Future Trends
As I have briefly mentioned in the introduction, console-based games are now becoming more and more online. The consoles themselves are platforms to connect people in a global scale. Compatibility may become a problem since the big manufacturing companies (Sony, Microsoft and Nintendo) are not currently able to communicate to one another in the realm of online games. Today, customers are restricted to their chosen console which has its own community.
For instance in the next-generation consoles, we have Microsoft’s XBOX Live, Nintendo’s Wi-Fi Connection, and Sony’s Playstation Network. Each represents a source of revenue stream that could provide one an advantage over the other. Having collaboration among these three networks alone is going to benefit the industry as people do not have to choose sides, and are able to “talk” with one another regardless of the console. Therefore, having one online community instead of multiple is the way to go. I do not see this happening in the near future because of the stiff competition and big egos these companies have.
Console hardware is constantly becoming a mini multimedia center, offering more functionality other than just playing games (just look at the next-generation consoles). With the ability to have internet access, the consoles have become a tool for people to socialize and relax at the same time. You can get almost anything at your heart’s desire in the internet.
The online communities in the console world are also steadily increasing. Although this online model is still a fairly new concept to most console owners, I believe that it is the direction the industry is heading towards in general. The console segment will have an overlap with online gaming and PC gaming due to the reach of internet. Game developers and publishers will lean toward multi-platform online games as there are more market shares to grab in this segment rather than the generally offline console games.
Future of the global video game industry is very bright with a growing consumer base and interconnection around the world. The internet has become a platform for the industry to expand. Console, PC, and online games will all converge to become, well, online. Humans are social creatures, so it is just natural to have more interaction in video games. There is bound to be some cultural differences when such globalization takes place, and the game industry is not an exception. Even though online is the future of gaming, people still come from various nationalities and backgrounds and each has his/her own expectation. Adapting to each other is the key success factor in having a thriving game industry.
Saturday, April 28, 2007
Friday, April 27, 2007
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.
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.
Video Game Industry: The Consoles (Part 2)
Competitive Dynamics
Game developers, or the software producers, are mainly concerned with competition in their specific genres. Whether it is a role-playing game (RPG) or a fighting game, it is unlikely that competitions will cross over. This is because they have different customer demand for each genre. For instance, RPGs demand better graphics while fighting games concentrate on the game play. Therefore a developer has to look at the game’s content (story and game play), quality produced (graphics), and customer loyalty in their respective genres to take full advantage of the competition. The race for game development is always wide open with the various genres, but those with loyal fan bases will have the upper hand. Developing franchises like the Mario series is not an easy task since you have to keep consumers from being bored over a long period of time. Customers will not buy games that are similar in nature, and they are always looking for something new and innovative from one game to the next. Franchises are, therefore, difficult to maintain.
Game publishers are constantly looking for titles that have potentials to be great hits. They use brand names and reputations to sell their published products. Publishers must have good game developers in order for the games to be more marketable to the public. Thus, constant and careful evaluation of their developers’ creativity, consistency, and use of technology is crucial. Electronic Arts is a good example with its successful Madden NFL and NBA Live franchises. It has its own internal developers which can easily communicate information to its own publisher, EA Sports. Having everything internal is a great advantage for Electronic Arts and it propels the company to be the top publisher as mentioned in the first post.
Console manufacturers differentiate itself by technical capacities, price, and game titles available in the console world. In 2007, the battle for supremacy among game console manufacturers is primarily between Sony’s Playstation 3, Microsoft’s XBOX 360, and Nintendo’s Wii (view comparisons here). They are still at the beginning stage of the next-generation console war. The latest global sales of next-generation consoles indicate the rapid growth of Wii sales while XBOX 360 and Playstation 3 are cooling off.
Nintendo’s Wii capitalizes extremely well as it provides more interactivity and a whole new gaming experience. These features are boosting Wii’s sales and it is separating itself apart from the competition. In the meantime, Microsoft is trying to maintain its lead by releasing an upgraded version of the XBOX 360 called the XBOX 360 Elite. Such a move is questionable since consumers who have already owned an XBOX 360 is not likely to spend more on unnecessary functions. Sony has not made a news-breaking move yet to enhance its sales, but I bet that it is counting on the game titles to sell its machines. Sony’s Playstation series has always had strong software to support its system dating back since its original release in 1995. Whatever the cases maybe, I think that the Wii holds the upper hand because of its fresh approach to console gaming, and it has given consumers all over the world an eye-opening experience.
