[Latest 2026] Seismic shifts in the global game market. The next-generation infrastructure war over the disposable time of 3.6 billion people and the investment scenario of Sony, Nintendo, and Microsoft

[Summary]

The game market in 2026 will no longer be a ``market for selling game software.''

The essence is a digital time infrastructure war in which approximately 3.6 billion players around the world compete for disposable time, communities, payments, IP, cloud, and AI infrastructure.

According to Newzoo's 2025 forecast, the global gaming market will be approximately $188.9 billion, with 3.578 billion players and 1.6 billion paying users. While China, the United States, and Japan account for the top sales, the focus of growth has shifted from being exclusively mobile to PC, consoles, cross-platform, subscription, and live services.

At the center of this structural change are the Sony Group, Nintendo, Microsoft, and Valve, which controls the PC game market despite being unlisted, or Steam.

Hardware sales volume is not the only indicator that investors should look at. What matters is how long each company can keep users on their site and how high a profit margin they can monetize that time.

First, the conclusion

The essence of the game market is the competition for disposable time.

The boundaries between video streaming, music, SNS, short videos, live streaming, and games are collapsing. Rather than "buying a game," users invest their time in specific IPs, friends, communities, avatars, events, rankings, and subscriptions.

That's why the evaluation criteria for game companies has changed.

Previously, the following indicators were the main focus:

*Hardware sales volume

• Number of packaged software sold
• First week sales of new titles
• Console market share

However, here are the indicators we should look at in 2026.

• Monthly active users
• Total play time
• Digital sales ratio
• Recurring revenue from DLC, skins, battle passes, and subscriptions
• Cross-platform deployment
• IP non-game revenue
• Development efficiency and operational efficiency using AI

In other words, game companies are changing from ``product sales companies'' to ``time infrastructure companies.''

Notes on market size

When talking about the game market, the first thing to pay attention to is the definition of statistics.

Broadly defined "Gaming" statistics include hardware, peripherals, advertising, esports, gamification, and even areas close to online gambling. In such cases, the market size is sometimes quoted as exceeding $500 billion.

On the other hand, this paper will focus on the video game market defined by Newzoo as the basis for investment analysis.

According to Newzoo's 2025 forecast, the global gaming market is expected to reach $188.9 billion and exceed $200 billion by 2027. The number of players in 2025 is estimated to be 3.578 billion, and the number of paying users to be 1.6 billion. (Newzoo 2025 Q2 Market Update, Newzoo Free Global Games Market Report 2025)

If you look at these numbers alone, games may seem small compared to video ads and social media.

However, sales volume is not the only important thing.

The game involves users' stay time, payments, friend graphs, avatars, item ownership, event participation, and streaming viewing. Therefore, the gaming market is not just an entertainment market, but is becoming the very foundation of digital consumption.

Country Market

In Newzoo's 2025 country rankings, the top three markets are China, the United States, and Japan. (Newzoo Country Game Revenue Ranking)

These three countries are not just large in size. The quality of earnings is different.

China

China has one of the world's largest mobile gaming economies, centered on Tencent and NetEase.

Its strengths are the overwhelming number of players and the development and management capabilities of domestic companies. On the other hand, political and regulatory risks are significant for foreign companies. Regulations on playing time for minors, content censorship, edition acquisition, and sudden tightening of regulations are shaking the earnings outlook.

Although the Chinese market is a market to exploit, it is also a market that should not be relied upon.

United States

The strength of the US market is not just the number of players.

ARPU, or spending power per user, is high. Battle passes, DLC, skin purchases, season passes, subscriptions, and live events have matured, making it easy to continuously monetize users' disposable time.

It is this US-style high ARPU market that Sony, Microsoft, and Valve are most conscious of.

Japan

Japan has a strong uniqueness.

Gacha culture has matured in smartphone games, and there is already a sense that it has hit a plateau. On the other hand, it has a strong group of console and IP companies such as Nintendo, Sony, Capcom, Bandai Namco, and Square Enix.

The Japanese market is characterized by high gaming spending relative to the population size and strong loyalty to IP.

Structural changes in 2026

After experiencing a rebound from the coronavirus special demand, the game market is entering a phase of renewed growth. However, there is a clear division between areas that are growing and areas that are slowing down.

The areas of growth are as follows.

• PC games
• Cross-platform
• Cloud gaming
• Live service games
• Subscription
• Adaptation of IP into movies, animations, and theme parks
• Improving development efficiency using AI

The following areas will see a slowdown:

• Gacha-dependent one-off mobile game
• Developed super large AAA that cannot be recovered
• A business closed to hardware alone
• Earnings model that depends only on the initial sales of new products

Newzoo explains that the PC market in 2024 will grow by 4.4% on the back of growth in China and some Western markets. It also notes that the Steam player base continues to grow in China and Japan.

This is important.

PCs were once a peripheral market for Japanese investors. However, with the spread of Steam, gaming PCs, handheld PCs, and cross-play, PCs have become a core market alongside consoles.

