All three console makers are rethinking the bet at once

Gaming 5 min 80 sources

Nintendo, Microsoft and Sony are each recalculating how consoles make money — while Amazon tries again through owned IP, one indie hit saves a studio, and a lawsuit probes who really controls the store.

Key takeaways

All three console makers are recalculating the same bet: Nintendo's Switch 2 sales whipsawed around a price hike, Microsoft is "resetting" Xbox to prioritise exclusives again, and Sony's first-party game sales have roughly halved since 2020 — because consoles make money on games and store cuts, not hardware.
Amazon's new games plan is to own the IP rather than out-build studios (IO Interactive's 007 First Light sold 2.7 million copies, with future Bond games going to Amazon and MGM), while one indie hit selling 300,000 copies kept a small studio alive.
A long-running lawsuit alleges Valve uses a price-parity rule to protect Steam's ~30% cut, GameStop is funneling its meme-stock cash into a $2 billion buyback, and 212 million Americans now game — including a third of over-80s the industry barely builds for.

The console business is being recalculated

A single number captured the week: Nintendo’s Switch 2 hardware sales in Japan fell 87% in one week, down to about 31,750 units [2]. The crash had a clear cause. In the three weeks before, sales had surged past 200,000 a week as buyers rushed to beat a looming price increase [2]. People bought early to dodge the higher price, leaving a hole right after.

That tells you how the console business actually works. Makers sell the hardware cheap — sometimes at a loss — and earn the money later. It comes from game sales and the roughly 30% cut they take from every download on their store. So price, exclusivity and the storefront are the real levers, and right now all three big makers are pulling them differently.

Microsoft is the sharpest turn. Its new Xbox chief, Asha Sharma, says she is “resetting” the business and will prioritise exclusive games again [5]. That reverses years of putting Xbox titles on rival platforms. Exclusives, she now argues, are what sell a console in the first place [56]. Sony shows why that matters: its own first-party game sales have roughly halved, from 58.4 million in its 2020 financial year to 28.9 million in 2024 [54]. As one summary put it, you need games to sell consoles [54]. Three makers, one lesson, three different responses.

Amazon tries games again — this time by owning the story

Amazon has spent a decade and a fortune trying to make hit games, mostly without success. This week it showed its new plan: stop trying so hard to build them, and instead own the stories. IO Interactive’s new game, 007 First Light, sold 2.7 million copies in its first week, and is nearing three million [12]. Future James Bond games will now be published by MGM and Amazon Game Studios, not by IO itself [10].

The system here is intellectual property — IP, the owned rights to a character or world. Amazon bought the film studio MGM for $8.45 billion in 2022, and MGM owns James Bond [10]. So Amazon’s route into games is no longer to out-develop the experts. It’s to own a franchise everyone wants and collect a publisher’s share of whatever gets made with it. For a tech giant, owning the brand is a surer bet than building the studio.

One hit, and a studio gets to live

At the other end of the scale, a small team just survived on a single launch. Mina the Hollower, from Yacht Club Games, sold 300,000 copies in three days [14]. The studio’s founder had called it “make-or-break” the year before — and to fund it, the team had shelved another game it was working on [43][14].

That’s the brutal arithmetic of an independent studio. A giant publisher spreads its money across many games, so one miss is survivable. A small studio usually has just one game in the oven at a time, so every release is the whole company wagered at once. It’s why beloved small teams can vanish after a single underperformer — and why a surprise hit isn’t just good news, it’s the difference between existing and not.

The 30% question: who really controls the store

The biggest force in PC gaming is facing a long legal test of how it keeps its grip. For five years, a class-action lawsuit has alleged that Valve, which runs the dominant PC store Steam, abuses its position to overcharge developers [17]. Court documents suggest Valve penalised developers who sold their games more cheaply on other stores — allegedly threatening to pull big titles if they broke ranks [17].

The mechanism is a price-parity rule. Steam takes about 30% of each sale. A rule that you can’t sell your game cheaper elsewhere stops rival stores from competing on price — which is what would normally force that 30% cut down. If you’ve ever wondered why a game costs the same on every store, this is a large part of the answer. (Valve also just raised the price of its Steam Deck handheld by $300 [35].)

GameStop turns meme cash into a buyback

The retailer that became a stock-market phenomenon gave a glimpse of its real business. GameStop reported a 14% rise in quarterly revenue and announced a $2 billion share buyback [40].

