They took a big lead for reasons other than controlling distribution: convenience, name rec, and so on. To my recollection, that only started to break down when the mobile app stores came along.
Not to be a downer, but I’d push back on the optimistic case of market clearing here. It is difficult to overstate how much platform shenanigans go on in games and always have. e.g. one huge player is price-fixing, the other is tying, consoles have always been locked down, that’s before we even get into DLC, exclusives, subscriptions, lootboxes etc etc…
From a certain perspective, the appearance of a Roblox, or even an App Store, etc. can only increase market competition no matter how bad their policies might be. After all they add to the choices consumers have already.
It’s only when we have a strong intuition that consumers aren’t getting a good deal as we expect that we go looking for answers, and then we find the answers we were looking for. Markets would have worked, if it wasn’t for you meddling kids! (network effects, natural monopolies, install base, people’s habits, tying, government regulation, dopamine, etc…)
If you think about, it’s a strange way to learn about the world. If we want to learn what medicines are effective, we use an evidence-based framework and we pick the interventions that work. If an intervention doesn’t work, it may be because of confounding factors, but we’re not satisfied just to think those factors are out there, we’re satisfied to treat the disease with all its meddling kids.
In the case of US regulation, we’re satisfied to increase competition, and just assume there is some way this has to advantage consumers eventually. But if you suppose there really is some daylight between market competition and consumer power, the more you can do to make market competition the beachhead of the regulatory framework, the more shenanigans you can do on your platform