AI will change the profit structure

AI is no longer a "hot topic" in the gaming industry, but an element that will change cost structures and experience design.

On the development side, the following changes are underway.

• NPC dialogue generation
• Support for generating maps and background materials
• Multilingual translation
• QA, bug detection, test automation
• Player behavior analysis
• Individual optimization of tutorial and difficulty adjustment

On the player side, AI companions, personalized events, and player-specific path design will increase dwell time.

On the hardware side, AI upscaling, frame generation, cloud processing, and semiconductor efficiency will be important.

However, AI is not a panacea.

While reducing development costs, it also incurs costs for AI human resources, GPUs, cloud, rights processing, and quality control. The gap is widening between companies that can use AI to improve profit margins and companies that only increase costs by investing in AI.

4 major platformers

To understand the game market in 2026, we must not compare Sony, Nintendo, Microsoft, and Valve on the same playing field.

Although they are in the same "gaming market," they are climbing different mountains.

【2026year 4Key point】

Key point
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PS Plus、PS Store、Key point
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Key point
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Switch 2、Key point
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Key point
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Game Pass、PC、Key point
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Valve
PCmarketKey point
Steam、Steam Deck、SteamOS、Key point
        ↓
Key point

Sony Group

Sony's essence is not a game company, but a general entertainment OS.

PlayStation is its core hub, but Sony's strengths don't end with games alone. Music, movies, anime, Crunchyroll, image sensors, distribution, and IP development are connected.

In its May 2026 management policy briefing, Sony explained that the number of active users of the PlayStation platform has reached over 125 million worldwide. (Sony Group 2026 Management Policy)

PS5 unit sales aren't the only important thing for investors.

The following indicators should be looked at.

• PlayStation monthly active users
• Total play time
• Migration to higher PS Plus plan
• PS Store third-party fees
• DLC, add-ons and live service revenue
• IP circulation with anime, movies, and music

Sony's stock valuation still has the vestiges of being a consumer electronics/hardware company. According to data from Matsui Securities, as of May 8, 2026, Sony Group's expected PER was in the 16x range and PBR was in the high 2x range. (Matsui Securities Sony Group Stock Price Information)

After the separation of the financial business, if it becomes easier to see the allocation of capital to entertainment, games, and sensors, there is room for Sony to be reevaluated as a ``global IP/platform stock'' rather than a ``home appliance stock.''

Nintendo

Nintendo is more of a global IP empire than a hardware manufacturer.

The company's strength is that it has IP that doesn't lose value even if it moves out of the game. Mario, Zelda, Pokemon, Animal Crossing, and Splatoon are not just software sales, but also movies, theme parks, goods, licenses, and events.

The Nintendo Switch 2 is already setting a new cycle in motion for Nintendo.

In Nintendo's financial results briefing Q&A on May 11, 2026, it was explained that Switch 2 sales for the fiscal year ending March 2026 were 19.86 million units, exceeding the initial plan of 15 million units and the revised plan of 19 million units. The Switch 2 sales plan for the fiscal year ending March 2027 is 16.5 million units. (Nintendo FY2026 Financial Results Briefing Q&A)

What we should be looking at here is not ``We are weak because the number of units sold is lower than last year''.

What is important is how much software, digital, Nintendo Switch Online, DLC, and IP revenue will accumulate after the Switch 2 becomes popular.

There are three reasons why Nintendo tends to receive high ratings:

• Pricing power with exclusive IP
• High profit margin of software
• Ability to expand into non-game revenue

However, there are also risks.

The forecast for the fiscal year ending March 2027 takes into account the impact of costs such as memory prices and tariffs. Nintendo itself has also mentioned the rise in component prices, especially memory prices.

Switch 2 is strong, but when the hardware ratio is high, the gross profit margin becomes heavy. Investors should look at software installation rate, digital ratio, subscription revenue, and IP-related revenue rather than unit sales.

Microsoft

Microsoft's game strategy is not a competition to sell Xbox consoles.

The company's goal is to connect every screen to the Xbox economy.

Connect your Game Pass and Xbox account to your PC, smartphone, smart TV, cloud, or console. The Call of Duty, Diablo, Warcraft and King mobile assets acquired through the acquisition of Activision Blizzard are core to this strategy.

However, Microsoft Gaming as of 2026 will not simply be on the rise.

In Microsoft's FY26 Q3 results, Gaming revenue was down 7% year-on-year, Xbox hardware revenue was down 33%, and Xbox content and services revenue was down 5%. Meanwhile, CEO Satya Nadella said Xbox monthly active users and game streaming time hit record highs in the quarter. (Microsoft FY26 Q3 More Personal Computing, Microsoft FY26 Q3 Earnings Call)

This indicates that Microsoft's game business is in a transition period.

Rather than hard sales, we need to look at the following indicators:

• Game Pass ARPU
• PC Game Pass growth
• Cloud game usage time
• Multi-platform earnings for Activision Blizzard titles
• Utilization efficiency of Azure and AI infrastructure
• Decrease in profit dependence from Xbox hardware

Microsoft is evaluated not for games alone, but for Azure, AI, Windows, advertising, and the cloud. Therefore, investment decisions for the company as a whole should not be based solely on Xbox's short-term revenue decline.

