Big Tech sucks at gaming

Can Amazon, Google, Facebook, and Apple disrupt the video games market?

6 min readJul 29, 2020


The lockdown over the past months has focused attention on the games industry like never before. And for good reason. Video games today are immensely popular after successfully transitioning from the fringes and becoming a mainstream form of entertainment. Annual spending on video games stands at $130 billion globally and well over 2 billion people claim to play regularly.

It is precisely because of this growth that all of the major tech firms have grown an interest in gaming. Big Tech — Amazon, Google, Facebook, and Apple — are trying to penetrate and further expand their share in games. After music and video, these firms hope to disrupt gaming and leverage it as a way to attract more, and especially younger, people to their services and products. Today, with the release of a new console generation just a few months away, industry observers are wondering: “Can Big Tech conquer the video games industry?”

So far, it’s not going so well.

Image credit: Stephen Bliss for Fortune Magazine.

Just a few weeks ago we saw how mighty Amazon stumbled when it released its first big title. What was undoubtedly meant to be a declaration of its commitment and inevitable dominance over the category, its shooter title, Crucible, flopped painfully. It is working on a cloud gaming service but it has been eerily quiet on this front. Its crown jewel, Twitch, has been struggling to grow its ad revenue and lost several of its most popular streamers, including Tyler ‘Ninja’ Blevins, to rival platforms with deep pockets. And different from other categories, Amazon has yet to dethrone GameStop, BestBuy, Target and Walmart when it comes to physical game sales. After Amazon acquired Double Helix in 2014, many rumored that the biggest online store owner in the world would swiftly disrupt the games industry. But six years later none of that has happened.

Another relative newcomer in games, Google is always going to be a bridesmaid but never a bride at this rate. Its earnings and offering have stayed in Apple’s shadow, despite its much broader user base. And on YouTube, gaming has long been a major content category after music. Despite a rapid rollout of a live streaming service YouTube earned itself a familiar second position. (In fairness, Microsoft tried with Mixer and didn’t even get close and handed in the towel recently.) YouTube Gaming continues to suffer from its own opaque algorithms. Most of the titles that were announced last year at the industry’s biggest convention, E3, contributed to the de-monetization of video creators because they featured content that upsets the sensibilities of YouTube’s advertiser clients.

This is probably why it decided to launch its cloud gaming service, Stadia. When its CEO showed up to announce its vision for the future of games, people believed it was a sign of how serious Google is about gaming. Now, more than a year later, its service is incrementally improving, sure, but Google has all but lost the first-mover advantage it held over its rivals. According to one senior executive I spoke:

“Google is committed, but it’s not all in.”

Facebook seems to have the hardest time yet. After initially enjoying an unexpected popularity with social games as its users flocked to titles like FarmVille in between uploading messages to their friends and family, the genie slipped out the bottle when it was late to transition to mobile. Facebook has been chasing this first high ever since.

It had its own digital distribution platform, acquired Oculus for $2 billion, and has more recently started investing its live streaming service. Certainly, Facebook has proven eager to spend and acquire. But so far it has not managed to show a big return as video games only awkwardly fit into the company’s ad-based revenue model. None of it seems to stick.

It is tempting, of course, to point at Apple. It rules the mobile segment with $11 billion in revenue in 2018. Much of that was by accident rather than a planned effort to penetrate the games industry. In fact, Jobs, after spending his early years at Atari, always held a strong contempt for video games. Nevertheless, he gleefully reported during the 2010 Apple event that while his firm had not “set out to compete with Nintendo or Sony on their PSP, but we are now a significant part of that market.” As PC gaming started to grow over the past decade, Apple barely managed to benefit because it does not prioritize game development for its Mac hardware. To Apple, games are a means to an end and not a passion. If it was, why insist on a 30% cut, still?

Nevertheless, success for Apple creates new problems entirely. Its App Store is a tangled mess with millions of applications which makes it difficult for developers to stand out and end-users struggle to navigate. The launch of the Apple Arcade, a subscription-based service aimed at consumers that prefer to ‘pay once and play’, has been marred by its high-brow offering. After spending several hundred million dollars on acquiring exclusive content, the service has not been able to attract a critical mass of users despite Apple’s enormous install base.

The one firm that bucks this trend is Chinese titan Tencent. With dominance over its domestic user base due to regulatory requirements (foreign firms can only release content in China if they partner with a domestic firm), it is eagerly looking for properties in South East Asia, Europe, and North America. It acquired some of the most successful game companies in the history of the industry, Riot Games, which created League of Legends (an online multiplayer game with 100 million active players at its peak) and Supercell, known for Clash of Clans and Clash Royale. Both of these firms generate billions in revenue annually.

Tencent offers a familiar mix of content for PC, console, and mobile, combined with live streaming services. And it is currently beta-testing its cloud gaming offering. Tencent is quickly becoming the gatekeeper to all of Asia for western game companies due to its vast network of investments. But, despite its size, Tencent is stuck between regulation and a hard place.

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Looking at the current exposure to gaming among major tech firms, we can see the writing on the wall. Big Tech will have to commit or move on. Combined, Amazon, Google, Facebook, and Apple control about $20 billion compared to $31 billion for two of the major incumbents, Microsoft and Sony. More so, for games to become a meaningful part of their operations, Big Tech needs to grow their share of the market well beyond the 3% it currently represents. Each makes substantially less in revenue and controls a much smaller market share than their incumbent competitors.

Knowing how each has dealt with content industries previously, it is likely they will continue pushing into the games industry and increase their spending. But unlike music and movies, whether it has been relatively easy to throw a bunch of money around to obtain platform exclusive content, tech firms are finding this more difficult in gaming. Most successful titles depend on positive network effects and have made multi-player game play central to their appeal. Platform exclusivity does not make sense in that context. More so, with the exception of outright acquiring one of the major publishers, Big Tech will have a really hard time and likely no interest in establishing themselves as content creators.

Is the games industry different now than it was twenty years ago? Absolutely! Can Amazon, Google, Facebook, and Apple claim it for themselves as they’ve done everywhere else? We’ll see. For now the great disruptors of our time are all playing defense.

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I’m an academic and entrepreneur with expertise in video games, wrote One Up, teaches at @NYUStern, was @_SuperData CEO (exit)