see partnerships and smaller, tactical acquisitions. Adjust your timelines accordingly; the quick exit is dead.
6. Sovereign Wealth vs. Venture Capital: Who is the Better Partner for Your Studio?
The Hare vs. The Tortoise (With Infinite Money)
If you are a studio founder, who you take money from determines your destiny. Venture Capital (VC) is like a sprinter. They need you to grow 10x in five years so they can sell you. This pressure often forces studios to ruin their games with aggressive monetization to pump up short-term numbers.
Sovereign Wealth (like the Saudi PIF) is different. They are playing a generational game. They don’t need the money back in five years; they want an asset that lasts for fifty. This is “patience capital.” However, it comes with heavy PR baggage and geopolitical complexity. I always tell founders: Take VC money if you want to burn bright and sell fast. Take Sovereign money if you want to build a legacy, but be prepared for the world to scrutinize your ethics.
7. Platform vs. Publisher: Investing in the “Pickaxes” (Unity/Unreal) vs. The “Gold” (EA/Take-Two)
Why I Prefer Selling Shovels to Digging for Gold
Investing in a game publisher (like EA) is risky. They live and die by their next hit release. If the game flops, the stock drops. It is a roller coaster. This is why I prefer the “Pickaxe” strategy: investing in the technology that makes the games, like Unity or Unreal Engine.
Think of it like this: If there is a gold rush, don’t try to find the gold. Sell the shovels to the miners. Whether a game succeeds or fails, the developer still had to pay for the engine, the server technology, and the analytics tools. Infrastructure is boring, unsexy, and predictable—exactly what smart money should love. While everyone else is betting on which horse will win the race, you own the racetrack.
8. The Mid-Market Death Zone: Why You Should Only Buy “Indie” or “AAA” (And Nothing in Between)
The “Walmart vs. Boutique” Economy of Gaming
The gaming market is hollowing out. On one end, you have massive “AAA” blockbusters (like Grand Theft Auto) that cost $300 million to make but sell millions. On the other end, you have tiny “Indie” teams making cheap, creative games that yield high profit margins.
The danger zone is the middle—the “AA” games. These are games with $30 million budgets that aren’t quite blockbusters but are too expensive to be niche. They are getting crushed. They don’t have the marketing budget to compete with the giants, and they aren’t nimble enough to pivot like the indies. If you are looking at a studio that says, “We are the middle ground,” run. In this economy, you want to be the luxury brand or the garage startup. Being average is a death sentence.
9. Blockchain Gaming: The Dead Cat Bounce or The Next Wave?
Separating the Scam from the Software
Institutional investors constantly ask me, “Is Web3 gaming dead?” The answer is nuanced. The “Play-to-Earn” model where people played bad games just to earn pennies? Yes, that was a Ponzi scheme, and it collapsed.
However, the underlying technology—owning your digital items—is still relevant. The smart money is no longer funding “crypto games.” It is funding veteran game designers who happen to use blockchain in the background. If a studio pitches you a “token economy” before they show you a fun game, walk away. But if they show you a great game where players can safely trade items, that is a real business. The hype is gone, which means it’s finally safe to look at the actual tech.
10. Mobile vs. PC/Console: Where is the “Sticky” Money?
The Turnstile vs. The Clubhouse
Mobile gaming generates massive revenue, but it has a fatal flaw: zero loyalty. Since Apple changed its privacy rules (IDFA), finding new users has become incredibly expensive. Mobile players are like commuters passing through a turnstile; they are gone the moment a shiny new ad appears.
PC and Console players are different. They are like members of a clubhouse. Once they love a franchise (like World of Warcraft or Dark Souls), they stay for decades. They buy the sequels, the merchandise, and the expansions. In 2025, I am shifting my portfolio back to PC/Console. The margins might be lower initially, but the cash flow is reliable. I would rather have 100,000 loyal fans than 1 million tourists who leave tomorrow.
11. The Talent Exodus: Acquiring Studios vs. Poaching Teams
Don’t Buy the Building, Buy the Brains
Here is a secret that M&A lawyers won’t tell you: A game studio is just an empty building with computers. The real value—the “assets”—are the people, and they can walk out the door every evening. I have seen companies pay $200 million for a studio, only for the lead creative director and technical lead to quit a month later to start a new company.
Smart investors have stopped buying bloated legacy studios. Instead, they are funding the “exodus.” They look for the team that just left Blizzard or Riot Games and fund their new startup. Why pay a premium for the old brand when you can get the actual talent that built it for a fraction of the price? In gaming, talent is the IP.
12. Buying The Back Catalog: The “Music Rights” Strategy for Gaming
Can You Monetize Nostalgia Forever?
There is a trend of companies (like Embracer Group) buying up old game franchises (like Tomb Raider or Lord of the Rings) hoping to passively collect money, similar to how funds buy music rights. The theory is: “People will always buy these classics.”
The reality is messier. Unlike a song, which you can just listen to, a video game ages poorly. Old code breaks. Graphics look dated. To keep an old game selling, you have to spend money remaking it. It is not passive income; it is active maintenance. While there is value in nostalgia, it is not a “set it and forget it” money printer. If you buy a back catalog, be prepared to work for that revenue.
