Industry overview
Size
In 2017 in the United States, which represented about a third of the global video game market, the Entertainment Software Association estimated that there were over 2,300 development companies and over 525 publishing companies, including in hardware and software manufacturing, service providers, and distributors. These companies in total have nearly 66,000 direct employees. When including indirect employment, such as a developer using the services of a graphics design package from a different firm, the total number of employees involved in the video game industry rises above 220,000.Value chain
Traditionally, the video game industry has had six connected layers in itsRoles
Ben Sawyer of Digitalmill observes that the development side of the industry is made up of six connected and distinctive layers: # Capital and publishing layer: involved in paying for development of new games and seeking returns through licensing of the properties. # Product and talent layer: includes developers, designers and artists, who may be working under individual contracts or as part of in-house development teams. # Production and tools layer: generates content production tools, game developmentHistory
1940s–1960s
Prior to the 1970s, there was no significant commercial aspect of the video game industry, but many advances in computing would set the stage for the birth of the industry. Many early publicly available interactive computer-based game machines used or other mechanisms to mimic a display; while technically not "video games", they had elements of interactivity between the player and the machine. Some examples of these included the 1940 "Nimatron", an electromagnetic relay-based Nim-playing device designed by Edward Condon and built by Westinghouse Electric for the New York World's Fair, '' Bertie the Brain'', an arcade game of1970s
In 1971, the first commercial arcade video game, ''1980s
In the early 1980s, the golden age of video arcade games reached its zenith. The total sales of arcade video game machines in North America increased significantly during this period, from $50 million in 1978 to $900 million by 1981, with the arcade video game industry's revenue in North America tripling to $2.8 billion in 1980. By 1981, the arcade video game industry was generating an annual North American revenue of (equivalent to $ in ). In 1982, the arcade video game industry reached its peak, generating $8 billion in quarters, surpassing the annual gross revenue of both1990s
Game related technology advances of the 1990s include these: * The "3D Revolution" where 3D polygon graphics became the ''2000s
In 2000s, the video game industry was in heavy development; profit still drove technological advancement used by other industry sectors. Technologies such as2010s
Indie games are not the main driver but significantly impact the industry, such as '' Spelunky'', '' Fez'', ''2020s
The next generations of Xbox Series X/S and PlayStation 5 were planned for 2020, but the video game industry was affected by the COVID-19 pandemic that had a worldwide impact starting in March 2020 due to forced stay-at-home orders by governmental regulations. There were similar impacts to the video game industry as with other industries, such as cancellation of in-person trade shows, conventions and esports events, and the delay of many games into late 2020, 2021, or beyond, and the industry was one of the few to actually thrive from a home-bound population using video games to cope. The market had a 20% year-to-year growth from 2019, reaching over in global revenue in both hardware and software for 2020. Easily learned games with high social interactions were popular, including ''Animal Crossing: New Horizons'', ''Fall Guys'', and ''Among Us''. As the pandemic wore on from 2020 into 2021, a secondary effect was the impact of the 2020–21 global chip shortage, global semiconductor chip shortage on hardware manufacturing. The three major console vendors, Nintendo, Microsoft, and Sony, were impacted by availability of supply of core components, and for the latter two, limited the launch of their new consoles. The chip supply shortage also affected personal computer gamers, coupled with demand for computer parts to be used in cryptocurrency mining, which artificially raised prices and made it difficult to purchase newer components. However, after cryptocurrency mining started paying out less during and following the Cryptocurrency bubble, 2021–2022 cryptocurrency crash, computer parts such as Graphics processing unit, GPUs have become more affordable as of August 2022.Economics
Early development costs were minimal, and video games could be quite profitable. Games developed by a single programmer, or by a small team of programmers and artists, could sell hundreds of thousands of copies each. Many of these games only took a few months to create, so developers could release multiple games per year. Thus, publishers could often be generous with benefits, such as royalties on the games sold. Many early game publishers started from this economic climate, such as Origin Systems, Sierra Entertainment, Capcom, Activision and Electronic Arts. As computing and graphics power increased, so too did the size of development teams, as larger staffs were needed to address the ever-increasing technical and design complexities. The larger teams consist of programmers, artists, game designers, and producers. Their salaries can range anywhere from $50,000 to $120,000 generating large labor costs for firms producing video games which can often take between one and three years to develop. Modern budgets typically reach millions of dollars and useRetail
