Video Game Industry: The Consoles (Part 3)

Business & Revenue Models

When it comes to the video game industry, most of the revenues come from sales of hardware game consoles and the software themselves. This is obviously the main revenue stream for game companies, but they are beginning to capitalize in other industries as well. Nowadays, more and more companies are advertising via popular game titles. The movie industry is also heavily impacted with games being converted into movies and vice versa. Even the stock market has been invaded by video game stocks. We will see how companies can utilize these new revenue generators, and whether they are capitalizing on them.

First, let us take a look at advertising in video games. Online games are the hotbeds for advertising. They have a large amount of audience which is still growing at a fast rate. The amount of exposure that advertising companies can get is infinitely large if they choose the proper games to advertise their products. Offline games should not be left out as well. Merchandising companies like Nike and Reebok advertise frequently in multi-platform games like NBA Live and FIFA Football. These games could either be online or offline. This article gives you a sense of the new channel in advertising for major companies to consider.

Since the turn of the millennium, there has been a trend of games converted into big budget movies and the other way round. Past efforts to do game to movie conversions were not considered successful due to the lack of technology, resulting in poor receptions by movie goers and critics. Now, game movies have a decent chance to succeed because of superior technology. Movie studios will be more willing to take on game-related projects. As we can see from the all time best game-based movies list, it contains mostly of game franchises such as Pokemon and Tomb Raider. The public has to be able to relate to the characters in these video games. However, these adaptations are still not selling enough to compete with the mainstream movies. Video games have a long way to go in the box office.

Another way to earn revenue for game companies is to become publicly traded companies. The stock game is not one I will want to mess with if I was one of the game companies. The stock market is too unpredictable and unstable for companies to earn profits. In this article, it states that 2007 may be a rough period for video game stocks. From my perspective, only the big companies like Microsoft and Nintendo are able to play in this field. They have the resources to take risks and gain enough in the process.

The big question for the players in the video game industry is: which channel should I choose to be most profitable. Game developers, publishers, and console manufacturers can each have a slice of the pie if they do it right. There are licensing fees to be gained from advertisements and movies. Stocks can earn a plenty in a good day. In retrospect, companies have to do their due diligence before committing to one of the aforementioned channel. Know your own limits and capacities so that you are not regretting your actions later.