The Gaming Industry: An Overview from Web2 to Web3 Ecosystems

The first quarter of 2025 reveals a gaming industry in transition. Both traditional and blockchain gaming are exhibiting contrasting trends – record sales alongside studio closures, AI innovation amid layoffs, and cautious investment with selective M&A. This report examines the current state of gaming across business operations, game performance, upcoming titles, and funding landscapes. 

Web2 Gaming Changes and Challenges 

The gaming industry is facing significant upheaval in 2025, with structural changes reshaping how games are created and sold. This section examines the business realities affecting developers, publishers, and hardware makers.

– Studio Closures and Workforce Reductions

Just two weeks into 2025, three game studios shut down completely. This continues the troubling trend from 2024, when 41% of developers reported experiencing layoffs, according to GDC survey data.

Warner Bros. Games made one of the most surprising moves by canceling their anticipated Wonder Woman game and closing multiple studios. This reversal stands out because the publisher had invested heavily in DC gaming properties for years.

The first quarter has seen major companies cutting staff and consolidating efforts. With companies such as Unity cutting their entire balance development team in their latest staff reduction. Bandai Namco eliminated 120 jobs in under a year based on recent reporting. Hi-Rez Studios cut dozens of developers in another round of staff reductions. Even smaller studios like Just Cause creator Liquid Swords announced layoffs, citing the need to remain financially viable.

Perhaps most unexpected was NetEase dismantling the entire Marvel Rivals development team. The superhero competitive shooter had shown promise in previews, making the decision particularly puzzling.

– GDC 2025 Insights

The Game Developers Conference brought together nearly 30,000 industry professionals in an atmosphere of cautious optimism mixed with uncertainty. Attendance was slightly lower than in previous years, with some attributing this to widespread layoffs and travel restrictions. The expo floor was noticeably smaller, with major engine companies like Unity and Epic Games reducing their physical booth presence.

A landmark announcement at GDC was the formation of the first North American industry-wide union for video game workers, the United Video Game Workers – CWA  (UVW-CWA.org). This union aims to support and advocate for developers across the continent, addressing the job security concerns that have dominated many industry discussions.

The sustainability of live service games emerged as a major topic. Despite their current popularity, many developers expressed doubts about the long-term viability of this business model. This skepticism comes as a significant portion of AAA studios continues focusing resources on live service development.

International developers, particularly those from Canada, have voiced concerns about traveling to the US due to the political climate and visa issues. Some canceled their GDC plans entirely, highlighting how geopolitical factors are affecting industry gatherings.

While large publishers struggled with layoffs, the indie game scene showed remarkable resilience. Self-funding remains common among independent developers, with the Independent Games Festival Awards celebrating innovative titles like “Consume Me,” which won the Grand Prize.

On the Web3 side, Arbitrum showcased several titles within its ecosystem at a large booth, including Ubisoft’s Captain Laserhawk, Pirate Nation, and Riftstorm, among other exciting web3 titles. This highlighted that games, no matter the technology they are built on, have a place on the gaming stage and at dedicated events such as GDC.

– Economic Pressures and Policy Impacts

Beyond layoffs, the industry confronts growing economic headwinds. New tariffs could make video games more expensive as manufacturing and import costs rise. The ESA’s statement highlighted how these policies “take aim directly at game harm” for US developers and players. These tariffs will likely hit hardware makers and physical game distributors hardest.

– Gaming’s New Directions

Not all industry news is bleak. Microsoft filed a patent for gaming experiences with OpenAI, suggesting future games may include more advanced AI systems. Meanwhile, EA is preparing several franchises for Nintendo Switch 2, showing faith in Nintendo’s next hardware.

Speaking of Nintendo, their leadership says anticipation around the Switch 2 isn’t the cause for falling Switch sales. They attribute the decline to the normal market cycle of a console, which has been seen in the last seven years. (source)

The relationship between game development and technology continues to evolve. A recent study found that most game development companies already use Generative AI despite worker concerns about job security and creative ownership. This trend was reinforced at GDC, where AI was a central topic with dedicated summits and ethical discussions. East Asian studios showed greater receptiveness to generative AI compared to their North American counterparts, revealing regional differences in technology adoption.