Game developers, or the software producers, are mainly concerned with competition in their specific genres. Whether it is a role-playing game (RPG) or a fighting game, it is unlikely that competitions will cross over. This is because they have different customer demand for each genre. For instance, RPGs demand better graphics while fighting games concentrate on the game play. Therefore a developer has to look at the game’s content (story and game play), quality produced (graphics), and customer loyalty in their respective genres to take full advantage of the competition. The race for game development is always wide open with the various genres, but those with loyal fan bases will have the upper hand. Developing franchises like the Mario series is not an easy task since you have to keep consumers from being bored over a long period of time. Customers will not buy games that are similar in nature, and they are always looking for something new and innovative from one game to the next. Franchises are, therefore, difficult to maintain.
Game publishers are constantly looking for titles that have potentials to be great hits. They use brand names and reputations to sell their published products. Publishers must have good game developers in order for the games to be more marketable to the public. Thus, constant and careful evaluation of their developers’ creativity, consistency, and use of technology is crucial. Electronic Arts is a good example with its successful Madden NFL and NBA Live franchises. It has its own internal developers which can easily communicate information to its own publisher, EA Sports. Having everything internal is a great advantage for Electronic Arts and it propels the company to be the top publisher as mentioned in the first post.
Console manufacturers differentiate itself by technical capacities, price, and game titles available in the console world. In 2007, the battle for supremacy among game console manufacturers is primarily between Sony’s Playstation 3, Microsoft’s XBOX 360, and Nintendo’s Wii (view comparisons here). They are still at the beginning stage of the next-generation console war. The latest global sales of next-generation consoles indicate the rapid growth of Wii sales while XBOX 360 and Playstation 3 are cooling off.
Nintendo’s Wii capitalizes extremely well as it provides more interactivity and a whole new gaming experience. These features are boosting Wii’s sales and it is separating itself apart from the competition. In the meantime, Microsoft is trying to maintain its lead by releasing an upgraded version of the XBOX 360 called the XBOX 360 Elite. Such a move is questionable since consumers who have already owned an XBOX 360 is not likely to spend more on unnecessary functions. Sony has not made a news-breaking move yet to enhance its sales, but I bet that it is counting on the game titles to sell its machines. Sony’s Playstation series has always had strong software to support its system dating back since its original release in 1995. Whatever the cases maybe, I think that the Wii holds the upper hand because of its fresh approach to console gaming, and it has given consumers all over the world an eye-opening experience.
Video Game Industry: The Consoles (Part 1)
Readers, welcome back to my blog. This week I have decided to take a break from the topic of format war, and introduce you all to the world of console gaming. After all that battles, I think that we deserve a little time off, don’t you? For the topic of video game consoles, there are a lot of areas to be discussed. This is despite the fact that console gaming is only a segment of the entire video game industry. As a result, I am now splitting into four major areas: Introduction, Competitive Dynamics, Business & Revenue Models, and Future Trends. I hope that we are learning a little more from this segment of the hugely popular industry. Now, let us get started on our journey shall we. (Expect four parts to be posted separately for your convenience)
Introduction
The game console segment of the video game industry has evolved tremendously throughout its history. The first ever game console, the Magnavox Odyssey, was released in 1972. Later, the same developer created one of the most embraced and popular console games of all time, PONG. At that time, the console game came in various types of systems under different manufacturers and names. All of them played the same type of ping-pong game, although ATARI was the first ever developer. You could imagine the difference between that period and the current diversity of console games available. As such, console systems can presently be divided into two major categories. They are either classified as home systems or handheld systems. Unlike a personal computer (PC) which has various functions, game consoles are bought primarily and used solely for the purpose playing video games. This trend is definitely beginning to change as technology keeps on advancing (I will discuss this in the very last part in Future Trends).
