Video Gaming Industry
Introduction
A video game can be referred to as electronic games that involve the interaction of humans with user interfaces which then generates a visual feedback on a video gadget. The electronic systems that are used to play video games are called platforms with examples of video game consoles and personal computers. Even though some specialized video games like the arcade games which were more common previously have continued to decline in their use. Video games have grown to become an industry and an art form. Like many other forms of media, video games may be can be categorized into different genres which are based in many factors which include methods of playing, art style, art style, types of goals, interactivity and others.
For the reasons that genres depend on the content for definitions, the video game genres have continued to evolve and change as other new styles of video games are coming into existence. Due to the ever advancing production and technology values in the development of video games, complex and lifelike games have been produced resulting to introduction of enhanced genres and pushing of the existing video games boundaries. In the current times, it very common to find high level genres games that are collective across all the other genres like a combination of action, rhythm/music and horror in a single video game.
Global economic situation
It would be a temptation for the people in the video game businesses to take some current news -that the video game sales were over the roof in October and that World of Warcraft PC game broke the all time record of sales in single day-as a proof that the industry of video game may be immune to the deep despair that the global economy is facing. This seems to be what most people in the video game industry believe, that in the rough times, many people spend their money on entertainment and that video game hardware and software can give much more value than the other options. They believe that the industry of video games is immune to recession. The rationale behind the projected growth despite the face of an impending and deep recession has been explained by several people.
Ron Meiners, the director of community Hollywood Interactive suggests that, for comparable cost, the amount of time of solid entertainment gotten from the purchase of video games is much greater than other forms of entertainment. It has also been said, at the current times, video games give the consumers a much higher level of engagement and interactivity and hence their doing well despite the global economic problems.
Despite all the positive attention the video gaming industry has gain in its doing well in the harsh economic times, there are some people who are seeing deep flaws in the business model of the video game industry, flaws that could cause havoc even if things seem to be solid in the short term. A co-founder of the Virtual World platform developer Mr. Corey Bridges says that the problems that face the video gaming industry have a lot to do with the manner in which its biggest publishers distribute and design their games. He adds that, the video game industry will do well in this recession times for the reasons that video games are pretty damned proficient use of time. He also put it that the industry is facing some other problems which it has been ignoring for a time and will slowly continue to creep up on it. In the short term, there is a lot of evidence that the video game industry may seem to be stronger than other businesses. No other business is going to do well than the business of producing cheap liquor but when it comes to the world of technology, it would be difficult to identify a sector which would out do the video games.
The business life cycles
In the near past, video games were only found on bulky arcade machines. From the Pac-Man, to Nintendo consoles and to the more advanced video games and systems that are in existence today, the industry of video games has grown up into a globally recognized powerhouse that went on to earn revenues estimated to be $40 billion in the year 2007. In the United States, the sales on video game hardware went to $6.6 billion in the year while those on software were $15.8 billion in the year 2007. In earlier days, the costs of development were minimal and as so, the video games were very much profitable.
Games that were developed by single programmers or by few individual and artists were able to sell many copies up to hundreds of thousands. Most of these video games took only a few months to be created and hence developers were in a position to release several titles every year. Publishers of the video games were often generous with their benefits and in return offered royalties on video games sold. As graphics and computing on video game continue to increase, so have the sizes of development teams because of the larger staffs needed to cater for the programming and graphical complexities. Currently, the video game budgets can go up to millions of dollars while some other profession games need one to three years for their development thus increasing the strain on video game budgets. John Carmack who is a technical director of Id Software and once a visionary in video games said that the life cycle of the next generation video games console shall be long even with the existing and emerging competitors. He also warns on the extinction of the video game consoles as we currently know them.
Both Sony Corp. and Microsoft Corp. had predicted very long life cycles for their PlayStation 3 and Xbox 360 game consoles in their initial years. Sony had suggested that PlayStation 3 would last for a decade, from the year 2006 to the year 2016. At first Microsoft was a bit cautious but later on started to predict a decade lifespan for the Xbox 360 which ranged from 2005 to 2016. Analysts now say that both of these companies will release next generation products in the late 2013 and they will also have very long life cycles. With the increase in cloud streaming of the video games, social gaming, mobile gaming and other new types of games, the high-end game consoles and PCs may lose popularity among non-frequent and casual gamers as they see no need to spend money on hardware. Due to this, there is a big chance that the game consoles will start to see their end this year.
Interest rates
Places like Japan and the United States which are highly dominated by the business of video games and hence contributing a lot towards the gross domestic profit of their countries. Interest rates do not have a lot of impact in the industry of video games as they mostly manufacture their units. The income that is disposable for the consumers in the industry of video game has some effect in their behavior of buying. The people who fall under low income ranges may not afford the costs of buying a video game of high price.
The low manufacturing costs by Nintendo was one of the reasons for them selling their games at nominal prices and hence increasing its sales. The video game companies use the traditional debt financing systems to source their capital. Due to high interest rates, mostly the typical loan transactions are not able to meet the funding requirement for most of the video game companies and also that lenders are not able to properly value the IP assets.
Consumer disposable income
Video and computer games have come to a critical mass. Currently, almost every device that has a screen plays games and hence they do provide and interactive entertainment experience for a large population. Creativity of the publishers and developers lead to production of ever-expanding game variety to choose from across all the platforms and in different formats. The innovations in the video gaming industry have led to higher consumer demands and such most people are willing to spend more on buying video games.
Even with a drop in the disposable income and some other changes in the economy, publishers of video game software have continued to experience very high sales in the past 5 years. Through increment of investment in building hype and marketing about new releases, the demand of video games has been seen to rise. In the next 5 years, the revenues will probably continue to rise with the publishers trying to new consoles and technologies. With the emphasis on wireless and the new emerging technologies, the way video games are played is improving everyday and as a result attracting new audience at it holds on tight to those already using video games. In order to ease the process of buying video games, companies are encouraging its consumers to buy the games through the internet and this has also helped the companies to maximize profits.
Consumer demands and spending patterns
The demand for video games has continued to rise over the years and as such, more people are willing to spend on them. The number of programs for video game development, design and programming has continued to go upwards in the American universities, colleges, art and trade schools all the country. The high growth of video games coincides with the growth of the entertainment industry and also with the increased role of video games in people’s daily life. Following a new study by the Economists Incorporated, the real annual growth for the game makers had topped 10% between the years 2005 and 2010 which is seven times the rate of growth the United States’ economy.
Video and computer game sales in the year 2010 went up to $25.1 billion and now the game companies indirectly and directly employ over 120,000 persons in 34 states. Following a report by ESA, 72% of the American households do play video and computer games. The report continued to indicate that American universities and colleges are going to offer 344 programs in game development, design and programming in 2011-2012 academic year. This is a clear indication the demand for video games is expected to grow even bigger than it is currently .
Entertainment software includes console games, personal computer games, wireless games and online games. The consumption demographics for each of the categories are very diverse and even go beyond the stereotypical male teens. The people exposed to the entertainment software at young ages since 1960s have been enjoying the games throughout their lives. There are increasing numbers of women who are entering the market of software entertainment. In the 1987, 14% of women accounted for software entertainment users. By the year 2005, were accounting for 31% of the general software entertainment market. Women were the main consumers of casual online games hitting levels of up to 64%.
References
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Phillip K. Arnold, D. P. (2009, February 23). Entertainment Software Association: Game Programs. Retrieved September 14, 2012
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Zackariasson, P. a. (2012). The Video Game Industry. Formation, Present State and Future.