Web2 and Web3 game studios are seeing a rise in the deployment of AI agents to increase the speed of development while reducing the need for large teams. While this impact has been seen across large developers, the use of AI can present opportunities for indie games and small studios. 

Gaming Winners and Struggles

The gaming market in early 2025 shows contrasting results across titles and platforms. This section explores which games are finding success with players and which are facing challenges, offering insights into current player preferences.

– Breakout Hits and Strong Performers

Monster Hunter Wilds became an instant success with 8 million sales in three days, reaching 10 million copies by April. It topped global charts with 1.3 million concurrent players on Steam, outperforming established hits like Cyberpunk 2077 and Elden Ring.

Kingdom Come Deliverance 2 sold 2 million units in its first two weeks, including 1 million on day one – much faster than its predecessor. The medieval RPG reached 256,000 concurrent Steam players, showing strong engagement.

Silent Hill 2’s remake moved over 2 million copies, boosting Konami’s finances as the company raised forecasts with profits increasing 35% to $860 million. Cyberpunk 2077’s latest update brought in 36.6 million players, demonstrating how games can recover from difficult launches.

Squid Game: Unleashed performed well with over 10 million players. The first quarter also saw strong results from Avowed, Like a Dragon: Pirate Yakuza in Hawaii, and Civilization VII despite some reported issues.

– Launch Challenges

Assassin’s Creed Shadows faced problems before release as fans gained early access and leaked gameplay online. Despite this, the game has attracted 3 million players since its March debut and achieved the second-highest day-one sales in franchise history. It topped UK sales charts for two consecutive weeks and was the best-selling game in the US during its launch week.

Indiana Jones reached 1.5 million players after its launch, but this wasn’t enough to prevent a decline in overall Xbox revenue. However, the game did receive critical acclaim, gaining numerous award nominations.

– Platform Performance

For mobile gaming, Hasbro reported that $175 million of its $472 million digital gaming revenue came from Monopoly Go alone. This reflects the mobile market’s continued strength, especially in regions like Africa, where 90% of games industry revenue comes from mobile.

PC gaming saw the Epic Games Store reach 295 million players and $1.09 billion in game sales during 2024. Meanwhile, releasing PlayStation games on PC has proven highly profitable, according to former executive Shuhei Yoshida.

The console market shows mixed results. PS5 enjoyed record holiday sales, with PlayStation revenues reaching $11 billion. MLB The Show 25 sold strongly in the US market, becoming a top seller in Q1. However, Nintendo lowered its forecast as Switch sales dropped 31% to $0.18 billion, with the aging console “performing below expectations.” Similarly, Xbox hardware sales declined, though Game Pass set a quarterly revenue record.

New Releases and Future Titles

The gaming release calendar continues to evolve with new titles, unexpected partnerships, and shifting development priorities. This section highlights recent launches and upcoming games that are shaping player expectations for the rest of 2025.

– Award Recognition and Fan Favorites

Astro Bot and Helldivers 2 dominated the DICE Awards 2025, winning major categories after leading the “most liked” nominations alongside Indiana Jones. These wins reflect how players value both innovative gameplay mechanics and established franchise entries. Meanwhile, Hitman: World of Assassination tops recommendation charts among players, while new Doom: The Dark Ages footage has impressed viewers with its visual quality and refined combat systems.

– Publisher Transitions and Creative Partnerships

Marvel Snap developer Second Dinner went offline due to complications from the US TikTok ban affecting ByteDance companies. The studio has since found a new home with publisher Skystone Games, ensuring the popular card game continues operation. In an unusual crossover, ITV created a Fallout-inspired BBC Kitchen game for Roblox, featuring 200 players competing in post-apocalyptic cooking challenges.

