Video Game Industry Analysis

Custom Student Mr. Teacher ENG 1001-04 17 December 2016

Video Game Industry Analysis

The history of video games goes as far back as the 1940s, when in 1947 Thomas T. Goldsmith, Jr. and Este Ray Mann filed a United States patent request for an invention they described as a “cathode ray tube amusement device.” Video gaming would not reach mainstream popularity until the 1970s and 1980s, when arcade video games, gaming consoles and home computer games were introduced to the general public. Since then, video gaming has become a popular form of entertainment and a part of modern culture in most parts of the world. There are currently considered to be eight generations of video game consoles, with the seventh and the eighth concurrently ongoing.

Early Founders

During the golden age of video games in the 1970s, it was a rush to the start to see which company and which programmer could create a video game and platform that could trump the rest. However, most large video game manufacturers can trace their roots far before that decade, reaching back into the early 1900s or even the late 1800s. While some video game companies, such as Nintendo and Sony, would begin their economic pursuits in other fields, companies like Atari and Sega were created with an eye toward producing the ultimate gaming system. The first major video game company to come into being was Nintendo, which would eventually make video games popular again in the 1980s. Nintendo is a Japanese company that was created in 1889 and was originally named the Marufuku Company. In 1951, this company, which manufactured Western-style playing cards in Japan, would take the name Nintendo, meaning “leave luck to heaven.

In 1891, the Philips Company, owner of Magnavox and an important frontrunner in the video game production race, was established in the Netherlands. In 1947, another major video game icon was founded under the name Tokyo Telecommunications Engineering Company. After the founders realized this name was too cumbersome to say and remember easily, they modified the Latin word sonus (meaning sound) to form the company name Sony. Sega was founded in 1952, under the name Service Games, as a company that provided coin-operated games and jukeboxes to American servicemen in Japan. It would not be until 1972, well into the beginning of video games, that Atari was formed as a cooperative partnership between leading video game programmers Nolan Bushnell and Ted Dabney.

First Video Games and Platforms

The idea for an interactive video game was first conceived of by Ralph Baer, an engineer with an airborne electronics company, in 1951. Commissioned to design a television for the company, Baer believed the TV could be more marketable to consumers if it contained a type of interactive game (Kent 2001). His idea was shot down by the company, but other engineers and programmers would not let it settle for long. The first official video games, a table-tennis type game and a computer space game, were developed in 1958 and 1961, respectively. These early video games proved to be the necessary catalyst for game programmers and were the early predecessors of the popular arcade games Pong and Space Invaders. Pong, created by the Atari Company in 1972, turned into an incredible success in arcades and led to the creation of the first home video gaming system, the Magnavox Odyssey. After the moderate success of the Odyssey, several video game companies would follow with their own home gaming systems in 1976 and 1977, including the Atari Video Computer System (VCS).

Video Games Take Off

By 1978, home video game consoles were beginning to sell well, and more competitors had entered the market. Nintendo of Japan released its first video game that year, a simplistic version of the board game Othello that was marketed in arcades. The popular toy makers Mattel and Milton Bradley also entered the video game scene in the following two years with a hand-held video game unit from Milton Bradley and the Intellivision by Mattel, the first video game console to offer true competition to Atari. During this golden age of video games in the late 1970s, the two leading contenders, Magnavox and Atari, both tried to add competition to the home computer market. Magnavox released the Odyssey 2, a programmable video game console that included a built-in keyboard, while Atari began selling its own personal computer designed to rival Apple. However, most consumers connected Atari only with video games, and the computer system was widely disregarded.

During this time period, Atari also released its first home version of the popular arcade game Space Invaders, leading to a massive increase in sales for the VCS game console. As video gaming entered the 1980s, two incredibly popular games that would revolutionize the industry were created. Pac-Man, created by Namco in 1980, became the best-selling arcade game of all time and the first video game that was popular with both males and females. The later version, Ms. Pac-Man, would also prove to be immensely popular at arcades. The next year, in 1981, Nintendo of America created Donkey Kong for arcades. While the hero of Donkey Kong was originally named Jump man, this name was later changed to Mario and he would become an icon in years to come as a key video game hero. Unfortunately, as video games began to take off in the early 1980s, the market quickly became flooded with multiple consoles and games, and the industry experienced a market crash in 1984.

Industry Growth

Along with increasing Internet and broadband penetration throughout the world, online and mobile gaming represents the greatest push in the video game growth. The implication of this increase in accessibility to technology is many developing countries -specifically the BRIC economies (Brazil, Russia, India and China) – are now becoming major players in the industry. As online and mobile gaming becomes more affordable, video gaming becomes more accessible to developing countries. Though console gaming currently represents the largest market in the industry, its growth is projected to slow down in the upcoming years, from a 10.9% growth between 2003 and 2008, to a 5.5% between 2008 and 2013.

In 2008, Europe, the Middle East, and Africa (EMEA) represented the largest video gaming market share (35.3%). In 2013 it is projected the Asia-Pacific region will be the leader in both growth and market share. The projection is market share in EMEA and North America will decline, while it is expected to increase in Latin America. The video game industry in the BRIC economies has developed in parallel fashion to these countries’ general economic expansion. It is projected the BRIC countries will have increased market share in future years.