Overall, the console segment accounts for $6 billion of the $30 billion global video game industry. In the United States, the console market is valued at $3.3 billion of the total $12.5 billion. The number of titles available for game consoles exceeds tens of thousands. Some of these titles are able to develop into franchises, and become crucial for game developers and console manufacturers alike as a selling point for their respective revenue streams. Some examples include Nintendo’s long-time running Mario and Pokemon series. As of the fall of 2006, they have each sold 193 millions units and 155 millions units worldwide (You can view Nintendo’s comprehensive sales here). Therefore, a good game can mean a difference between success and failure for the many players of the game console industry.
Talking about the players, they are also divided into several categories. There are the game developers, game publishers, and console manufacturers themselves. Game developers specialize on the software of video games, and can develop on one or multiple systems of the consoles. To be more specific, game developers can be further broken up into third-party developers, second-party developers and first-party developers. Game publishers, similar with book publishers, are responsible for their products’ marketing and manufacturing. They work extremely closely with game developers to ensure a smooth operation. Sometimes, they are even the same entity altogether (example: Nintendo). By the end of 2006, Electronic Arts become the top game publishers according to the Game Developer’s magazine.
Lastly, we have the console manufacturers themselves. These guys are more concerned with the hardware side of things. Currently, the main players are the big three of Nintendo, Sony, and Microsoft. Looking at the U.S. alone for console sales in the first quarter of 2007, we can infer who the major players in terms of console makers. Nintendo is doing extremely well with its Nintendo DS Lite and Wii consoles. If this keeps up, Sony’s stranglehold in the console market may just loosen up. Competition is certainly starting to heat up with the releases of the next-generation consoles as well as the game titles that come with them.
Introduction
The game console segment of the video game industry has evolved tremendously throughout its history. The first ever game console, the Magnavox Odyssey, was released in 1972. Later, the same developer created one of the most embraced and popular console games of all time, PONG. At that time, the console game came in various types of systems under different manufacturers and names. All of them played the same type of ping-pong game, although ATARI was the first ever developer. You could imagine the difference between that period and the current diversity of console games available. As such, console systems can presently be divided into two major categories. They are either classified as home systems or handheld systems. Unlike a personal computer (PC) which has various functions, game consoles are bought primarily and used solely for the purpose playing video games. This trend is definitely beginning to change as technology keeps on advancing (I will discuss this in the very last part in Future Trends).
Overall, the console segment accounts for $6 billion of the $30 billion global video game industry. In the United States, the console market is valued at $3.3 billion of the total $12.5 billion. The number of titles available for game consoles exceeds tens of thousands. Some of these titles are able to develop into franchises, and become crucial for game developers and console manufacturers alike as a selling point for their respective revenue streams. Some examples include Nintendo’s long-time running Mario and Pokemon series. As of the fall of 2006, they have each sold 193 millions units and 155 millions units worldwide (You can view Nintendo’s comprehensive sales here). Therefore, a good game can mean a difference between success and failure for the many players of the game console industry.
Talking about the players, they are also divided into several categories. There are the game developers, game publishers, and console manufacturers themselves. Game developers specialize on the software of video games, and can develop on one or multiple systems of the consoles. To be more specific, game developers can be further broken up into third-party developers, second-party developers and first-party developers. Game publishers, similar with book publishers, are responsible for their products’ marketing and manufacturing. They work extremely closely with game developers to ensure a smooth operation. Sometimes, they are even the same entity altogether (example: Nintendo). By the end of 2006, Electronic Arts become the top game publishers according to the Game Developer’s magazine.
Lastly, we have the console manufacturers themselves. These guys are more concerned with the hardware side of things. Currently, the main players are the big three of Nintendo, Sony, and Microsoft. Looking at the U.S. alone for console sales in the first quarter of 2007, we can infer who the major players in terms of console makers. Nintendo is doing extremely well with its Nintendo DS Lite and Wii consoles. If this keeps up, Sony’s stranglehold in the console market may just loosen up. Competition is certainly starting to heat up with the releases of the next-generation consoles as well as the game titles that come with them.
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