Navigating Oversaturation: Identifying Undervalued Mid-Sized Game Developers in 2025
The global video-game industry, projected to reach $269 billion in revenue in 2025, is grappling with a paradox: unprecedented growth coexists with intense market saturation, particularly in the mobile gaming sector, which accounts for 50% of global revenue [1]. For mid-sized developers, this environment presents both challenges and opportunities. While blockbuster titles dominate 50% of global gameplay hours and user acquisition costs soar to $5.11 per install on iOS, innovative strategies—such as cross-platform development, AI-driven workflows, and subscription-based models—are reshaping the competitive landscape. This article identifies undervalued mid-sized developers leveraging strong intellectual property (IP) and efficient distribution to thrive in a saturated market.
The Saturated Landscape and Rising Costs
The mobile gaming segment, though lucrative, is a battleground for mid-sized developers. A 2025 report by Newzoo highlights that only 10 titles capture half of all gameplay hours globally, while the cost of user acquisition has surged due to platform fees and algorithmic shifts [1]. For example, the average cost per install on iOS and Android in 2024 reached $5.11 and $4.61, respectively [1]. These pressures are compounded by rising development costs, with 42% of developers citing funding as a major challenge and a 30% increase in production expenses over three years [2].
However, the industry is not without avenues for growth. Cloud gaming, projected to grow at a 33.6% CAGR through 2028, and generative AI tools, adopted by 36% of studios in 2025, are reducing barriers to entry and enabling mid-sized developers to compete [1]. Subscription services, which are expected to reach $27 billion by 2028, further diversify revenue streams [1].
Strategic Advantages: Strong IP and Cross-Platform Distribution
Mid-sized developers with robust IP and cross-platform strategies are uniquely positioned to capitalize on these trends. For instance, Devolver Digital demonstrated resilience in 2024 by leveraging its back-catalog strategy, generating $104.8 million in revenue with 88% derived from older titles like Cult of the Lamb and Astroneer [3]. This approach, bolstered by DLC updates and strategic acquisitions (e.g., System Era for $40 million), yielded a 22.6% increase in gross profit and a positive EBITDA of $5.1 million [3].
Similarly, Juego Studio and Kevuru Games are leveraging cross-platform development and AI tools to optimize costs. Juego Studio, with an estimated $47.1 million in revenue for 2025, specializes in AR/VR and blockchain integration, enabling scalable, immersive experiences [4]. Kevuru Games, which reported $44–$67 million in revenue in 2025, has adopted hybrid workflows using Unity and Unreal Engine to balance performance and visual fidelity [5]. Both companies exemplify how mid-sized developers can mitigate saturation by focusing on niche markets and technological innovation.
Financial Metrics and Undervaluation
Industry-wide, mid-sized developers typically operate with gross margins of 40–50% and EBITDA margins of 15–25% [2]. However, companies like Devolver Digital and Juego Studio outperform these averages through cost discipline and recurring revenue models. Devolver's gross margin of 28.7% in 2024, while below the industry average, reflects efficient cost management, with operating expenses growing by just 0.5% despite a 13.5% revenue increase [3]. Juego Studio's 141.65% year-over-year EBITDA growth underscores its ability to scale profitably [4].
Investment Implications
The key to identifying undervalued mid-sized developers lies in their ability to balance innovation with profitability. Studios that prioritize:
1. IP longevity (e.g., Devolver's DLC-driven model),
2. Cross-platform accessibility (e.g., Juego Studio's AR/VR and blockchain integration), and
3. AI-driven efficiency (e.g., Kevuru Games' hybrid workflows)
are best positioned to navigate saturation.
Moreover, the rise of cloud gaming and 5G adoption—enabling high-quality play on modest devices—creates a tailwind for developers with scalable IP [1]. For investors, this suggests that mid-sized studios with recurring revenue streams and low user acquisition costs (e.g., through organic community engagement) are prime candidates for undervaluation.
Conclusion
While the video-game industry's oversaturation poses significant challenges, mid-sized developers with strong IP, cross-platform strategies, and AI-native workflows are carving out profitable niches. By analyzing financial metrics, technological adoption, and market positioning, investors can identify undervalued opportunities in a sector poised for transformative growth.
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