A buyback is when a company uses its cash to buy its own shares back from the market. It returns money to shareholders and, by shrinking the number of shares, lifts the value of each one that’s left. GameStop’s stores have been shrinking for years, but the meme-stock frenzy left it sitting on a pile of cash. The buyback is a tell about strategy: rather than pour that money into reinventing the shops, it’s handing a chunk back to investors. The financial machine, not the retail one, is doing the work.

The players nobody’s building for

End on a number that reframes the whole industry. A new report from the Entertainment Software Association, the US industry body, found that 67% of Americans — about 212.3 million people — now play video games [19]. The striking part is the spread: 32% of those over 80 play too [19].

Gaming long ago stopped being a young person’s hobby, but the games business still aims most of its biggest spending at the same narrow audience it always has. As one industry piece put it bluntly, almost nobody is making games for retired people [8]. That’s the systems angle hiding in a survey: an enormous, growing, underserved group of players exists, and the money hasn’t followed them yet. The audience changed faster than the industry that serves it.

02 · Lesson · why it matters

Who takes the risk, and who takes the cut

The one taking the risk and the one taking the reward are usually different people — and structure, not effort, decides which chair you're sitting in.

A studio bet everything; someone else got paid either way

This week a small studio called Yacht Club survived. Its game, Mina the Hollower, sold 300,000 copies in three days — and the founder had called it “make-or-break,” because the team had bet the whole company on it. It worked. The studio lives.

Now look at who else got paid. Steam, the store the game sold on, took its cut — roughly 30% of every copy. And here is the part that matters: Steam would have taken that cut even if the game had flopped and the studio had folded. The makers risked their entire existence on one throw. The platform collected its share no matter which way the throw landed.

That split — the maker carries the risk, the platform takes the cut — runs underneath the whole games business. And underneath far more than games.

Risk and reward don’t sit in the same chair

We grow up believing risk and reward travel together: take the chance, earn the prize. In real systems, they’re routinely pulled apart and handed to different parties.

In almost any layered arrangement, there’s a chair that bears the downside: the maker, the borrower, the franchisee, the gambler. And there’s a chair that collects the upside with little downside: the platform, the lender, the franchisor, the house. One chair eats the loss if the thing fails. The other keeps a slice whether it fails or not. They look like they’re in the same business. They are not in the same position at all.

The cut-taker doesn’t have to pick winners

Here’s why the cut chair is so powerful: it doesn’t have to be right about anything.

Steam doesn’t need to know which game will be a hit. It takes a piece of every game, the hits and the flops alike. A console maker earns its store cut no matter which titles sell. The toll booth doesn’t bet on where the traffic is going — it taxes all the traffic. So the safest and richest spot in any system isn’t making the winner. It’s owning the gate that every winner and every loser both have to pass through. You collect on the whole field, while risking nothing on any single horse.

The maker carries the risk because the maker can be replaced

So why does anyone sit in the risk chair? Often because they have no choice — the structure puts them there.

There are thousands of game studios and one dominant PC store. Many games chasing players, and one James Bond licence everyone wants. The abundant side competes fiercely and absorbs the risk; the scarce side, the gate, collects and stays insulated. That’s the quiet cruelty of it: the people doing the visible, creative, exhausting work are often the ones capturing the least and bearing the most. Effort and exposure pile up in the same chair, while the reward flows to the gate that the effort had to pass through.

How to read any deal

This gives you a sharp test for almost any arrangement — a job, an investment, a partnership, a platform you build your living on. Before you ask who’s winning, ask two separate questions. Who eats the loss if this fails? And who keeps a cut if it succeeds?

They’re usually different parties, and the distance between them is where the power lives. Renter and landlord. Gig worker and the app. Author and publisher. You on a salary and the company you build value for. In each pairing, one chair holds the risk and the other holds the cut. The work you’re doing tells you almost nothing about which chair you’re in. The structure tells you everything.

Choosing your chair

This isn’t a reason for cynicism. It’s literacy. Sometimes the risk chair is exactly where you want to be: you make the hit, you own it outright, and the whole upside is yours. Sometimes the cut chair is quietly running the entire game while the makers exhaust themselves below. Neither is simply good or bad.

But you cannot choose well if you can’t see which chair a system is putting you in. So whenever you’re about to pour in your work, your money, or your years, look past the activity and find the split. Who carries the risk here, and who keeps the cut? The two are rarely the same person — and knowing which one you are is most of knowing how the system will treat you.

03 · Lab · your turn

The Maker and the House

Split your stake each season between backing one game and taking a cut of every game, and feel that the maker rides boom-or-bust while the store's cut compounds steadily — the chair, not the skill, shapes the ride.