The industry's shift from brick and mortar retail to digital downloads led to a severe sales decline at video game retailers such as GameStop, following other media retailers superseded by Internet delivery, such as Blockbuster LLC, Blockbuster, Tower Records (music retailer), Tower Records, and Virgin Megastores. GameStop diversified its services by purchasing chains that repair wireless devices and expanding its trade-in program through which customers trade used games for credit towards new games. The company began to produce its own merchandise and games. In Britain, the games retailer Game (retailer), Game revamped its stores so customers would spend time playing games there. It built a gaming arena for events and tournaments. The shift to digital marketplaces, especially for smartphones, led to an influx of inexpensive and disposable games, and lower engagement among gamers who otherwise purchased new games from retail. Customers also shifted away from the tradition of buying games on their first day of release. Publishers often funded trade-in deals to encourage consumers to purchase new games. Trade-in customers at the Australia retailer Game would purchase twice the games per year as non-trade-in customers. The sale of pre-owned games kept retailers in business, and composed about a third of Game's revenue. Retailers also saved on the UK's value-added tax, which only taxed the retailer's profit on pre-owned games, rather than the full sale on regular games. The former trade-in retail executives behind the trade-in price comparison site Trade In Detectives estimated that the United Kingdom's trade-in industry was about a third of the size of its new games business. They figured that sites such as eBay, which convert used games into cash, compose about a quarter of the UK's trade-in market, but do not keep the credit within the industry. While consumers might appear to receive better offers on these sites, they also take about 15 percent of the selling price in fees. Alternatively, some retailers will match the trade-in values offered by their competitors. Microsoft's original plan for the Xbox One attempted to translate trade-in deals for the digital marketplace, with a database of product licenses that shops would be able to resell with publisher permission, though the plan was poorly received or poorly sold.Practices
Video game industry practices are similar to those of other entertainment industries (e.g., the recording industry, music recording industry), but the video game industry in particular has been accused of treating its development talent poorly. This promotes independent development, as developers leave to form new companies and projects. In some notable cases, these new companies grow large and impersonal, having adopted the business practices of their forebears, and ultimately perpetuate the cycle. However, unlike the music industry, where modern technology has allowed a fully professional product to be created extremely inexpensively by an independent musician, modern games require increasing amounts of manpower and equipment. This dynamic makes video game publisher, publishers, who fund the video game developer, developers, much more important than in the music industry.Breakaways
In the video game industry, it is common for developers to leave their current studio and start their own. A particularly famous case is the "original" independent developer Activision, founded by former Atari developers. Activision grew to become the world's second largest game publisher. In the meantime, many of the original developers left to work on other projects. For example, founder Alan Miller (game designer), Alan Miller left Activision to start another video game development company, Accolade (company), Accolade (now Atari née Infogrames). Activision was popular among developers for giving them credit in the packaging and title screens for their games, while Atari disallowed this practice. As the video game industry took off in the mid-1980s, many developers faced the more distressing problem of working with fly-by-night or unscrupulous publishers that would either fold unexpectedly or run off with the game profits.Piracy
The industry claims software piracy to be a big problem, and take measures to counter this. Digital rights management have proved to be the most unpopular with gamers, as a measure to counter piracy. The most popular and effective strategy to counter piracy is to change the business model to freemium, where gamers pay for their in-game needs or service. Strong server-side security is required for this, to properly distinguish authentic transactions from Cheating in video games, hacked transactions.Creative control
