Direct Market environment:

Competitive Market Structure:

The Video Game Industry was born in 1972 when “Magnavox came out with the first
home game console, The Odyssey.” (PBS) They were the first company to come out with a
device convenient enough to be used with the home Television. The Odyssey was the brain child
of “Ralph Baer” (PBS) and included 12 games including Ping-Pong. From this year forward
“Baer was known as the father of video games” (PBS). In that same year Nolan Bushell founded
Atari, Bushell immediately hired “Al Alcon to help him create games” (PBS) for his new
console. The first game the Alcon developed was the extremely famous and popular Pong. Ten
years later in 1981 Nintendo came to the scene with the creation of Donkey Kong which was
developed by Shigeru Miyamoto. Miyamoto San eventually became the most beloved video
game designer in the world. What Donkey Kong did for the Industry was that it brought the first
game that “featured four different levels.” This revolutionary push made Donkey Kong and
Nintendo “Tremendously Successful.” During this introductory period the landscape of the
Industry was very different from today. In the early years the manufactures of the hardware also
developed the Video Games. This made it easy for the consumers because all they had to do was
purchase the console with the games that they enjoyed the most.
Flash forward to the current period and the Industry has divided into two very different
industries that are symbiotic of each of other. The hardware (Console) manufacturers’ portion of
the video game industry is made up a few large companies that already have a huge share of the
markets. Today they are Microsoft, Sony and Nintendo hold those top positions. The reason there
is currently little competition in the hardware space is because of a cost carrier, currently to
compete in the Console market you would need to run up huge research and development costs
to develop a new console and then you would need the means to mass produce those new
consoles. With so little competition in this space the companies usually compete for more market
share by developing new consoles with better technology.
The hardware manufacturing part of the video game industry has always been an
Oligopoly; a very small group of Companies driving the Industry. Currently the top Players are
Nintendo, Sony and Microsoft. Even though over the past 40 years you have seen a shift in the
Console leaders there have always been around three top manufactures of consoles. Sega fell off
the map when they introduce the Sega Dreamcast which was a very technologically advance
machine for when it was released but because of a high prices tag and a lack of support from
developers they couldn’t survive, after the failure of the Sega Dreamcast, Sega changed their
business model to just Develop video games. When Sega fell Microsoft jumped in with the Xbox
and filled the third position. Ever since the release of the very first consoles there has only been a
few large companies driving the industry and technology. In the early years it was Atari, Sega
and Nintendo and Today it is Nintendo, Microsoft and Sony. But as technology moves on so does
the consumers’ needs and the Oligopoly may change.

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 The lack of competition can change in future. There have already been talks of creating
an “on-demand video games via cloud computing technologies.” (USA Today) With this
technology console manufactures would only need to create a bridge from the cloud servers to
the consumer’s television. It was bring down the upfront costs of produce hardware immensely.
Having this cheap devise will no doubt be a winner with the low income market but the future
also holds many exciting things for the consumers that are willing to spend more. With 3D and
motion sensing already under development the future of the industry is bound to make some
technological strides.
Game developers are the other side of the Video game Industry coin and the
Manufactures of the consoles can be made or broken by the game developers. The game
developing industry started out small, with the “console manufactures developing their own
games” (PBS) but over time, computer programmers and entrepreneurs saw the potential and
started taking advantage. The first two software companies were founded in 1973 and they were
Midway and Namco. Namco started out developing games for “Atari’s coin-ops in Japan.
Midway was developing coin-ops independently and developed Gunfight for the United States.
Ever since then, more and more companies were being founded, some going under because they
could not develop memorable games and others making big. Today you have your big players
like Electronic Arts, Activision and Blizzard but you always have you smaller independent firms
like Rare and Travelers’ Tales. Smaller firms can be started in someone’s house creating games
for Consoles, Computer or phones. With this mix of competition it is safe to say that that the
game developer industry is a perfect competition. Even though you have you big budget
companies that produce blockbusters that people line up for, you also have your independent
firms that strive to create something innovating and out of the box. This mix creates a great
environment for a level playing field between the big budget developers and the independents.