– Platform Expansions and Technical Hurdles

Resident Evil 2 remake fans are campaigning for a mobile version to bring the horror experience to portable devices. Rainbow Six Siege X has been announced with various improvements, with a dedicated showcase scheduled for March 13. Forza Horizon 5 is coming to PlayStation 5 this spring, expanding the racing franchise to new platforms.

Spider-Man 2’s PC port has received criticism for optimization issues and technical problems, highlighting the challenges in cross-platform development. These problems serve as a reminder that even successful console games need careful adaptation for PC environments.

Community Solutions and Development Pivots

Monster Hunter Wilds players have found solutions through community mods addressing the game’s major issues, including improved drop rates, multiplayer fixes, and enhanced graphics options for mid-range computers. These player-made improvements show how communities continue to enhance official releases.

Ubisoft has rebooted its Far Cry multiplayer shooter as an extraction-based game, taking the franchise in a new direction. This significant change demonstrates how publishers are willing to reimagine established franchises to match evolving player preferences.

– Platform Strategy Changes and Production Challenges

In a notable industry shift, Xbox currently has more first-party games coming to PlayStation 5 this year than Sony itself does. This cross-platform approach marks a significant strategy change for Microsoft. Meanwhile, Avowed is skipping Xbox Cloud Gaming but will be available on NVIDIA GeForce Now, giving PC players additional access options.

Destiny 2 Heresy launched with missing voice lines due to the ongoing SAG-AFTRA strike, with Bungie warning players about the incomplete audio experience. This highlights how broader entertainment industry labor issues continue to impact game development.

– Media Convergence and Streaming Integration

Netflix continues expanding its gaming initiatives with new cloud plans featuring co-op and party games. This demonstrates how traditional media companies are moving into interactive entertainment, blurring the lines between passive and active entertainment forms.

Funding Landscape with Web2 Gaming

Financial investment in gaming shows early signs of recovery, though still below previous peaks. This section examines where money is flowing in the industry and what it reveals about investor confidence in different sectors.

– Venture Capital Revival

Game industry venture capital reached $373 million across 77 deals in Q1 2025, according to Konvoy Ventures. This marks a 35% increase from Q4 2024, showing renewed momentum after a period of tighter funding. However, these numbers remain 41% lower than the same period in 2024, with deal counts down 51% year-over-year.

The current funding environment shows investors taking a more selective approach rather than the widespread enthusiasm seen during the 2021 peak, when the industry attracted $10.2 billion in VC funding. Gaming-focused ETFs outperformed broader market indexes, suggesting investor confidence in selected gaming stocks despite overall caution.

– Regional Investment Patterns

Investment patterns show sharp regional differences. In Europe, 97% of deals were early-stage funding, indicating interest but with smaller initial investments to spread risk. The US experienced a notable rebound in growth-stage funding, though deal counts remained below historical highs. US-based gaming startups secured significantly more VC funding than their Chinese counterparts.

Asia, particularly China, remains a dominant market despite geopolitical tensions and US tariffs complicating cross-border investments. Meanwhile, Africa, Australia, and South America recorded no gaming venture deals in Q1 2025, highlighting a stark slowdown in these regions.

– Mergers and Acquisitions Surge

While venture capital shows mixed signals, M&A activity rebounded strongly with 48 deals announced in Q1 2025, totaling $4.4 billion in disclosed values – the highest quarterly total in nearly two years. Notable transactions included Scopely’s $3.5 billion acquisition of Niantic’s games division and Tripledot’s reported $900 million purchase of AppLovin’s games division.

This increased M&A activity stems from strategic players reshaping their portfolios, private equity interest, and particular focus on the mobile gaming sector, which continues to offer attractive growth potential.

– Private Investment Beyond VC

Outside traditional venture capital, 149 private placements totaled $3.5 billion in disclosed value. The most significant was a reported $3 billion investment in Infinite Reality. However, securing later-stage financing remains challenging for many companies, creating a funding gap for mid-size studios looking to scale.

– Investor Priorities

Investors now favor proven teams, late-stage traction, and innovative concepts. Particular interest surrounds AI integration in games, community-led platforms, and User-Generated Content tools. Angel investors and syndicates are actively backing gaming projects, often filling gaps where traditional VC has become more cautious.

