Executive Summary

Gaming is no longer just an entertainment vertical — it is a testing ground for digital economies, cultural influence, and AI-driven interaction. With over 3.3B global gamers and a $200B+ annual market, gaming already surpasses film and music combined.

The rise of blockchain, verifiable ownership (NFTs), and AI-powered content creation has accelerated gaming into a platform for financial and cultural experimentation. While the first cycle of Play-to-Earn (P2E) collapsed under unsustainable economics, the next generation of verifiable, interoperable, and AI-driven games may redefine how value is created and shared.

This report examines the evolution of gaming, the current state of Web3/AI games, investable sub-sectors, and risks for early-stage investors.

1. Market Overview

• Global Gaming Revenue (2024): ~$212B (Newzoo).

• Mobile First: >50% of revenue driven by mobile.

• Web3 Gaming Funding: ~$2B invested in 2024, down from ~$5B peak in 2021 but showing healthier fundamentals.

• Audience: 18–35 demographic dominates, but cross-generational adoption accelerating with mobile + casual formats.

2. Structural Shifts in Gaming

From Play-to-Earn → Play-and-Own

• P2E relied on inflationary token incentives → collapsed.

• Play-and-Own emphasizes durable ownership of in-game assets (skins, land, reputation).

From Walled Gardens → Open Economies

• Traditional games trap assets in closed ecosystems.

• Web3 enables portable, composable assets that retain value beyond a single title.

From Static Worlds → AI-Driven Worlds

• AI-generated NPCs, narratives, and dynamic environments enhance immersion.

• Procedural + generative design reduces dev cost, increases content scale.

From Entertainment → Culture & Finance

• Games like Fortnite, Roblox act as cultural hubs.

• Tokenized gaming economies blur line between play, work, and investment.

3. Investable Sub-Sectors

1. On-Chain Gaming Infrastructure

• Engines, SDKs, wallet abstractions for seamless onboarding.

• Thesis: winners will make blockchain invisible to players.

2. Digital Ownership Platforms

• NFT marketplaces, cross-game asset standards, Layer 2 gaming chains.

• Thesis: liquidity + composability = durable moat.

3. AI-Powered Games

• AI-driven NPCs, storytelling, user-generated content engines.

• Thesis: personalization and infinite content creation drive engagement.

4. Esports & Interactive Communities

• Games as cultural stages (concerts, tournaments, metaverse events).

• Thesis: culture multiplies financial value, making games the new social networks.

5. Tokenized Game Economies

• In-game currencies, DAO-driven economies, prediction/derivative markets on game outcomes.

• Thesis: sustainable if underpinned by verifiable player contribution rather than inflationary farming.

4. Economic Drivers

• Attention as Currency: Users increasingly value experiences that can also yield financial return.

• Ownership Premium: Players spend more on assets they can own, trade, and leverage across ecosystems.

• Community Network Effects: Successful games scale not just by gameplay but by cultural adoption.

• Capital Convergence: Gaming becomes a distribution channel for DeFi, NFTs, and cultural tokens.

5. Risks

• Tokenomics Pitfalls: Over-financialization alienates players.

• Regulatory Uncertainty: Gambling laws, securities treatment of in-game assets.

• User Acquisition Cost: Web3 games still struggle with UX and onboarding friction.

• Market Saturation: Too many low-quality titles erode trust in “blockchain gaming.”

6. Outlook & Implications

The next generation of investable games will not be “earn-first” Ponzi schemes, but persistent digital economieswhere:

1. Ownership is real (assets tradeable across titles).

2. AI drives immersion (NPCs, quests, environments adapt dynamically).

3. Communities are co-owners (DAOs, guilds, modders participate in governance).

4. Financial rails are embedded (staking, prediction markets, yield integrated invisibly).

Conclusion

Gaming is the cultural on-ramp to digital economies. Its intersection with AI and blockchain creates asymmetric upside: a single successful title can achieve platform-level dominance and redefine user expectations of ownership and play.

At Leland Ventures, our thesis is clear: the most investable games are not games at all — they are self-sustaining economies where culture, finance, and technology converge.