13. How to Value “Player Sentiment”: The Metric That Predicts Stock Crashes
The Anger Index: Why Reddit Knows Before Wall Street
Wall Street looks at quarterly reports. I look at Discord servers and Reddit threads. Why? Because player sentiment is a leading indicator of financial performance. If a community turns toxic, revenue will drop, but it takes about six months to show up on the balance sheet.
I once shorted a major publisher’s stock because their most dedicated players were revolting over a small change in the game. The analysts said, “Revenue is up!” But I knew the whales (big spenders) were leaving. Three months later, the earnings missed expectations, and the stock crashed. Don’t just look at the numbers; listen to the noise. If the customers hate the product, the graph is about to go down.
14. Structuring the Earn-Out: How to Keep Founders from Walking Away After the Check Clears
The “Golden Handcuffs” That Actually Work
The biggest risk in buying a game studio is “Founder Wealth Syndrome.” You write them a check for $50 million, and suddenly, they aren’t hungry anymore. They start taking long vacations, and the game quality suffers.
To solve this, you need a smart “Earn-Out” structure. Do not just tie their bonus to revenue. Tie it to shipping. Make the payout contingent on the game actually launching and hitting a specific quality score (like a Metacritic rating). You need to align their financial reward with their creative pride. If they get paid regardless of quality, you just bought a very expensive paperweight.
15. The “Live Service” P&L: Why Development Costs Are Only 30% of the Equation
The Hidden Iceberg of Running a Game
When a studio pitches you, they will show you the “Development Budget.” This is the cost to make the game. In a Live Service model (games that update forever), this is a lie. Making the game is only about 30% of the total cost.
The other 70%? It’s the “Live Ops.” It is the army of customer support agents, the expensive servers to host millions of players, the community managers, and the constant user acquisition ads. I have seen many “Fortnite Killers” run out of cash in six months because they budgeted for the launch but forgot to budget for the war. If the P&L doesn’t show massive ongoing server and marketing costs, the business plan is a fantasy.
16. Navigating the “Culture Clash”: When East Meets West in M&A
Why Time Zones Are the Least of Your Worries
We are seeing a massive wave of Asian giants (Tencent, NetEase) buying Western studios. The failure rate is high, and it’s rarely about the money. It is about decision-making culture.
In many Western studios, decisions are democratic and creative-led. In many Eastern parent companies, decisions are hierarchical and data-led. I’ve seen deals implode because the parent company demanded a change to the game art based on a spreadsheet, causing the creative team to revolt. If you are facilitating these deals, you must build a “governance airlock”—a layer of management that translates the data demands of the parent into the creative language of the studio. Without that translation, the culture dies.
17. Cross-Industry Integration: What Happens When Netflix Buys a Game Studio?
The Difference Between a Product and a Perk
Netflix is buying game studios. New York Times bought Wordle. Why? They aren’t trying to sell games. They are trying to keep you subscribed to their main service. This is “Games as a Perk.”
This creates a weird dynamic. A normal game studio wants to make money from the game. Netflix wants the game to make you watch more Stranger Things. This confuses developers. I have seen great teams fail in these environments because they don’t know what “success” looks like anymore. If you invest here, ensure the Key Performance Indicators (KPIs) are clear. Are we trying to make profit, or are we just a retention tool? If the goal isn’t clear, the game will be bad.
18. The 2025 Gaming Investment Thesis: “Flight to Quality”
Boring is Beautiful: The New Safe Haven
The era of easy money is over. The $55 billion EA valuation sets a ceiling, showing us the absolute limit of what the market can bear. My strategy for 2025 is simple: Flight to Quality.
I am selling positions in unproven, mid-tier studios. I am buying positions in infrastructure (tools, engines) and “Forever IP”—games that have survived for 10+ years like League of Legends or Minecraft. In a recession-prone economy, people don’t stop playing games, but they stop trying new, expensive games. They retreat to the games they know and love. Bet on the incumbents. Bet on the habits, not the hype.
19. Why I’m Bullish on “UGC” (User Generated Content) and Bearish on $200M Blockbusters
Let the Players Build the Product
The cost to make a top-tier game has ballooned to $200 million. It is unsustainable. One flop destroys the studio. The solution? User Generated Content (UGC). Platforms like Roblox or Unreal Editor for Fortnite (UEFN).
Here is the magic: The company builds the tools, and the players build the games for free. You don’t pay salaries to millions of creators; you just share a slice of the revenue when they succeed. It lowers your risk to near zero. As an investor, I am looking for the next platform that empowers creators, because “crowdsourcing” content is the only way to beat the rising cost of development.
20. The Exit Strategy: How to Position Your Studio for a Savvy/Tencent Buyout in 12 Months
What the Due Diligence Team is Actually Looking For
You want the big payout? You want to sell to the Saudis or Tencent? Stop focusing on your top-line revenue. They don’t care if you made $10 million last year if you lost all your players.
The Due Diligence teams at these mega-funds are obsessed with “Retention Cohorts.” They want to see that a player who joined six months ago is still playing today. They look for “technological debt” (is your code a mess?) and “IP ownership” (do you actually own everything?). If you want to sell in 12 months, spend the next year cleaning up your code and fixing your retention. That is what gets the check signed.