Gaming Industry Growth Hinges on New Ad-Supported Models

The gaming industry is facing a new reality: the days of rapid, double-digit growth are behind us. However, this doesn't mean the market is stagnant. Industry experts at GamesBeat Summit 2025 in Los Angeles gathered to debate how gaming can evolve beyond traditional business models to unlock new growth opportunities.

Michael Pachter, managing director at Wedbush Securities, drew a compelling analogy comparing gaming today to the movie and television industries of the 1960s. Back then, audiences had limited ways to consume content—either in theaters or on TV. Today, viewers enjoy a plethora of options including streaming, on-demand services, and YouTube. Pachter believes gaming is on the cusp of a similar transformation, with ad-supported models poised to expand access and grow the market.

He highlighted Netflix’s success with its ad-supported subscription tier, which has attracted 70 million subscribers worldwide. Pachter suggested that Microsoft could adopt a similar approach by offering an ad-supported Xbox Game Pass at a lower price point, potentially doubling its subscriber base. He also questioned why Microsoft hasn’t integrated its popular mobile games like Candy Crush or Call of Duty: Mobile into Game Pass, envisioning a future where games, movies, and TV coexist on a single platform.

Pachter warned that without fresh thinking and innovation, Microsoft risks losing ground to Netflix, which has been steadily acquiring studios and expanding its gaming offerings. While Netflix hasn’t yet entered the console and PC gaming space, its developer-friendly revenue sharing model could position it as a major disruptor if it does.

However, the subscription model itself has limitations. Rhys Elliott of Alinea Analytics pointed out that unlike music or video streaming, where users consume large volumes of content monthly, gamers typically only play one or two games per month due to the time investment required. Free-to-play games also compete for players’ attention, further complicating engagement.

Catalin Alexandru, a behavioral game economist, noted that services like Game Pass have not been a silver bullet because many gamers have large backlogs on platforms like Steam, complete with social and curation features that keep them loyal. Convincing gamers to switch to a platform like Netflix requires overcoming significant inertia and building a compelling flywheel effect.

The panel also discussed the future of live-service games, rising triple-A development costs, and how upcoming releases like Nintendo Switch 2 and Grand Theft Auto VI could influence the industry’s trajectory. These factors underscore the complexity of navigating growth in a mature market.

In summary, while traditional growth drivers have slowed, the gaming industry stands at a crossroads. Embracing ad-supported models, integrating mobile and console experiences, and fostering innovative platform strategies could unlock new audiences and revenue streams. The question remains: will established players adapt quickly enough, or will newcomers like Netflix redefine the gaming landscape?