The gaming industry is experiencing a fundamental shift in investment strategy, with gaming funding in India contracting from $133 million in 2025 to $42.5 million in 2026 despite the market crossing a $1 billion revenue mark in 2025. According to The Hindu BusinessLine, this represents a funding reset where investors are now demanding stronger retention, capital efficiency and sustainable monetisation over short-term growth. Industry leaders view this trend as one of the most significant changes in gaming investment strategy over the past decade, with the sector evolving from a hit-driven business into a maturing digital entertainment ecosystem. As Nitish Mittersain, Founder and CEO of Nazara Technologies, noted, "Companies that can consistently retain players, build communities around their products and create multiple engagement touchpoints are proving to be far more resilient businesses."
The gaming industry is experiencing a significant shift from its post-pandemic expansion phase to a cost-conscious reset period. According to reports from Mint, gaming giant Electronic Arts recently closed its $55 billion deal to go private, led by Saudi Arabia's Public Investment Fund. Microsoft announced 3,200 job cuts at Xbox and is divesting studios, while Ubisoft closed studios and pushed major productions into 2028-29. These moves signal the end of the industry's expansionist phase driven by COVID-19 pandemic demand.
During the pandemic lockdowns, video game demand surged significantly, with global revenues rising from $131.7 billion in 2019 to $147.7 billion in 2020, before jumping to $214.2 billion in 2021, according to a 2022 PwC report. The industry experienced unprecedented consolidation, with over 1,300 deals announced or completed in 2022 alone, representing $127 billion in deal value, as reported by the Drake Star Global Gaming Report. About half of all billion-dollar gaming deals to date occurred between 2020 and 2023, including Microsoft's $68.7 billion acquisition of Activision Blizzard.
The role of technology in gaming is evolving significantly, with AI now being assessed as a genuine differentiator rather than a buzzword. As Anuj Tandon, Partner at BITKRAFT Ventures, explained, "Studios using AI to cut development cycles, personalise live-ops, improve player retention and build large distribution moats are able to do more with leaner teams and tighter burn." Companies are increasingly adopting targeted capital like the $20 million non-dilutive user-acquisition financing secured by Metasports Interactive from London-based Metica to scale Hitwicket globally. This shift represents a fundamental change in how investors evaluate gaming businesses, with efficiency combined with strong recurring revenue and engagement fundamentals becoming the new baseline for investor screening.
India's gaming industry demonstrates structural differences from Western markets, remaining overwhelmingly mobile-first and built around free-to-play business models. According to Niko Partners data reported by Mint, India's video games market (excluding real-money gaming) crossed $1.04 billion in 2025 and is expected to reach $1.2 billion in 2026, with potential to reach $1.77 billion by 2030 at an annual growth rate of about 11%. The player base crossed 500 million in 2025, with 95% of users accessing games on mobile devices, positioning India relatively insulated from Western challenges including console saturation and AAA development cost escalation.