Market size

The Video Games are a cultural phenomenon that is growing ever more prominent among young and old alike. They have become an integral part of the mass media culture and have been in existence for nearly as long as the television. While the video games of today are growing ever more detailed and lifelike, early video games like Pong, Space Invaders, and Pac-Man were equally impressive and highly entertaining at their time. From their earliest years to the complex video game landscape of the twenty-first century, video games have developed into enchanting, alternate worlds that have captured the hearts of millions of players. As of today, it is estimated that video game consoles represent more than 25% of the world’s general-purpose computational power. Also they were banned in China since June 2000 and now China is seeing explosive growth. Market size from 2003 to 2013 in $billions

REVENUE FOR 2012

Size of global traditional video game market revenue, excluding mobile games on smart phones and tablets: $70 billion, up from $65 billion in 2011 Size of global video game market revenue, including mobile games on smart phones and tablets: $78.5 billion for 2012 Retail software revenue: $28 billion, down from $29.5 billion in 2011 Online revenue, including digital delivery, subscriptions, Facebook games: $24 billion, up from $18 billion in 2011 (Source: DFC Intelligence)

CONSOLE MAKERS
Microsoft Corp
* Xbox 360 launched in the United States: November 2005
* Xbox consoles sold: 67 million
* Kinect motion sensors sold: 19 million

Major initiative: Microsoft is expected to show off new entertainment features of its Xbox 360 and a new version of “Halo.” Sony Corp
* PlayStation3 launched in the United States and Japan: November 2006 * As of March 31, PlayStation3 units sold: Over 63 million units * As of June 6, 2011, Sony Move motion sensors shipped: 8.8 million units Major initiative: Sony is expected to push new games to boost sales of the Vita and PlayStation 3. Nintendo Co Ltd

* Launched Wii in the United States: November 2006
* Wii units shipped: More than 95 million
* DS units shipped: More than 151 million
* 3DS units: More than 17 million

Major initiative: Nintendo will finally unveil the first home console in six years at E3. Device is expected to feature HD graphics, a special tablet controller and motion sensors.

SOFTWARE PUBLISHERS

Activision Blizzard
Annual revenue: $4.8 billion
Top franchises: “Call of Duty” and “World of Warcraft” Electronic Arts Inc Annual revenue: $4.1 billion
Top franchises: “The Sims” and “Madden NFL” Take-Two Interactive Software Annual revenue: $826 million
Top franchises: “Grand Theft Auto” and “Red Dead Redemption” Ubisoft Annual revenue: 1.06 billion euros

Substitute Products

Substitute products for games maybe songs from music industry, movies from movie industry, and television programs from television industry which people also sought fun and entertainment. There have not been so many problems with the substitute products because video game industry is uprising. According to a writer for Fortune, music sales have been falling in recent years, the movie going experience hasn’t change that much and network TV is on the skids.

Political Determinants

Unlike many other industries, the gaming industry isn’t universally affected by political determinants. Political determinants are generally specific to a country. While violence and sexual content of games are common themes of discussion, how they are handled varies from country to county. Social and Environmental Factors

Social Factors

Video games have an enormous place in society – most kids are exposed to video games in some sort of capacity growing up. Just like other technological mediums, there are both positive and negative social issues related to video gaming.

Some Positive Effects of Playing Video Games

Video games have proven to be effective tools for children’s learning when used appropriately as they impart specific attitudes, skills and behaviors on the player. For example, some video games have helped to teach children how to effectively deal with their asthma and diabetes. Further, in a study with college students, playing a golf video game improved students’ actual control of force when putting, even though the video game gave no bodily feedback on actual putting movement or force. Video games have also been shown to increase surgical skills for doctors, and research has more broadly proven that people can learn iconic, spatial, and visual attention skills from video games.[1]

Some Negative Effects of Playing Video Games

Research has shown that video games can lead to negative effects on children’s physical health, including obesity, video-induced seizures, and postural, muscular and skeletal disorders, such as tendonitis, nerve compression, and carpal tunnel syndrome. Additionally, the amount of time spent playing video games has been shown to have a negative correlation with academic performance.[2] But even more prevalent, is that playing video games has been shown to have a positive correlation with antisocial and aggressive behavior. Violent video games are most commonly defined as games where the player can intentionally harm the other characters. Not only do a majority of video games today fall under this definition, but a recent study established that the majority of 4th to 8th grade students prefer violent games.[3]

Environmental Factors
E-Waste

Almost 50 million tons of electronic products are discarded every year, and the figure continues to grow as the lifespan of new devices continues to shrink. According to the environmental organization Greenpeace, that estimated amount of e-waste generated every year put into containers on a train would be enough to circle the globe! In fact, up to five percent of all municipal solid waste worldwide is this electronic waste (e-waste). Such is the magnitude of this e-waste that it now ties with plastic packaging in number; yet electronic waste is much more hazardous. While mobile phones and computers are the main causes of this ever-increasing waste as they are replaced on average more frequently, video games and video game consoles contribute significantly to e-waste.

[1] http://www.mediafamily.org/facts/facts_effect.shtml
[2] http://www.buzzle.com/articles/effects-of-video-games-on-children.html [3] http://findarticles.com/p/articles/mi_m0816/is_6_21/ai_n9772319/

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