Konvoy Releases Q1 2025 Gaming Industry Report: Stabilized funding environment and AI's Emerging Role

DENVER, April 16, 2025 /PRNewswire/ -- Konvoy, a venture capital firm investing in the future of gaming, has released its Q1 2025 Gaming Industry Report, signaling cautious optimism across the sector. With the global gaming market on track to hit $186 billion by 2026 (+4.7% YoY) and gaming ETFs outperforming the S&P 500 (ESPO: +4.8%, HERO: +6.2% vs. S&P: -5.4% YTD), investor sentiment is beginning to rebound.

"We're seeing a stable and consistent funding environment in gaming, as investment groups have become more selective and strategic.," said Josh Chapman, Managing Partner at Konvoy. "Founders who are building around the shifts in distribution, regulation, and tooling will define the next wave of breakout companies."

Venture funding in gaming rose 35% quarter-over-quarter to $373 million across 77 deals—though still down 41% year-over-year—suggesting early signs of capital returning to the space.

Konvoy's report notes a stark divergence between the U.S. and China: while U.S. gamers made up just 6.4% of the global player base, they generated 26% of global gaming revenue in 2024 and spent over 3x more per capita than their Chinese counterparts. U.S. startups also secured 7.6x more venture funding and 5x more VC-backed deals than those in China.

The quarter also saw renewed M&A activity, including Scopely's acquisition of Niantic and MTG's purchase of Plarium. Konvoy views these moves as evidence of large publishers refocusing on core capabilities.

Meanwhile, U.S. scrutiny of China-owned gaming platforms continues to grow. While a full TikTok ban remains unlikely, President Trump's repeated extensions to ByteDance underscore a broader regulatory focus on algorithm control and U.S. data ownership. Konvoy expects this scrutiny to expand to major entities like Riot Games, Epic Games, and Lilith Games, with implications for global publishing, distribution, and M&A.

Ubisoft's continued partnership with Tencent also drew attention. With its share price down 87% from its 2021 high, the French publisher appears to be leaning on Tencent to steady key IP without pursuing full privatization.

The report also tracks the early impact of AI in game development. Microsoft's MUSE and NVIDIA's ACE represent meaningful steps in generative AI and autonomous agents, but Konvoy believes their immediate impact will be limited to early-stage ideation and iteration, not core gameplay innovation—yet.

Looking ahead, Konvoy anticipates muted excitement for upcoming hardware. The Switch 2 is expected to underperform the original Switch by 25–40%, while nostalgia-driven handhelds like the Atari Gamestation Go will cater to a niche, rather than disrupt the broader console landscape.

The full Konvoy Gaming Industry Report Q1 2025 is now live. To access the report, please visit (https://docsend.com/v/j79gx/konvoy-q1-25report) .

SOURCE Konvoy