Active investors include BITKRAFT and Play Ventures in the VC space, while companies like Krafton, Tencent, and Samsung continue making strategic investments in promising studios and technologies.

Several new funds focused on gaming investments were announced during Q1, suggesting continued institutional commitment to early-stage innovation despite the overall funding slowdown.

Web3 Gaming Market Outlook

The funding landscape shows signs of stabilization after two challenging years. While nowhere near the peaks of 2021, the quarter-over-quarter improvement and strong M&A activity suggest renewed confidence. However, investors remain selective, focusing on strong fundamentals rather than speculative concepts.

This more disciplined investment approach may ultimately create a healthier ecosystem that is less prone to the boom-bust cycles that have characterized gaming investment in recent years.

Building Resilient Worlds: Web3 Gaming’s Shift Toward Long-Term Growth

Q1: The Future Is Sustainable: How Web3 Gaming Is Growing Beyond the Hype

The first quarter of the year has officially wrapped up for the Web3 gaming sector — and while momentum remains strong, the investment landscape is clearly evolving. Venture capital firms are moving more cautiously, taking additional time to assess the long-term sustainability of projects. The investment landscape is seeing a shift from token allocations to equity-based funding. This trend marks a longer-term view from investors, and will lead toward building a more sustainable ecosystem, but also reduce the pressure on projects to prematurely launch tokens under unripe conditions.

Despite the more selective climate, several standout funding rounds have made headlines. The Game Company (TGC) raised an impressive $10 million and announced a major partnership with BytePlus, the enterprise technology division of ByteDance (parent company of TikTok). Together, they aim to revolutionize gaming, streaming, and reward systems for creators around the globe — a powerful step in merging entertainment and Web3 innovation.

Another notable investment in Q1, highlighting the advancement of blockchain gaming infrastructure: Beamable secured $13.5 million in a round led by BITKRAFT Ventures, which will fuel Beamable’s mission to build decentralized backend infrastructure for games, empowering developers with new tools to create dynamic, scalable experiences.

Mobile-first gaming is also heating up. Pixion Games raised $12.4 million to accelerate the development of Fableborne, a highly anticipated title blending action RPG elements with mobile-first design. This round, led by Delphi Ventures, was also backed by top names in the industry such as Spartan Capital Group, Sky Mavis, and Animoca Brands, demonstrating continued confidence in the future of the market.

In another exciting move, SuperGaming secured fresh funding from Bandai Namco, showing that traditional gaming giants continue to place their bets on Web3’s future.

Finally, Web3 gaming studio, Hyve Labs, received $2.75 million in pre-seed funding, led by Framework Ventures and joined by Volt Capital, Builder Capital, 32 Bit Ventures, and angel investors hailing from the likes of Zynga and InfiniGods.

All signs point to a Web3 gaming industry that’s maturing, focusing not just on fast growth, but on building for the long haul.

Q2: Next-Gen Gaming Gets a Boost: Major Wins in Funding, Acceleration, and Innovation

The momentum from Q1 has continued to carry through into the second quarter, with more impressive funding announcements fueling excitement for the future of the Web3 gaming sector. 

Ultra kicked off funding news by raising $12 million, reinforcing its position as a major player in the blockchain gaming space. Meanwhile, Liminal Experiences, Inc. secured $5.8 million, enabling the project to push the boundaries of immersive gaming experiences, and welevel studios locked in $5.7 million to advance AI-driven game development — a clear sign that artificial intelligence is becoming a cornerstone of next-gen gaming innovation.

On the fully on-chain side, Kamigotchi, a project embracing the vision of decentralized gaming, raised $1.3 million to continue building out its ecosystem. And in another exciting move, a16z’s Speedrun program (SR005) announced a $1 million investment opportunity designed to identify and accelerate the next wave of groundbreaking gaming startups.

Together, these funding milestones highlight growing investor confidence and an accelerating evolution in how games are built, distributed, and monetized — across both traditional and Web3 ecosystems.