On various Internet forums, some gamers have expressed disapproval of publishers having creative control since publishers are more apt to follow short-term market trends rather than invest in risky but potentially lucrative ideas. On the other hand, publishers may know better than developers what consumers want. The relationship between video game developers and publishers parallels the relationship between Recording Artists' Coalition, recording artists and RIAA, record labels in many ways. But unlike the music industry, which has seen flat or declining sales in the early 2000s, the video game industry continues to grow. In the computer games industry, it is easier to create a startup, resulting in many successful companies. The video game console, console industry is more closed, and a game developer must have up to three licenses from the console manufacturer: # A license to develop games for the console # The publisher must have a license to publish games for the console # A separate license for each game In addition, the developer must usually buy development systems from the console manufacturer in order to even develop a game for consideration, as well as obtain concept approval for the game from the console manufacturer. Therefore, the developer normally has to have a publishing deal in place before starting development on a game project, but in order to secure a publishing deal, the developer must have a track record of console development, something which few startups will have.Alternatives
An alternative method for publishing video games is to self-publish using the shareware or Open-source software, open source model over theGaming conventions
Gaming conventions are an important showcase of the industry. The major annual video game conventions include Gamescom in Cologne (Germany), the Electronic Entertainment Expo, E3 in Los Angeles (USA), the Penny Arcade Expo, and :Video game conventions, others.Regional distribution
As with other forms of media, video games have often been released in different world regions at different times. The practice has been used where video game localization, localization is not done in parallel with the rest of development or where the game must be encoded differently, as in PAL vs. NTSC. It has also been used to provide price discrimination in different markets or to focus limited marketing resources. Developers may also stagger digital releases so as not to overwhelm the servers hosting the game.International practices
The video game industry had its primary roots in the United States following the introduction of arcade games and console systems, with Japan soon following. With the introduction of the personal computer, Western Europe also became a major center for video game development. Since then, the industry is primarily led by companies in North American, Europe, and Japan, but other regions, including Australia/New Zealand, and other southeast Asian countries including China and South Korea, have become significant sectors for the industry.World trends
International video game revenue is estimated to be $81.5B in 2014. This is more than double the revenue of the international film industry in 2013. In 2015, it was estimated at . The largest nations by estimated video game revenues in 2016 are China ($24.4B), the United States ($23.5B) and Japan ($12.4B). The largest regions in 2015 were Asia-Pacific ($43.1B), North America ($23.8B), and Western Europe ($15.6B). In 2018, the global video games market was valued at around $134.9bn.Largest markets
According to market research firm Newzoo, the following countries are the largest video game markets by annual revenue, . In general, spending on gaming tends to increase with increase in nominal GDP. However, gaming is relatively more popular in East Asia, and relatively less popular in India.North America
Canada
Canada has the third largest video game industry in terms of employment numbers. The video game industry has also been booming in Montreal since 1997, coinciding with the opening of Ubisoft Montreal. Recently, the city has attracted world leading game developers and publishers studios such as Ubisoft, Electronic Arts, EA, Eidos Interactive, Artificial Mind and Movement, BioWare, Warner Bros. Interactive Entertainment and Strategy First, mainly because video games jobs have been heavily subsidized by the provincial government. Every year, this industry generates billions of dollars and thousands of jobs in the Montreal area. Vancouver has also developed a particularly large business cluster, cluster ofUnited States
The video game industry got its start in the United States in the late 1970s and early 1980s with the creation of arcade games like '' Pong'' and the first home console, the Magnavox Odyssey. Several factors, including loss of publishing control, a flooded market, and competition from personal computers, led to the 1983 video game crash in the U.S., affecting both arcades and home game systems. Nintendo's introduction of the Nintendo Entertainment System helped to revitalize the industry, but until Microsoft's introduction of the Xbox in the early 2000s, the hardware side was dominated by mostly Japanese-developed systems. Instead, much of the industry's growth in the U.S. was on game development, implementing new game technologies and gameplay concepts, as well as creating the large-scale publisher model used by companies like Electronic Arts to support marketing and distribution of games. The United States has the largest video games presence in the world in terms of total industry employees. In 2017, the U.S. game industry as a whole was worth US$18.4 billion and consisted of roughly 2457 companies that had a rough total of 220,000 people employed. U.S. video game revenue is forecast to reach $230 billion by 2022, making it the largest video game market in the world. Over 150 million Americans play video games, with an average age of 35 and a gender breakdown of 59 percent male and 41 percent female. American gamers are more likely to vote than non-gamers, feel that the economy is the most important political issue, and lean conservative, however party demographics are split evenly with 38% identifying as Democrats, 38% identifying as Republicans, and 24% identifying as Independents.Europe
