State of the Video Game Industry

Gaming Industry

Since the creation of video games there has been a dramatic evolution taking place as technology grows more enhanced and video game creators have begun to understand the demographics of their consumers and the way video games affect their everyday lives. For some they consider it merely a hobby, a casual gamer perhaps while those on the other side of the spectrum are hardcore gamers with video games taking a huge role in their lives. What’s beautiful about the video game industry is that the innovation and change that has happened over the past 40 years has affected both sides of the spectrum for each to enjoy in their own ways based on their view of the video games they are playing.


The history of video games has been a constant battle of change throughout the years as technology grows more sophisticated through time. “It (the video game industry) is currently in a maturation and diversification stage based on the wide variety of genres and the multiple capabilities promised by the newest generation of machines.” (Williams) To understand the diversification that has taken place we must first remember that the first “video game” was developed in 1958 by Wally Higginbotham in a lab dealing with nuclear research. From the get go video games were a work of entertainment as Wally originally created his “game of tennis on an oscilloscope screen” to excite visitors who often times found themselves bored while visiting the lab. From this idea sprouted the soon release of the first mass marketed home game machine, the Odyssey.

The Odyssey introduced removable media components, creating the model still used today in modern consoles seen in the Xbox and Playstation. The Odyssey’s successor, Atari, would create the third-party system which would allow other companies to create games for their system, selling them in stores such as Sears. The Atari had excellent ideas but poor execution when it came to gameplay as their largely advertised games E.T. and Pac-Man flopped and are still considered to be some of the worst games ever made. After the shortcomings of Atari on E.T. and Pac-Man the industry seemed to be in stasis until the Nintendo Company took hold in the 1980’s. Sega soon entered the picture but the management from both companies made it difficult for anyone but the seldom few large gaming companies to thrive. This was also a time these companies created games that would not interchangeably work with other consoles, forcing the consumer to go all in on one console.

The next step taken by the video game industry was supported by the development of home computers with the first computers that took advantage of the new industry was Apple Computer’s in 1977. (2) By the late 1980s more computer companies realized the possibilities and scale of the industry which is why Microsoft and IBM joined Apple in taking advantage of early gaming.

As Sony and Microsoft realized the positive effect video games could have on their companies they began producing their own consoles with Sony being the first by releasing the Plastation 2 in 2000. Microsoft responded with original Xbox in 2001 and did not see initial revenue as it struggle in its early release. Both Sony’s and Microsoft’s consoles were competing with Sega’s Dreamcast and the Gamecube. Microsoft soon understood the capabilities of their device and released Xbox Live in 2002, a service which you could play against other gamers instead of NPCs. (non-player character) Xbox Live took off when Halo Combat Evolved used the service as a way to allow players play against each other and even allowed them to talk over microphone to their friend or foe.

Economists praise the video game industry seldom as it is a new media and has its share of critics as all new media does in its early youth. This is a point that the video game industry defies trends in multiple ways whether it be distribution or marketing. The recession of 2008 was a difficult time for the United States economy but surprisingly had the opposite effect on the video game industry as sales rose in June by 53%. “The Video game industry continues to perform in the face of an increasingly difficult economic environment.” NPD group analyst Anita Frazier. (NPD Group INC))

 In 2015 the main contenders in the video game industry are Microsoft, Sony, Nintendo, and Valve (who own the gaming software Steam). Microsoft and Sony are in a close battle with each releasing their consoles in similar time periods while Nintendo remains on the outside, releasing their consoles at a slower pace and at different times of the year. Globally the Playstation 4 sold 251,094 units with Xbox One following in second with 245,104 units sold with the Wii U which is Nintendo’s newest console at 53,435 units globally. (VGChartz) Steam has been dominating the PC gaming sector with over 781 million games available with 9.2 million users. With this stated it is not surprising that the PC gaming store had a total of $1.5 billion in total sales with DOTA 2, Counter-Strike: Global Offensive and Team Fortress 2 (all Valve created games) made more than $450 million profit across all three games. (Strickland)


Present State of the Industry

Skip to present day and more Americans play video games than go to the movies. Publishers are finding that a new level of investment is needed to create a AAA title that will be successful as Activision invested $500 million (Griffiths, Gamespot) into their new game, Destiny which was developed by Bungie. The budget for an AAA game is only estimated at US$15-20 million for most games. (Zackariasson) Part of Activision’s confidence in the product is because Bungie was the studio that created the cultural phenomenon of Halo on Xbox. You see this sort of action within the video game industry at present day as the publisher hopes for enormous sales such as when Call of Duty: Modern Warfare 3 was released and earned $400 million (The Guardian) within a mere 24 hours. Within 16 days Call of Duty had broken the record set by James Cameron’s Avatar by hitting $1 billion in sales during that time. (The Guardian)

Current Day Development Processes

A new system of creating video games has altered the video game industry to how it functions today ranging from sales and marketing. Often times game developers lack the financial capabilities to fund and promote their games, making publishers an essential participant in bringing games to consumers. The first step of the process is “publishers works with different developers in order to build portfolios of games they consider have a possibility of attracting customers’ attention and creating sales.” (Zackariasson) Many times publishers will adapt their game model to market trends and establish strategies to promote exposure of the game based off of other successful models. The staff involved in video game creation can vary from studio to studio but it begins with the programmers of the team. They create the software code that makes the game run and in the end a complete game is a massive amount of programs interacting to create parts of the game such as sounds and the graphics of the game.