Valve and Steam

Valve is the most overlooked company in the 2026 gaming market.

Valve is a private company and cannot be directly invested in through the stock market. However, when understanding the PC gaming market, Steam cannot be avoided.

Steam is the center of payment, distribution, community, reviews, and library management in the open PC market.

According to Valve's official Steam statistics, the peak concurrent users in the most recent 48 hours as of May 18, 2026 was over 41.2 million. (Steam official statistics)

This scale shows that Steam is not just a store, but an OS for PC games.

Steam's strengths are as follows.

• Don't take too much hard inventory risk
• Has a huge game library and review assets
• Control payments and distribution
• Community and friend relationships are locked in
• Have a beachhead on the hardware side with Steam Deck and SteamOS
• Benefit from the expansion of PC gaming across the board

Steam fees are generally talked about at a rate of 30%. However, since Valve is unlisted and does not disclose detailed earnings structure, it is realistic to understand it as a ``highly efficient distribution platform'' in investment analysis.

I can't buy Valve.

However, Valve's growth will affect the valuations of Sony, Microsoft, Nintendo, semiconductors, PC parts, peripherals, and game development companies. Steam is the invisible gravity of game investment.

Investment scenario

Sony Group

In the bullish scenario, Sony will be reevaluated as a comprehensive entertainment OS that brings together music, movies, anime, and sensors, centered on PlayStation.

The conditions are as follows.

• PS Plus and PS Store recurring revenue will grow
• Add-on, DLC, and live service revenue will be stable
• Capital efficiency will be evaluated after financial separation
• Image sensor profit margin returns
• Anime, music, movie IP circulates with games

In this case, the PER is closer to that of an IP/platform stock, rather than the PER of a home appliance stock. We can see a scenario in which the stock price recovers to the 4,000 yen level and then tests towards 4,500 yen.

A bearish scenario would be weighed down by game development costs, Bungie-related impairments, sensor market conditions, memory prices, and lack of hits for movies and games.

Nintendo

In the bullish scenario, the adoption of Switch 2 and software installation rate will increase simultaneously, and digital sales and IP revenue will accumulate.

The conditions are as follows.

*Switch 2 sales exceed company plans

• High soft attachment rate
• ARPU of Nintendo Switch Online increases *Movie, theme park, merchandise, and licensing revenues will expand
• Absorb increases in component prices through price transfer and soft profits

In this case, Nintendo is not just a hard cycle stock, but as a Disney-type IP company, it is easy to maintain a premium valuation. There is a scenario in which the stock price attempts to settle in the 10,000 yen range.

In a bearish scenario, rising prices will slow adoption and hard costs will weigh on profit margins. Nintendo is a strong company, but in the early stages of a hard cycle, it is necessary to carefully look at the balance between sales and profit margins.

Microsoft

Microsoft is not a stock to buy solely for games.

In a bullish scenario, Game Pass, Activision Blizzard, cloud, AI, Windows, and advertising work together to make games work as part of the company's AI cloud economy.

In a bearish scenario, Game Pass price revisions, content costs, decreased hardware sales, regulations, and post-acquisition integration costs will reduce profit margins.

Investors should look at how profitable games will be within Microsoft's overall cloud and AI investment return, rather than Xbox hardware sales.

KPIs to see in the second half of 2026

Summary

The game market in 2026 will not be a game software sales market.

It is a digital time infrastructure market where companies compete to capture the disposable time of 3.6 billion players around the world on which platform and monetize it at a high profit rate.

Sony aims to be a comprehensive entertainment OS that connects games, music, movies, anime, and sensors, centered on PlayStation.

Nintendo is a global IP empire that expands its revenue beyond gaming, centered on the Switch 2 and powerful IP.

Microsoft is an infrastructure company that connects all devices through Game Pass, PC, cloud, and Azure, not the Xbox itself.

Though unlisted, Valve is the fourth ruler of the PC game market, controlling payments, distribution, and the community through Steam.

What investors should look at is not the past simple indicator of hardware shipments.

Things to look at are disposable time, recurring charges, IP circulation, profit margin improvement through AI, and the network effect of the platform.

Companies that control the gaming market have the potential to control the next generation digital economy.

This article is for reference information when making investment decisions, and does not recommend buying or selling specific stocks.

Source

• Newzoo Global Games Market Update Q2 2025
• Newzoo Free Global Games Market Report 2025
• Newzoo Top Countries and Markets by Video Game Revenues
• Sony Group 2026 Management Policy
• Nintendo Financial Results Briefing Q&A for the Fiscal Year Ending March 2026
• Microsoft FY26 Q3 More Personal Computing Performance
• Microsoft FY26 Q3 Earnings Conference Call
• Steam Official Statistics
• Matsui Securities Sony Group Stock Price Information