Germany
Germany has the largest video games market in Europe, with revenues of $4.1 billion forecast for 2017. The annual Gamescom in Cologne is Europe's largest video game expo. One of the earliest internationally successful video game companies was Gütersloh-based Rainbow Arts (founded in 1984) who were responsible for publishing the popular ''Turrican'' series of games. The Anno (series), Anno series and The Settlers, The Settlers series are globally popular strategy game franchises since the 1990s. The Gothic series, SpellForce: The Order of Dawn, SpellForce and Risen (video game), Risen are established RPG franchises. The X (game series), X series by Egosoft is the best-selling space simulation. The FIFA Manager (video game series), FIFA Manager series was also developed in Germany. The German action game Spec Ops: The Line (2012) was successful in the markets and received largely positive reviews. One of the most famed game from Germany is ''Far Cry'' (2004) by Frankfurt-based Crytek, who also produced the topseller ''Crysis'' and its sequels later. Other well-known current and former developers from Germany include Ascaron, Blue Byte, Deck13, EA Phenomic, Piranha Bytes, Radon Labs, Related Designs, Spellbound Entertainment and Yager Development. Publishers include Deep Silver (Plaion), dtp entertainment, Kalypso Media and Nintendo Europe. Bigpoint Games, Gameforge, Goodgame Studios and Wooga are among the world's leading browser game and social network game developers/distributors.United Kingdom
The United Kingdom, UK industry is the third largest in the World in terms of developer success and sales of hardware and software by country alone but fourth behind Canada in terms of people employed. The size of the UK game industry is comparable to its film or music industries. Like most European countries, the UK entered the video game industry through personal computers rather than video game consoles. Low-cost computers like the ZX Spectrum and Amiga 500 led to numerous "bedroom coders" that would make and sell games through mail-order or to distributors that helped to mass-produce them. Coupled with quirky british humour, the "Britsoft" wave of popular games led to a number of influential people and studios in the 1990s. As game programming became more complex and costly in the early 2000s, more traditional studio structures arose to support both personal computers and consoles, with several studios that, in some form or another, remain highly regarded and influential in the present. Some of the studios have become defunct or been purchased by larger companies such as ''LittleBigPlanet'' developer, Media Molecule and Codemasters. The country is home to some of the world's most successful video game franchises, such as ''Tomb Raider'', ''Grand Theft Auto'', ''Fable (video game series), Fable'', ''Colin McRae: Dirt, Colin McRae Dirt'' and ''Total War (video game series), Total War''. The country also went without tax relief until March 21, 2012 when the British government changed its mind on tax relief for UK developers, which without, meant most of the talented development within the UK may move overseas for more profit, along with parents of certain video game developers which would pay for having games developed in the UK. The industry trade body TIGA estimates that it will increase the games development sector's contribution to UK GDP by £283 million, generate £172 million in new and protected tax receipts to HM Treasury, and could cost just £96 million over five years. Before the tax relief was introduced there was a fear that the UK game industry could fall behind other leading game industries around the world such as France and Canada, of which Canada overtook the UK in terms of job numbers in the industry in 2010.Asia
China
China had not been a major factor in the global video game market early on due to economic factors, governmental oversight, and a black market for foreign products. The government initiated a ban on video game consoles in 2000 that lasted through 2014, during which China's video game market grew for personal computer games, particularly subscription-based and microtransaction-based ones that were amenable to use in PC cafes, and later into mobile games. Media publishers like Tencent and NetEase focused on these types of games, growing successfully during the 2010s to become leading international companies. As of 2015, China's video game market revenue exceeds that of the United States, and is the largest country by both revenue and number of players. China is also the largest contributor towards esports in both revenue and in the number of professional players from the country. The industry, like most media in China, is tightly controlled by the government, with strong restrictions on what content may be in games, and incorporation of anti-addiction measures to limit playtime. It is home to Asia Game Show, the largest game convention in the world by attendance.Japan
