Technology and media (9 of 9)

Video games and betting

About 7 minutes to read in full, or 1 minute for the short version belowFacts checked 2 October 2026

In one minute

Companies make and sell video games for consoles, PCs and phones, and run sportsbooks, online casinos and lotteries where people bet money.

The big idea: Both businesses sell entertainment through screens and spend heavily to win each customer, so the key number is what a player or bettor brings over their life against what it cost to win them. In games a platform or app store takes a share of each digital sale; in betting the government takes a large share of the operator's margin in tax, and can ban the product outright.

One unit, in numbers: One month of an online sportsbook in a US state taxing 20 percent of gross gaming revenue: USD 40 million comes in, and USD 19.2 million (48%) is left after its own costs.What is left is the unit's contribution, before the costs of the whole company. See the worked example
Typical margin: About 10 to 20 percent operating margin for large game publishers; about 10 to 17 percent adjusted EBITDA margin for large betting operatorsRoughly how much of every 100 of sales (or income) is left as profit after the running costs. More on margin
Capital intensity: LowLittle money is tied up in buildings, machines or stock, so growing is cheap. More on capital intensity
The number to watch: Daily and monthly active usersHow many people play each day and each month, and how often they come back.

Ask this first in a case

How does the product earn money: buy once, free to play, subscription, or a betting margin?

Words used above (2)

Free to play:: A game that is free to download and earns from in-game purchases and ads.
Gross gaming revenue (GGR):: Money bet minus winnings paid out.

The industry's other words are explained in Words to know (12).

On this page (17 sections)

How money is made

Publishers sell games up front and, more and more, earn from items, passes and virtual currency bought after launch.
Free-to-play games are free to download and earn from the few per cent of players who pay, plus ads.
Platforms and app stores keep a commission on each digital sale, cut for small developers, subscriptions and, after court rulings, in some regions.
Subscriptions such as Xbox Game Pass and PlayStation Plus charge a monthly fee for a library of games or online play.
Sportsbooks and online casinos keep the share of money bet that is not paid back to winners, then pay tax, bonuses and marketing out of it.
Lotteries pay out about half or more of sales as prizes and pass a large share to the state or good causes; the operator keeps a small slice.

Worked example: one unit

Unit economics means the money in and out for one unit of the business. Start from the revenue, take away the unit's own costs, and what is left is its contribution. More on unit economics

The unit: One month of an online sportsbook in a US state taxing 20 percent of gross gaming revenue (USD million). Illustrative, rounded figures.
Line	Amountin USD millions	ShareShare of revenue
Net revenue: USD 500 million bet x 10 percent hold, minus USD 10 million of free bets	USD 40	100%
Minus State tax: 20 percent of USD 50 million of gross gaming revenue	USD 10	25%
Minus Payments, data and platform: 12 percent of net revenue	USD 4.80	12%
Minus Marketing	USD 6	15%
What is left (contribution)	USD 19.2	48%

Check: USD 40 minus USD 20.8 of costs leaves USD 19.2 (in USD millions).

So what: At a 51 percent tax rate the same bets would leave only USD 3.7 million, and a month with an 8 percent hold would leave nothing. The tax rate and the hold move this unit most, then free bets and marketing.

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Key measures(8)

Key measures (also called KPIs, key performance indicators) are the numbers people in this industry track. Ask for the first one or two early in a case.

Daily and monthly active users
How many people play each day and each month, and how often they come back.
Retention on day 1 and day 30
The share of new players still playing a day and a month after they install.
Typical: Median about 22 percent on day 1 and under 1 percent on day 30 for mobile games (an industry benchmark, as reported)[4]
Share of players who pay
The share of players who spend any money in a free-to-play game.
Cost per install against lifetime value
What it costs to win a new player, against what that player brings over their life.
Live services share of revenue
Revenue from items, passes and new content after launch, as a share of the total.
Typical: 73 percent at Electronic Arts (year to March 2025); 78 percent recurrent spending at Take-Two (year to March 2026)[1]
Handle
The total amount bet with a sportsbook.
Typical: USD 166.94 billion across US sportsbooks in 2025[9]
Hold
The share of the amount bet the operator keeps after paying winners.
Typical: About 10 percent for US sportsbooks in 2025[9]
Tax rate on gross gaming revenue
The share of the operator's gross gaming revenue paid to the government.
Typical: 20 percent in Ohio, up to 40 percent in Illinois; UK online casino duty 40 percent from April 2026[13]

First questions to ask

When a case lands in this industry, these questions get you to the numbers that matter.

