The Multi-Billion Dollar, Free-Market Regulated Video Gaming Industry

In recent years, Americans have been subjected to an endless shouting match between politicians, economists, activists, and journalists over the role of government in our economy. More so than in recent memory, the value and virtue of a free market economy seem up for debate, particularly among young Americans. But amid all that noise, I have yet to hear anyone on the pro-market side mention video games in their defense of capitalism.

That’s a shame, because the video game market is an incredibly free one that millions of young Americans interact with and understand. It’s perfect proof that when the government stays out of the way, free markets can enable the best and brightest among us to thrive and innovate, while also empowering consumers to hold businesses accountable to them and their employees.

It might be difficult for non-gamers to see this without fathoming the sheer size of the video game industry.

Red Dead Redemption II, the latest release from Rockstar Games of Grand Theft Auto notoriety, earned $725 million in its first weekend. That’s nearly $100 million more than Avengers: Infinity War earned during its record-breaking opening weekend. Electronic Arts (EA), another titan of the industry, is estimated to have earned around $1.7 billion in 2016 from that year’s installment of their FIFA Soccer franchise.

The video game industry earned $36 billion in revenue last year in the U.S. alone and by some estimates has earned more worldwide than the music and film industries combined. It’s spawned other industries in its wake, fueled by hundreds of millions of fans worldwide. They include international e-sports tournaments with prize purses that dwarf the prize pool for the Masters and countless YouTubers earning a living -- in some cases millions of dollars -- playing video games while millions watch.

But, the video game industry is largely ignored by Washington, which isn’t surprising given the average age of Congress is around 60. The last time any of them played a game was likely when Galaga hit arcades in 1981. That ignorance has served the industry well, as video game developers enjoy more freedom than most other businesses. Successful developers are free to sell to customers without licenses or government censorship, while failing ones are left to adapt or die without government subsidies or tariffs.

Leftists might claim that this lack of oversight has allowed companies like Rockstar and EA to make ridiculous amounts of money while abusing their workers and cheating customers. Granted, both companies -- most recently Rockstar -- have been accused of pressuring employees to work unreasonable amounts of overtime in hostile work environments. Additionally, many gamers -- myself included -- see EA as the source of all evil in the gaming industry. They’ve bought and gutted countless beloved game studios and have arguably been the driving force behind the industry’s trend toward bringing the nickel-and-diming mechanisms most commonly seen in mobile games into larger parts of the industry. However, unlike socialists, I’d argue that the laissez-faire nature of this market has, is, and will correct alleged injustices far faster and more effectively than government regulation could.

Possibly due to the video game industry’s lack of burdensome regulation, gamers are incredibly savvy and aggressive consumers. Perhaps more so than other consumers, gamers as a whole are incredibly careful -- and even vindictive -- with how they spend their money. More importantly, the market has given them tools to act on their often feelings toward a game or the company that made it. In short, the customers of video gaming companies are brilliant regulators.

Thanks to the Internet, gamers have an infinite number of ways to shop for and share their views regarding games and developers. They also have endless resources to research a game before buying, from reading reviews by fellow gamers to watching actual gameplay online. If a developer tries to cheat a gamer, he’s going to know it, tell everyone he knows, and spend his money somewhere else.

That’s made competition in the video game industry ruthless, and it’s a big reason why the price for a new Triple-A game has remained locked at $59.99 for the last decade, even while the cost to develop them has eclipsed most Hollywood blockbusters in that timeframe. Without government price controls or any kind of coordinated pressure campaign, individual gamers acting on their own individual self-interest have used the market to freeze the price for their games while the costs of health care, housing, and education have skyrocketed.

Developers have gotten around this through “microtransactions,” a revenue-generating tool most commonly seen in mobile games that offer extra content for sale in-game that unlocks new features. But, developers that have gone beyond purely cosmetic offerings in this regard have paid dearly.

EA found this out the hard way last year. When gamers learned they’d have to pay possibly hundreds of dollars to unlock vital, often gameplay-affecting features of Star Wars: Battlefront II in addition to the $60 they paid for the game itself, they were livid. They railed at them on Twitter, on YouTube, anywhere they could. They even made EA’s tone-deaf attempt at damage control on Reddit the most disliked post in the site’s history. But most importantly, they voted with their wallet.

In the aftermath of the firestorm, sales were well below expectations and the company’s stock dropped 8.5% in less than a month. Some American and European politicians threatened to regulate such business practices, but by then EA had already pulled all microtransactions from the game. It was outraged consumers and the resulting lackluster sales that forced EA to change course, not publicity-seeking politicians.

Those empowered consumers also empower dissatisfied game studio workers to change companies or even start their own. The barrier to entry in the video game industry is incredibly low, making it genuinely possible for one or two programmers to find a loyal following that will pay them handsomely to develop a game they love.

The five-worker shop of Yacht Club Games made Shovel Knight on $300,000 and went on to sell 180,000 copies in a year. The two-man team of Team Meat sold 1 million copies of their debut title, Super Meat Boy in two years. Perhaps most famously, Markus Person developed Minecraft practically alone and started a company that would go on to sell 154 million copies of the game and be acquired by Microsoft for $2.5 billion.

Hopefully, no one tells Washington just how much money the industry makes. When they find out, it’s only a matter of time before they demand their slice.