The Japanese video game industry is markedly different from the industry in North America, Europe and Australia. Japan initially trailed the United States in entering the video game sector as its companies followed trends set by their American partners, but started to pioneer their own ideas soon after. Several Japanese-developed arcade games, such as '' Space Invaders'', helped to usher in the golden age of arcade video games from 1978 to 1982. The 1983 video game crash that affected the North American market did have small but short-term effects in Japan, as most companies involved in the business were well-established and could weather the disruption. Nintendo took the opportunity to push the Nintendo Entertainment System, a rebranding of its Famicom system, into the Western markets after the crash, implementing technical and business practices to avoid the factors that created the 1983 crash but also secured its control on what games were published for the system. Japan became the dominant home for consoles and console games through the early 2000s, challenged only by the incorporation of large publishers in the West and the Xbox line of consoles from Microsoft. Nintendo along with companies likeSouth Korea
The video game industry in South Korea generally followed the same early trends as the Japanese market, but players started focusing on massively-multiplayer online games (MMO) and other games that could be played at PC bangs (Internet cafes). South Korea was one of the first major regions involved in esports in the 1990s and 2000s, and today a large number of professional esports players originate from South Korea.India
Video gaming in India is an emerging market since India is experiencing strong growth in online gaming, making it one of the top gaming markets in the world. Over the past few decades, the Indian gaming industry has gone from close to nonexistent in the 1990s to one of the top markets globally in the late 2010s. In 2019, the Online game, online gaming market in India was estimated at with an estimated 300 million gamers, a 41.6% increase from 2018. As of 2021, it is one of the top five Mobile game, mobile gaming markets in the world. The industry is projected to reach 510 million gamers by 2022.Others
Africa
The video game industry is still in its infancy throughout the African continent, but due to the continent's young population and increasing technological literacy, the sector is growing rapidly. African countries such as video gaming in South Africa, South Africa, video gaming in Nigeria, Nigeria, and video gaming in Kenya, Kenya have been making rapid advances in mobile gaming, mobile game development, both within their country and internationally, but due to limited funding and a market overcrowded with Western games, success has thus far been minimal.Australia and New Zealand
Australia and New Zealand have an active video game industry, with several standalone developers as well as additional studios from other major developers across the globe.Conventions, trade shows, and conferences
Gaming conventions are an important showcase of the industry. These typically provide the means for developers and publishers to demonstrate their games directly to video game players and consumers and obtain feedback. New games are frequently introduced during these events. Some examples of each conventions include the annual Gamescom in Cologne, and numerous PAX (event), PAX events. Some publishers, developers and technology producers also have their own regular conventions, with BlizzCon, QuakeCon, Nvision and the X (Xbox show), X shows being prominent examples. National trade groups that support their local video game industry often will hold trade shows aimed for developers and publishers to interact more directly with the video game media, and with retailers and distributors for planning future sales of products. The largest such trade show is the Electronic Entertainment Expo, E3 in Los Angeles, California is held by the Entertainment Software Association. Other similar trade shows include Tokyo Game Show (Japan), Brasil Game Show (Brazil), EB Games Expo (Australia), Russian Game Developers Conference, KRI (Russia), China Digital Entertainment Expo & Conference, ChinaJoy (China) and the annual Game Developers Conference. The development of video games is also a topic of academic and professional interest, leading to a number of Academic conference, conferences for developers to share their knowledge with others. Two of the major professional conferences include the Game Developers Conference (GDC), which holds multiple events through the year but with its main annual conference held in March in San Francisco, and the D.I.C.E. Summit run by the Academy of Interactive Arts & Sciences in February of each year at Las Vegas, Nevada.Media coverage and archiving
