Video game industry


The video game industry is a significant segment of the leisure sector, straddling the tertiary sector, which provides services to people, and the quaternary sector, which focuses on knowledge-intensive activities such as research and technological development. This industry includes the development, marketing, distribution, monetization, and consumer feedback processes related to video games. The industry encompasses dozens of job disciplines and thousands of jobs worldwide. The professions involved range from game designers and software engineers to sound designers, testers, marketers, and customer support staff. Video games have gradually gained increasing relevance as a widespread cultural phenomenon, exerting significant influence on many areas of contemporary society: from the economy and the labor market to education, from consumption patterns and daily habits to architecture and urban planning, passing through sectors such as healthcare, the automotive industry, cinema and television, fashion, and sports.
The video game industry has grown from niche to mainstream., video games generated annually in global sales. In the US, the industry earned about in 2007, in 2008, and 2010, as per the ESA annual report. Research from Ampere Analysis indicated three points: the sector has consistently grown since at least 2015 and expanded 26% from 2019 to 2021, to a record ; the global games and services market is forecast to shrink 1.2% annually to in 2022. Video games now compete with movies, music, and television in terms of both popularity and revenue.
The video game industry has played an important role in improvement of computer hardware. Many parts of modern personal computers were originally improved to meet the needs of video games. The industry has influenced the technological advancement of personal computers through sound cards, graphics cards and 3D graphic accelerators, CPUs, and co-processors like PhysX. Sound cards, for example, were originally developed for games and then improved for adoption by the music industry.

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. If 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 its value chain based on the retail distribution of games:
  1. Game development, representing programmers, designers, and artists, and their leadership, with support of middleware and other development tools.
  2. Publishing, which typically includes both the source of funding the development of a video game, as well as providing the marketing and advertising for a game.
  3. Distribution, whether through retail or digital channels. Distribution typically includes manufacturing and duplication of game media and packaging for retail games.
  4. Retailer, storefront where the game is sold.
  5. Consumers, the purchasers and players of video games
  6. Hardware platform manufacturers, which can own and place limitations for content on the platform they have made, charging license fees to developers or publishers.
As games have transitioned from the retail to more digital market, parts of this value chain have become redundant. For example, the distributor may be redundant as a function of either the publisher or the retailer, or even in some cases as the case of indie games, the function of the developer themselves.

Roles

Ben Sawyer of Digitalmill observes that the development side of the industry is made up of six connected and distinctive layers:
  1. Capital and publishing layer: involved in paying for development of new games and seeking returns through licensing of the properties.
  2. Product and talent layer: includes developers, designers and artists, who may be working under individual contracts or as part of in-house development teams.
  3. Production and tools layer: generates content production tools, game development middleware, customizable game engines, and production management tools.
  4. Distribution layer: or the "publishing" industry, involved in generating and marketing catalogs of games for retail and online distribution.
  5. Hardware layer: or the providers of the underlying platform, which may be console-based, accessed through online media, or accessed through mobile devices such as smartphones. This layer includes network infrastructure and non-hardware platforms such as virtual machines, or software platforms such as browsers or Facebook.
  6. End-users layer: or the players of the games.
The game industry employs those experienced in other traditional businesses, but some have experience tailored to the game industry. Some of the disciplines specific to the game industry include: game programmer, game designer, level designer, game producer, game artist, and game tester. Most of these professionals are employed by video game developers or video game publishers. However, many hobbyists also produce computer games and sell them commercially. Game developers and publishers sometimes employ those with extensive or long-term experience within the modding communities.

History

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 of tic-tac-toe, built by Josef Kates for the 1950 Canadian National Exhibition, and Nimrod created by engineering firm Ferranti for the 1951 Festival of Britain.
The development of cathode-ray tube, the core technology inside televisions, created several of the first true video games. In 1947, Thomas T. Goldsmith Jr. and Estle Ray Mann filed a patent for a "cathode ray tube amusement device". Their game, which uses a cathode-ray tube hooked to an oscilloscope display, challenges players to fire a gun at target.
Between the 1950s and 1960s, with mainframe computers becoming available to campus colleges, students and others started to develop games that could be played at terminals that accessed the mainframe. One of the first known examples is Spacewar!, developed by Harvard and MIT employees Martin Graetz, Steve Russell, and Wayne Wiitanen. The introduction of easy-to-program languages like BASIC for mainframes allowed for more simplistic games to be developed.
The arcade video game industry grew out of the pre-existing arcade game industry, which was previously dominated by electro-mechanical games. Following the arrival of Sega's EM game Periscope, the arcade industry was experiencing a "technological renaissance" driven by "audio-visual" EM novelty games, establishing the arcades as a healthy environment for the introduction of commercial video games in the early 1970s. In the late 1960s, a college student named Nolan Bushnell had a part-time job at an arcade where he became familiar with EM games such as Chicago Coin's racing game Speedway, watching customers play and helping to maintain the machinery, while learning how it worked and developing his understanding of how the game business operates.

1970s

In 1971, the first commercial arcade video game, Computer Space, was released. The following year, Atari, Inc. released the first commercially successful video game, Pong, and 19,000 arcade cabinets of the original arcade version were sold. In that year, video games were introduced to the home market with the release of the early video game console, the Magnavox Odyssey. However, both the arcade and home markets would be dominated by Pong clones, which flooded the market and led to the video game crash of 1977. The crash eventually came to an end with the success of Taito's Space Invaders, released in 1978, inspiring the golden age of video arcade games. The game's success prompted the prevalence of arcade machines in mainstream locations such as shopping malls, traditional storefronts, restaurants, and convenience stores during the golden age. More than 360,000 Space Invaders arcade cabinets were sold worldwide, and by 1982, generated a revenue of in quarters.
Space Invaders was soon licensed for the Atari VCS, becoming the first "killer app" and quadrupling the console's sales. The success of the Atari 2600 in turn revived the home video game market during the second generation of consoles, until the video game crash of 1983. By the end of the 1970s, the personal computer game industry began forming from a hobby culture.

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 . In 1982, the coin-operated video game industry reached its peak, generating $8 billion in quarters, surpassing the annual gross revenue of both pop music and Hollywood films combined. This was also nearly twice as much as the $3.8 billion generated by the home video game industry that year; both the arcade and home video game markets combined in 1982 total of . The arcade video game industry would continue to generate an annual revenue of $5 billion in quarters through to 1985. The most successful game of this era was Namco's Pac-Man, released in 1980, of which more than 350,000 cabinets were eventually sold, and within a year, collected more than $1 billion in quarters; in total, Pac-Man is estimated to have grossed over 10 billion quarters during the 20th century.
In the early 1980s, 8-bit home computing and home-made games boomed. This was especially in Europe and in Asia. Video game journalism arose at that time, which was later expanded to include covermounted cassettes and CDs. In 1983, the North American industry crashed due to the production of too many badly developed games, resulting in the fall of the North American industry. The industry would eventually be revitalized by the release of the Nintendo Entertainment System, which resulted in the home console market being dominated by Japanese companies such as Nintendo, while a professional European video game industry also began taking shape with companies such as Ocean Software and Gremlin Interactive. In 1987, Nintendo lost a legal challenge against Blockbuster Entertainment, which continued game rentals in the same way as movies. In 1989, the Game Boy handheld system was launched.
Video games transitioned from having been showcased at general trade shows like Consumer Electronics Show, to dedicated shows like Nintendo Space World and Electronic Entertainment Expo.