How does the product earn money: buy once, free to play, subscription, or a betting margin?
What does it cost to win a player or bettor, and what do they bring over their life?
What share do platforms or governments take, and is that changing?
Is the product legal in this market, and for how long are the rules likely to hold?
For a game: how much revenue repeats through live services, and what is the next big release?

Value chain: where the margin sits

The value chain is the steps a product or service passes through, from the first supplier to the customer. Each step below shows how much of the value it keeps. More on value chains

Step 1: Engines, tools and data: game engines, sports data and odds feeds
Medium margin
Unity, Epic Games (Unreal Engine), sports data suppliers
Step 2: Game development: studios build the games
Margin varies
Studios owned by publishers, and independent developers
Most games lose money; a few hits pay for the rest.
Step 3: Publishing: fund, market and run games after launch
Margin varies
Tencent, Sony, Microsoft, Nintendo, Electronic Arts, Take-Two, NetEase, Ubisoft
Electronic Arts kept about 20 percent of revenue as operating income in its year to March 2025, with 73 percent of revenue from live services.
Step 4: Platforms and stores: consoles, PC stores and app stores
Fat margin
Apple App Store, Google Play, Steam, PlayStation Store, Xbox Store, Nintendo eShop
A commission on almost every digital sale, at little extra cost per sale; 30 percent is Apple's standard rate.
Step 5: Betting operators: set odds, take bets, pay winners, pay tax
Medium margin
Flutter (FanDuel), DraftKings, Entain and BetMGM, Bet365, Allwyn (lotteries)
Taxes, free bets and marketing take much of the margin; tax rates differ by country and US state.

Profit pool: who keeps the money

Where in the value chain the profit ends up, which is often not where most of the sales are. More on profit pools

In games, most of the profit sits with the platform owners, which take a commission on almost every digital sale, and with the publishers of a few long-running hit series that keep earning from live services. In betting, governments take a large share through tax, and the profit sits with the largest operators that spread marketing and technology over many markets.

Cost structure(5)

The main costs, each as a share of revenue (the money from sales).

Research and development (games): About 34 percent of revenue at Electronic Arts, year to March 2025[1]
Cost of revenue, including platform fees and servers (games): About 21 percent of revenue at Electronic Arts[1]
Marketing and sales (games): About 13 percent of revenue at Electronic Arts[1]
Cost of sales, including betting taxes (betting): About 39 percent of revenue at Entain in 2025[12]
Sales and marketing (betting): About 22 percent of revenue at Flutter in 2025[10]

Benchmarks(6)

Typical figures for the industry, to check a client's numbers against.

World games market (2025): About USD 201.6 billion, of which mobile about USD 113.3 billion (Newzoo estimate, as reported)[3]
Operating margin, Electronic Arts (year to March 2025): About 20 percent[1]
Operating margin, Nintendo (year to March 2026): About 16 percent (JPY 360.1 billion on JPY 2,313.0 billion of sales)[5]
US sports betting (2025): USD 16.96 billion of revenue on USD 166.94 billion bet[9]
Adjusted EBITDA margin, betting operators (2025): About 17 percent at Flutter and about 10 percent at DraftKings[10]
UK National Lottery, per pound of sales (April 2024 to March 2025): 55 pence prizes, 23 pence good causes, 12 pence duty, 7 pence operator, 3 pence retailers[14]

Typical cases(6)

Case prompts you might hear in this industry.

A mobile game's revenue is growing but it loses money. Why?
Should a console publisher bring its biggest game to mobile?
Should a sportsbook enter a newly legal US state?
A betting group's profit fell after a tax rise. What should it do?
Should a sovereign fund buy a game studio, and at what price?
How should a publisher respond to lower app store fees and web shops?

Common traps(5)

Mistakes candidates make in this industry, and what to do instead.

Treating the amount bet (handle) as revenue, when the operator keeps only the hold, before tax and bonuses.
Assuming a hit game's sales will repeat with the next release.
Ignoring that store fees and betting taxes change by country, state and court ruling.
Sizing a betting market without asking whether it is legal, or for how long.
Reaching for a generic framework instead of the real driver of this industry. Instead, compare the value of a customer with the cost of winning them, after the share taken by stores or tax.

