Videogames are 'losing in the War for Attention': Analyst says many of the industry's biggest markets are spending less time on gaming

Matthew Ball's early-access 2025 report flags a structural decline in videogame engagement across several of the industry's largest markets, noting the US gaming population has fallen by 2.5–4 percentage points since pre-pandemic levels and larger drops in markets like South Korea (‑15% vs. 2017–19) and Canada (roughly one-in-six adult players lost from 2018–2022). While France, Germany and Japan buck participation declines (Japan +11% since 2019 but only ~6 million new players), combined PC/console consumer spending has flatlined or fallen over the last four years; Ball highlights substitution from short-form video, OnlyFans, consumer AI apps (quarterly installs up from 100M to ~1B since 2023) and other interactive services, implying increased monetization pressure on a shrinking player base and a negative growth outlook for gaming revenues.

Analysis

Winners & Losers: Attention is migrating from traditional PC/console gaming toward short-form social, consumer AI apps, betting/crypto and creator platforms. Winners will be ad-driven and notification-native platforms (short-form video, Meta SNAP, SEA regional platforms, crypto exchanges) that can monetize incremental attention cheaply; large live-service publishers (EA, ATVI, TTWO) and mid-cap studios reliant on a shrinking active base face margin pressure as ARPU must rise >2.5–4% just to offset population declines seen in mature markets.

Competitive Dynamics & Supply/Demand: Fewer players means higher marginal monetization incentives (more microtransactions, subscriptions, event gating) and increased pay-to-win experimentation, which accelerates churn and raises CAC for new titles. Market share will concentrate in multi-title platforms and ecosystems (MSFT/Sony/Nintendo/Tencent) able to cross-subsidize; independent hit-oriented studios will see pricing power and fundraising stress, increasing M&A activity and funding costs.

Risk Assessment & Catalysts: Tail risks include regulatory blowback on aggressive monetization (consumer protection or loot-box bans), a rapid migration back to gaming if a cultural hit arrives, or macro-driven discretionary spend shocks. Immediate (days) — sentiment swings on earnings or MAU prints; short-term (weeks/months) — volatility around earnings/launches; long-term (quarters/years) — secular attention shift. Key catalysts: MAU/DAU prints, ad CPM trends, short-form video engagement growth (>10% q/q), and regulatory proposals on in-game monetization.

Contrarian Angles: Consensus assumes continued monetization will fill revenue gaps; what's missed is elasticity—if ARPU increases >10% y/y, churn could accelerate, producing negative net revenue retention. Historical parallels: mobile gaming monetization waves (2013–2016) produced outsized returns then backlash and valuation compression later. Unintended consequence: stronger ad platforms could enter games (in-game ads) accelerating consolidation and benefitting ad-tech over publishers.

Key Decisions for Investors

• Establish a 2–3% notional long position in Meta Platforms (META) via a 6–12 month call spread (buy 15% OTM call, sell 30% OTM) to capture reallocation of attention to ad-driven short-form and consumer AI, target >20% upside if ad CPMs recover by +5–10% year-on-year.
• Initiate a 1.5–2% hedgeable short on Electronic Arts (EA) via 3–6 month 20% OTM put purchases (or buy-to-open put spreads) anticipating ARPU-driven backlash; add to position if quarterly active users decline >5% y/y or live-service bookings miss consensus by >7%.
• Pair trade: Long Nintendo (NTDOY) 2% vs short Activision Blizzard (ATVI) 2% over 9–12 months — NTDOY benefits from stronger Japan console engagement and first-party IP while ATVI is more exposed to Western live-service monetization pressure; rebalance if relative performance diverges >7%.
• Reduce exposure to small-cap/mid-cap game developers by 30–50% within gaming/entertainment sleeve and reallocate to ad-tech and consumer AI equities (e.g., SNAP, SEA, selected programmatic ad names) over next 1–3 months; use 1% portfolio cash to buy protection (index put spread) against a 10–15% sell-off in the gaming basket.