Accelerator programs are also ramping up in a big way. MARBLEX launched a new $20 million fund, while Alchemy introduced a $5 million fund aimed at catalyzing early-stage Web3 game developers. 

Meanwhile, the Inevitable Games Fund reported impressive growth, surging 180%. (Source) Another notable collaboration comes from Uprising Labs and Somnia, who have partnered to launch a six-month accelerator program backed by a $10 million grant. This initiative aims to empower game developers to build scalable blockchain games, further expanding the decentralized gaming landscape.

With new funding streams opening up and accelerator programs gaining momentum, Q2 is already shaping up to be a critical chapter in the future of gaming innovation.

Web3 Gaming Market Performance & Project Launches

While there has been a small decline across many sectors of the Dapp ecosystem, games still rank high when it comes to Unique Active Wallets (UAW). While the market is currently experiencing a bearish period, gaming projects are consolidating their efforts and continuing to build. 

Notable project launches include:​

• StrayShot: Utilizing SKALE’s infrastructure for enhanced gameplay. ​(Source)
  
• Hamster Kombat: A Telegram-based game that rapidly amassed over 300 million users, showcasing the potential of simple, engaging Web3 games. ​(Source)
  
• Animoca Brands and Soneium by Sony Block Solutions Labs announced a partnership to develop Moca Network’s identity layer and launch San FranTokyo’s anime initiatives on Soneium. (Source)
  
• The ever-popular MMORPG, MapleStory, a flagship IP from Korea’s largest game studio, Nexon, is being reimagined on Avalanche. First launched over 20 years ago, the game remains a cult classic, celebrated for its enduring popularity across generations of players. Now, a Web3-powered expansion of the franchise is set to debut on Avalanche, ushering MapleStory into the next evolution of gaming. The news has received widespread attention and is set to transcend the confines of traditional gaming by leveraging blockchain technology. A move that is set to reduce the gap between underlying gaming technologies. 

Top Web3 Games and Ecosystem Performance

Top games such as World of Dypians, Pixudi, and Age of Dino continue to drive engagement through roadmaps, partnerships, and ecosystem expansions. The total UAW highlights that there is an appetite and traction for great blockchain-based games. Time will tell whether users continue to engage beyond initial launches and whether a game can create a sustainable environment for its players.

Major Game Analysis: Top Releases and Performance Metrics

“The global web3 gaming market size is accounted at USD 37.55 billion in 2025 and is forecasted to hit around USD 182.98 billion by 2034, representing a CAGR of 19.24% from 2025 to 2034. The North America market size was estimated at USD 11.34 billion in 2024 and is expanding at a CAGR of 19.40% during the forecast period.” (Source) 

Looking Forward – Final Thoughts

Traditional gaming shows mixed signals in early 2025. Studio closures continue while Monster Hunter Wilds and other hits prove quality still sells. Funding has become more selective but not scarce, with investors favoring proven teams and innovative concepts. The formation of the first North American game developer union marks a workforce pushing back against instability.

Key trends to watch include the sustainability of live service developers are questioning long-term viability, AI integration in development processes, shifting console strategies with Nintendo’s Switch 2 on the horizon, and economic pressures affecting hardware production. The industry isn’t shrinking—it’s recalibrating toward sustainability over rapid growth.

On the web3 front, there are interesting developments, as we start to see projects focusing on building strong IPs. Sui is launching their handheld console, which is set to rival the Nintendo Switch in terms of quality and functionality, with games also available on Steam, targeting traditional players as well as Web3 native gamers. Shifting the focus and narrative has the potential to be a game-changer for blockchain-based gaming. A renewed outlook on how to onboard users as well as game developers could begin to attract players through innovative twists on already successful models and great gameplay, which is the main premise for all gamers who play for the game, not the rewards. Web3 gaming has promising times ahead, there is no lack of innovation across tooling and infrastructure, and time will be the main factor to highlight its trajectory going forward.

We’d love to hear what you think and where you see the industry heading in the comments below.

This article was written in collaboration with GM Games – Statistics supplied by Dappradar.