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What changed, 2024 to 2026(6)

Recent changes a case could turn on.

Gulf money bought big: PIF, Silver Lake and Affinity Partners completed the purchase of Electronic Arts at USD 210 a share, about USD 55 billion including debt, on 4 August 2026.[2]
A new console cycle: Nintendo's Switch 2 launched on 5 June 2025 and sold 19.86 million units in its first fiscal year, almost doubling Nintendo's sales.[5]
App store fees fell under legal pressure: US court rulings in Epic v. Apple opened the way to cheaper web shops, Apple cut EU commissions from October 2026, and Google cut Play fees in the US, UK and Europe from June 2026.[6]
Betting taxes rose: the UK raised online casino duty from 21 to 40 percent in April 2026, and New Jersey, Maryland and Illinois raised rates in 2025.[13]
Prediction markets regulated as financial contracts started offering bets on sports in 2025, and US appeals courts split in 2026 on whether states can stop them.[15]
Markets closed by law: India banned online money games in 2025, and Brazil banned fixed-odds betting by provisional measure on 25 September 2026.[16]

Players by region(7)

Well-known companies in each region. You do not need to learn them by heart; they help you picture the market.

Global: Sony Interactive Entertainment
Microsoft (Xbox and Activision Blizzard)
Nintendo
Apple App Store and Google Play
Flutter (FanDuel, Paddy Power, Sisal)
Bet365
United States: Electronic Arts (private since August 2026)
Take-Two (Rockstar)
DraftKings
BetMGM
Las Vegas Sands
MGM Resorts
Europe: Ubisoft
CD Projekt
Allwyn (UK National Lottery, OPAP)
Entain
China: Tencent
NetEase
Macau casino concessionaires such as Galaxy Entertainment
Middle East: Savvy Games Group (owned by PIF)
Scopely (owned by Savvy)
Wynn Al Marjan (UAE)
The UAE Lottery
Southeast Asia: Sea (Garena)
PAGCOR (Philippine regulator and operator)
Singapore Pools
Marina Bay Sands
Africa: Betway
SportPesa
South African casino groups

Words to know(12)

Linked words have a fuller entry in the glossary.

Free to play: A game that is free to download and earns from in-game purchases and ads.
Live service: A game that keeps adding content and selling items, passes or currency after launch.
Retention: The share of players still playing after a set number of days.
Cost per install (CPI): The advertising cost of winning one new player.
ARPPU (glossary entry): Average revenue per paying user.
Store commission: The share of each digital sale kept by an app store or platform.
Handle: The total amount of money bet.
Hold: The share of the amount bet that the operator keeps.
Gross gaming revenue (GGR): Money bet minus winnings paid out.
Net gaming revenue (NGR): Gross gaming revenue minus free bets and bonuses.
Prediction market: An exchange where people trade contracts on future events, including sports results.
Provisional measure: In Brazil, a presidential act with the force of law that lapses unless Congress approves it.

Business model patterns

The ways of making money this industry follows. Spot the pattern in a new industry and you already know the first questions to ask.

Sources(17)

Facts checked on 2 October 2026. Worked examples are illustrative, shaped by these sources rather than one company's figures.

Go deeper and practise

Go deeper

The full lessons behind this brief, with sources and worked cases.

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Same pattern elsewhere

Industries that make money in a similar way. What you learned here carries over.

Practise video games and betting

Short Industry Gym rounds on the costs, key measures and value chain of this industry, so the brief sticks.

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In one minute

How money is made

Worked example: one unit

Key measures(8)

First questions to ask

Value chain: where the margin sits

Step 1: Engines, tools and data: game engines, sports data and odds feeds

Step 2: Game development: studios build the games

Step 3: Publishing: fund, market and run games after launch

Step 4: Platforms and stores: consoles, PC stores and app stores

Step 5: Betting operators: set odds, take bets, pay winners, pay tax

Profit pool: who keeps the money

Cost structure(5)

Benchmarks(6)

Typical cases(6)

Common traps(5)

What changed, 2024 to 2026(6)

Players by region(7)

Words to know(12)

Business model patterns

Sources(17)

Go deeper and practise

Go deeper

Practise it

Same pattern elsewhere

Practise video games and betting