Video Games are Bigger Than You Think

It's Tuesday, May twenty sixth. Grand Theft Auto VI was supposed to launch today. Rockstar pushed it to November, the latest in a series of delays for what is already the most expensive entertainment product ever created. If you don't play video games, you might wonder why that matters. Here's why: GTA V, the previous installment, released in 2013, has generated over eight billion dollars in revenue. That makes it the most commercially successful entertainment product in human history, more than any movie, any album, or any franchise in any other medium. The game cost about two hundred and sixty five million to make and hit one billion in sales in three days. GTA VI reportedly cost between two and three billion dollars to develop, making it the most expensive entertainment product ever created. Analysts project it will generate three point two billion in its first year alone. We're covering this today because most people still think of video games as a niche hobby for teenagers. The gaming industry generated over two hundred and fifty billion dollars in 2025. That's more than the global film industry and the global music industry combined, and it has been for over a decade. The story of how that happened, and where the money actually comes from, is one most people outside the industry have never heard. The scale of the gaming industry is difficult to process if you haven't been paying attention. Over 3.5 billion people on Earth play video games, nearly half the planet, and the industry's revenue is projected to reach two hundred and fifty five billion dollars in 2026. Gaming doesn't just compete with traditional entertainment. It has outgrown it so thoroughly that the comparison almost isn't fair anymore. And it's not just playing. In 2014, Amazon paid 970 million dollars to acquire Twitch, a platform where people watch other people play video games. That sounded absurd to most people at the time. Twitch now has over 140 million monthly active users. People watching games has become its own industry, with professional streamers earning millions and live viewership numbers that rival cable television. When I was a sophomore in college, GTA V had just come out, and I pitched to my investment club that we should buy Take-Two Interactive, Rockstar's parent company. The stock was about eighteen dollars a share. It's around two hundred and twenty eight now. I'm not saying I'm a genius. I'm saying this industry has been growing at a pace that most people outside of it completely missed. The shift happened gradually and then all at once. In the 1980s and 1990s, gaming was a consumer electronics niche. You bought a console, you bought cartridges, and you played until you finished the game or got bored. Revenue came from hardware sales and one-time software purchases. The business model was identical to selling DVDs or CDs: make a product, sell it, hope people buy the next one. Three things changed that. Online connectivity came first: when consoles and PCs got reliable internet connections, games could be updated, expanded, and monetized after the initial purchase. Then came mobile. The iPhone turned every smartphone into a gaming device, and the app store model made it possible to distribute games to billions of people with zero retail overhead. Mobile gaming now accounts for roughly a hundred and eight billion dollars a year, nearly half the industry's total revenue. But the most consequential shift was subtler: the industry stopped selling products and started selling access. GTA V is the clearest example of how the economics of gaming changed. Rockstar released the single-player game in September 2013. It was a massive hit. But the real business started a month later when GTA Online launched, a persistent multiplayer world where players could buy properties, run businesses, race cars, and cause mayhem together. GTA Online is free to access if you own the base game. The revenue comes from Shark Cards, virtual currency that players buy with real money. A Megalodon Shark Card costs $99.99 and gives you eight million dollars of in-game currency. Rockstar has never disclosed total Shark Card revenue, but analysts estimate GTA Online has generated over four billion dollars from microtransactions alone, roughly half of the franchise's total lifetime revenue. The single-player game that won universal critical acclaim is the smaller half of the business. The online casino, essentially, is the bigger half. This model, called "live service" or "games as a service," is now the dominant business strategy in the industry. Fortnite, made by Epic Games, is free to download. It has generated over thirty billion dollars in revenue, almost entirely from cosmetic purchases: character skins, dances, outfits. The game itself costs nothing, but looking different inside the game costs everything, and that turned out to be enough to build a thirty-billion-dollar business. GTA VI is expected to follow the same model. The base game will likely cost seventy to eighty dollars. But the real revenue will come from GTA Online 2, which Rockstar is building alongside the single-player campaign. The infrastructure for microtransactions, seasonal content updates, and virtual economies is being developed from day one. When analysts project three point two billion in first-year revenue, they're not projecting based on game sales alone. They're projecting based on the live-service revenue that will run for years, potentially a decade, after launch. GTA V is still generating hundreds of millions per year, twelve years after release. The three-billion-dollar development cost makes more sense in this context. Rockstar isn't spending three billion to make a game. It's spending three billion to build a platform that will generate tens of billions over its lifetime. The economics look less like a movie and more like building a theme park: enormous upfront cost, decades of recurring revenue. The contrarian question is who actually funds this system. The $70 box price for a major game hasn't changed much in twenty years. Adjusted for inflation, games are cheaper than they've ever been. In 1990, a new Super Nintendo cartridge cost fifty to sixty dollars, which is over a hundred and twenty dollars in today's money. A new PS5 game costs seventy. The sticker price has effectively been cut in half over three decades. The industry made up the difference, and then some, through microtransactions. But spending on microtransactions isn't distributed evenly. The gaming industry uses a term borrowed from casino economics: "whales." A small percentage of players, typically between one and five percent, account for the majority of in-game spending. Some spend thousands of dollars a year on virtual items. The free-to-play model means the game is subsidized for the majority of players by a small number of heavy spenders. The ethics of this are debated constantly. Loot boxes, randomized virtual item purchases that function like slot machines, have been classified as gambling in Belgium and the Netherlands and restricted in several other countries. The World Health Organization recognized "gaming disorder" in 2019. Parents report children spending hundreds of dollars on in-game currencies without understanding the real-money value. The industry argues that these purchases are voluntary and that players are buying entertainment value. Critics argue that the monetization mechanics are deliberately designed to exploit psychological vulnerabilities, particularly in younger players. The mobile market is where this tension is sharpest. Mobile games are almost all free to download and funded entirely by ads and microtransactions. The top-grossing mobile games in the world, Honor of Kings, PUBG Mobile, Candy Crush, generate hundreds of millions per year each, and none of them charge an upfront price. The business model is: give the game away, build a habit, monetize the habit. If that sounds familiar from Saturday's Uber and AI episode, it should. The pattern is the same. The product is free until you're dependent, and then the spending starts. GTA VI will launch into this landscape later this year as the most expensive bet in entertainment history. Three billion dollars in development. Projected billions in return. A single-player experience designed to sell you on a multiplayer world designed to sell you virtual currency for the next decade. The game will almost certainly be brilliant. Rockstar doesn't ship anything less. The question is whether the economics of gaming have reached a point where the brilliance of the product and the aggressiveness of the monetization are impossible to separate. For three billion dollars, they'd better be. So if this comes up in conversation, here's how to think about it. Video games are the largest entertainment industry on Earth at over two hundred and fifty billion dollars a year. GTA V is the most commercially successful entertainment product in history at over eight billion dollars, and roughly half of that came from virtual currency purchases, not game sales. GTA VI cost up to three billion to develop because it's not really a game, it's a platform designed to generate revenue for a decade through microtransactions, seasonal content, and a virtual economy. The seventy-dollar price tag gets you in the door, and everything after that is where Rockstar makes its real money. Gaming stopped being a niche hobby a long time ago, and most people over forty still have no idea how big it actually got. Stay informed, stay curious, and we'll see you tomorrow.