The coverage of the video game industry started off with several magazines covering the topic, but as the Internet became widely available to support new media, much of the dedicated coverage of the video game industry has transitioned to detected websites, including ''Gamasutra'', ''IGN'', ''Eurogamer'', ''Polygon (website), Polygon'' and ''GameSpot''. More recently, the effect of Internet celebrity, social media influencers, video game players that create online videos or stream themselves playing games through services like Twitch (service), Twitch, have also become a significant source for coverage of video game news from the consumer point of view. Another facet of tracking the history of the video game industry is video game preservation, a process that is complicated due to game hardware technology that can become obsolete, dependencies on decommissioned online servers, and issues over intellectual property that legally restricts preservation efforts. Much of the industry's history prior to the 1983 crash has been lost, as companies affected by the crash simply threw material away, leaving little to recover today. There is better awareness of video game preservation into the 21st century, and several groups and museums have been established to collect and preserve hardware and software for the industry.Recognition within the industry
The video game industry has a number of annual award ceremonies, commonly associated with the above conventions, trade shows, and conferences, as well as standalone award shows. Many of the dedicated video game journalism websites also have their own set of awards. Most commonly, these ceremonies are capped by the top prize, the "List of Game of the Year awards, Game of the Year".Trends
Players become fourth-party developers, allowing for more Open-source software, open source models of game design, development and engineering. Players also create Mod (computer gaming), modifications (mods), which in some cases become just as popular as the original game for which they were created. An example of this is the game ''Counter-Strike (video game), Counter-Strike'', which began as a mod of the video game ''Half-Life (video game), Half-Life'' and eventually became a very successful, published game in its own right. While this "community of modifiers" may only add up to approximately 1% of a particular game's user base, the number of those involved will grow as more games offer modifying opportunities (such as, by releasing source code) and the video user base swells. According to Ben Sawyer, as many as 600,000 established online game community developers existed as of 2012. This effectively added a new component to the Video game industry#Game industry value chain, game industry value chain and if it continues to mature, it will integrate itself into the overall industry. The industry has seen a shift towards games with Multiplayer video game, multiplayer facilities. A larger percentage of games on all types of platforms include some type of competitive online multiplayer capability. In addition, the industry is experiencing further significant change driven by convergence, with technology and player comfort being the two primary reasons for this wave of industry convergence. Video games and related content can now be accessed and played on a variety of media, including: cable television, dedicated consoles, handheld devices and smartphones, through social networking sites or through an ISP, through a game developer's website, and online through a game console and/or home or office personal computer. In fact, 12% of U.S. households already make regular use of game consoles for accessing video content provided by online services such as Hulu and Netflix. In 2012, for the first time, entertainment usage passed multiplayer game usage on Xbox, meaning that users spent more time with online video and music services and applications than playing multiplayer games. This rapid type of industry convergence has caused the distinction between video game console and personal computers to disappear. A game console with high-speed microprocessors attached to a television set is, for all intents and purposes, a computer and monitor. As this distinction has been diminished, players' willingness to play and access content on different platforms has increased. The growing video gamer demographic accounts for this trend, as former president of the Entertainment Software Association Douglas Lowenstein explained at the 10th E3 expo, "Looking ahead, a child born in 1995, E3's inaugural year, will be 19 years old in 2014. And according to Census Bureau data, by the year 2020, there will be 174 million Americans between the ages of 5 and 44. That's 174 million Americans who will have grown up with PlayStations, Xboxes, and GameCubes from their early childhood and teenage years...What this means is that the average gamer will be both older and, given their lifetime familiarity with playing interactive games, more sophisticated and discriminating about the games they play." Evidence of the increasing player willingness to play video games across a variety of media and different platforms can be seen in the rise of casual gaming on smartphones, tablets, and social networking sites as 92% of all smartphone and tablet owners play games at least once a week, 45% play daily, and industry estimates predict that, by 2016, one-third of all global mobile video game revenue will come from tablets alone. Apple's App Store alone has more than 90,000 game apps, a growth of 1,400% since it went online. In addition, game revenues for iOS and Android mobile devices now exceed those of both Nintendo and Sony handheld video game systems combined.See also
* List of video games *List of video game websites *Hollywood and the video game industryReferences
Further reading
*External links