The video games industry is facing a “fundamental realignment”, having effectively moved on from the “content” past to a “network” present that has deeply changed the forces that kept the whole industry together, according to Square Enix former Director of Business.
In a lengthy thread posted on X, Jacob Navok, who, as Director of Business, worked closely with Square Enix’s CEO in the past, offered a very interesting in-depth analysis of the current state of the video games industry, highlighting the now mature shift from a content phase to a network phase and how this could evolve further in the future. For years, the vast majority of bigger publishers like Square Enix focused on producing content, which was the focus of the business. In 2004, however, something started to change, as former Square Enix CEO Yoichi Wada began writing about the network in his annual letters to shareholders, highlighting how that was the future, rather than content. Many believed he was referring to MMOs, but as time passed, it became clear he was referring to what is dominating the video games industry: the “social networks” of games, or rather platforms via which players access games.
For a very long time, the industry was defined by scarcity of content. Players would complete a game and move onto the next, and this held true even as the industry started moving towards richer mediums and MMOs. Creating good content and marketing the content appropriately would lead to profitable income. This is why release dates were set in the Fall towards the Holiday season, generally avoiding launching on the same date as other big hitters. A portion of the industry still works this way, but it is crumbling. Speaking about the Final Fantasy series, the former Square Enix employee highlights that the problem isn’t increasing costs, but the inability to generate the revenue needed. The audiences expected to play the game did not come, and were not willing to pay to spend their time.
What players, especially the younger generation, are willing to spend their time on nowadays are platform titles like Roblox and Fortnite, and a few other dominant forever games which are acting closer to platforms. Add in a social network like TikTok, which scratches the same itches of casual games, and it’s evident how players have less and less time to spend on traditional games, which continue to function as content and no longer enjoy the success of the past. Even in the network era of the video games industry, however, not every forever game that also acts as a platform can succeed, as few games can achieve the same level of success of Fortnite, a situation that mirrors social networks well, as only TikTok, has grown to a prominence that can rival Facebook and Instagram.
This doesn’t mean that video games are going away, Jacob Navok continues, but it’s a clear indication of how the video games industry has to change in its fight for time against social networks and platform, forever games. This is the problem Microsoft is facing today, and a situation that has changed a lot since the acquisition of Activision Blizzard and greenlighting the games that were canceled last week, like the Perfect Dark reboot. Concord is a clear example of an industry that has radically changed in the past few years, as a $400m investement and eight years of work with zero revenue generated would have never happened in the past, alongside some of the June 2025 happenings, which the former Square Enix Director of Business thinks to have been a critical month for the industry. Nearly $1bn has been invested by the video games industry in games like MindsEye, Splitgate 2, Marathon and FBC: Firebreak, and none of the launches and betas have gone as planned. Promises have been made to fix the games, but it’s unlikely the market can sustain all of them. One may argue that cutting costs could improve the situation, but that doesn’t address the real issue: the lack of players.
With the traditional video games industry facing these challenges, Microsoft’s recent actions are better explained. AI is a one-in-a-generation change in the entire digital order, and a dollar spent on AI may net back one hundred times as much, while a dollar invested in Xbox would either get burned or earn too little. With the market being what it is today, the decision to cancel games like the Perfect Dark reboot makes total sense, as it was very unlikely these would have take players away from dominating games.
This is something that Sony is also facing, to an extent. as Roblox, UEFN will continue to stay and represent the future of the video games industry. Jacob Navok makes the example of Death Stranding 2: On the Beach, which barely sold more than Clair Obscur: Expedition 33 did in just three days. As things stand, a dollar spent on a game like this is better spent on trying to make a Fortnite, which is what Sony will keep trying to. The Japanese company needs a forever platform, or it will still be a company in the content business during the network business era. Nintendo may manage to continue being a content business company, but Sony may not.
AI is also going to play a prominent role in this new era of the video games industry, empowering Roblox-like experiences that will give players the ability to create interactive worlds in five to ten years. In this sense, Take-Two, which has shown no concerns for the cost required to make Grand Theft Auto VI, seeing it as a function to achieve a dominant position in the current landscape, Epic and Roblox will compete with OpenAI, xAI and so on, as big tech companies are already making interactive world models that will compete with games. “Games, AI, and tech are really part of the same network effect. Metcalfe’s law states that the value of a network is proportional to the square of the number of its users. In other words, the platforms with the most creators and players generate the most value,” the former Square Enix Director of Business concluded, highlighting how Wada-san’s observation on networks transforming the video games industry was ultimately about the network of players.
Although this isn’t the first time we have heard from people who work, or worked in the video games industry how one of the current challenges is to convince players to spend time on new games, the analysis by Square Enix’s former Director of Business has painted a more complex picture that highlights well how traditional games will have a harder time finding success in the future. The industry, however, is unpredictable, so it will be very interesting to see if these predictions will end up being correct in the coming years.