Artists create the “graphical expression of a game, which usually begins with conceptual artwork” (Zackariasson, 8) that is approved by the designer or project manager. The artists create the conceptual art through a program to allow more than one artist understand the expression they are attempting to achieve which expedites the process. Writing is also very important in the creation of video games dealing with the story board and the dialogue, menus, even the in-game videos within the video game.

Sound technicians often times in the industry will be freelanced depending on the size of the studio. If sound is at utmost importance for the designer then the publishers will hire sound artists to work in-house and will contract external musicians or even entire orchestras depending on the project.

Finally the most important for last, the designers which will also be named project manager often times. They create overall setting and plotline of a video game, working interchangeably with each part of the company to allow fluidity within the video game. Designers have an effect on the art style and graphical impression. One such example is from Telltale Games, they create an interactive style comic book video game which does not fully immerse you into the actually control and gameplay of the characters but instead use the narrative of the story to keep the player entranced with their only action being QTE’s (quick time events.” Telltale also has a specific art style that resembles comic books and does not take advantage of current graphical innovations.

Distribution of Video Games

The video game industry essential works as a multitude of cogs within a larger machine that functions best when all other parts of the machine are well oiled and maintained. This brings up the question of what happens to the physical video games that are produced by the publishers. Below is a diagram of the distribution of video games which begins with the developers and their team I had just described. Once the developer has made a deal with the publisher and agrees to legal terms and conditions they finish the product. The publisher many times has ties with distributors which is why developers do not skip the middle man which very soon change. The distributor then uses its connections and effective logistics to determine where the game should be shipped and to what stores. The retailers then can make specific deals with publishers to market their game or allow for in-game benefits for pre-ordering (8) which can even include game breaking items but many times only contains cosmetic items. The retailer and publisher marketing campaign raises awareness for the customer to go to the store and purchase it physically.

Video games are largely sold as physical products but with the introduction of the internet increased the capabilities of distributing digitally but “the importance of shelf space thus continues to be important because of the visibility importance to the consumer and its attraction power.” (Zackariasson) This is where the middle-man could be outed in the process as consumers can access the games digitally. Online distribution has thrown a curveball to the retailers as Sony and Microsoft now have the option of releasing games through their online stores and even PC gaming has created their own software service to buy and sell digital video games with Steam. Many gamers like this idea as they can pre-download their game before it comes out and will be able to play the video game release night without having to leave their home. Retailers will attempt to prevent this by offering their own digital store for gamers to purchase their games on but this only pertains to PC gaming as it is the only medium that would allow for it to happen because Microsoft is not going to allow Best Buy or other retailers to create a digital store on their console.



Problems in the Industry

Exclusive content has been on the mind of many gamers in recent years as they ponder whether it would be effective for the video game industry if all games were on one console and companies consolidated to work on one console. This idea comes to mind because many gamers find it ridiculous that you need to own all consoles to have access to all the games you may want to play. You must also keep in mind these gaming consoles range from $300-$500 with each game also starting out being released at $60 with little hope of games going down in price.

Companies also use tactics of a staggered release on their games content for some companies over others simply because one paid more. An example of this happening recently would be with The Rise of the Tomb Raider which was released for Xbox One but had a staggered release on the Playstation 4 and will be releasing on Sony’s console next year. Another example would be with the gaming franchise of Call of Duty. Call of Duty favors on company over the other and allows DLC (downloadable content) to be released earlier on the PS4 and a month later on the Xbox One. This angers a lot of gamers because they feel that they are being ripped off as they have paid the same $60 that the other consumer had but they are then deprived of that content. DLC usage has also come under close scrutiny by gamers as publishers such as EA and Activision have begun selling shells of a game for $60 and DLC season passes for another $40. One such example is the recent Battlefront release as it was released with 12 maps on its release but a whopping 16 additional multiplayer (Kain) maps will be included only to season pass holders of the game.

Video games are a young media type with much growth to come along with its industry. Along the way there will be bumps and confusion all around the consumer but only the gamer can decide what’s worth their $60 in the end and can change from situation to situation. At the beginning of video game development they were awed by the pong video game and today we can recreate lifelike animations to enjoy for hours on end but how will the consumer treat the consumer and does the consumer even know what’s right for them? These are all questions that need to be answered in time but for now I’ll see you online.




Work Cited

  1. VIDEO GAME INDUSTRY DEFIES TRE (2008).Retailing Today, 47(10), 16. Retrieved from
  2. Willaims, D. (2002). Structure and Competition in the U.S. Home Video Game Industry. JMM: The International Journal On Media Management, 4(1), 41-54.
  3. Zackariasson, P., & Wilson, T. (Eds.). (2012). Video Game Industry : Formation, Present State, and Future. Florence, KY, USA: Routledge. Retrieved from
  4. Griffiths, Sarah. (2014) World’s most expensive video game goes on sale: Destiny Cost more than 310 million to make – dwarfing even Hollywood’s most extravagant budget.Retrieved from:
  5. 20 of the most expensive games ever made (Gamespot) Retrieved from :
  6. The Guardian. Modern Warfare 3 hits the $1bn mark in record time. Retrieved from :
  7. NPD Group Inc. More Americans Play Videogames than Go Out to the Movies. Accessed at (2009, May 20)
  8. Tom Clancy’s Rainbow Six Siege (Tom Clancy’s Rainbow Six Siege) Retrieved from:
  9. Video game charts, game sales, top sellers, game data. ( VGChartz ) Retrieved From:
  10. Strickland, Derek. Report: Valve rakes in $1.5 billion revenue from Steam sales in 2014. Retrieved From:
  11. Kain, Erik. New ‘Star Wars: Battlefront’ Season Pass Details Still Don’t Justify the Cost. (Forbes)
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