Competitors:
The Video Game Industry has many Competitors and like the market structure there are
two different sets of competitors. As an Oligopoly the console competitors have a history of only
having three main companies within the market. The first three competitors were Magnavox,
Atari, and Nintendo. These three companies would compete over having the best library of video
games and the better and more fun technology. When Atari came out with Pong it was the first
multiplayer game for the home console. This created a huge demand for the product and lead to a
huge increase in Atari market share. A few years later Nintendo developed a coin-ops game
called Donkey Kong that had multiple levels. It was this game that put Nintendo and the master
mind Shigeru Miyamoto on the top of consumers’ minds.
Today the competitive leaders have changed; Sony, Nintendo and Microsoft are now the
industry leaders and are shaping the future. Nintendo, a company that started in 1889 with
Japanese playing cards, is currently one of the largest and most widely recognized companies in
the videogame industry. They released their first console the NES in 1977 in Japan. After that
they released the Super NES, Game Boy, Nintendo 64, GameCube, Wii and mostly recently the
Wii U. While also developing hardware, Nintendo has also a market share in actual games as
well. Games like Donkey Kong, Super Mario, Metroid, and Zelda have been around for years,

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yet new incarnations games of these are being created for new generation. Nintendo’s ability to
develop those beloved games exclusively for their consoles has been one of the factors
contributing to its long successful history.
Sony has also been in the video game industry for a very long time. Unlike Nintendo, the
Sony PlayStation is only a very small part of the Sony Corporation, which makes, Televisions,
Computers and other electronics. When Sony first entered the “video game industry in 1988”
(Golden Age) they were “designing and producing chips for the upcoming Nintendo Super
Famicom system.”(Golden Age) In 1994 Sony released the Playstation in Japan; Sony decided
to change the technology of how the games were delivered and made the console with a CD-
Drive. This technological advancement was welcome by developers because they could put more
data on a CD than the traditional Cartridge storage device. After Sony’s success of the CD-Drive,
Disc drives have become the norm in video games. Sony has always been the Console
manufacture to move technology forward. The PlayStation 3 is the third version of this system
developed by Sony Computer Entertainment and was released 2006. The Playstation 3 brought
all sorts of new tech from being Wifi enabled to having Blu-ray technology.
Microsoft is the new kid on the block when it comes to making consoles but they have
been developing games under Microsoft Studios since the 80’s. Microsoft took center stage when
they came out with Xbox in the 2001, “it was the first major console to us a hard disk and to
effectively popularize online gaming.” This was also the same year that Sega halted the
production of their console Dreamcast and shifted their business to game development. One year
later Microsoft pushed the industry forward with the launch of Xbox Live. The Xbox Live
service gave console consumers the ability to play games over an internet connection and in real
time. This is what made the Xbox what is today and it created a new product qualifier in the
console market. From that day forward an internet connection was a must for consumers. Today
Microsoft as the Xbox 360 and has the best online service available amongst the three leaders.
Sony, Microsoft and Nintendo will have many years of competition between each of in
the future but there have been the introduction of new and smaller internet connected devices
that may cause a threat to their market share. One of these new threats is the introduction of the
smart phone. The smart phone gives developers and consumers, games that can be played on
demand and anywhere. The smart phone gaming industry has also been a growing market with
games like Angry Birds, Words with Friends, and Draw Something. While these games emulate
older more familiar games Scrabble (Words with Friends) and Pictionary (Draw Something) they
utilized what seems to be an important factor in the entire industry, being able to compete with
friends. By using social networks as a form of link, phone games are allowing individuals
anywhere with service to play and compete with each other. These games are cheaper for
developers to make and let them reach a much broader market. Developers are now left with a
difficult decision; to make big budget games for consoles or jump into the smaller budget games.
Developers have a very different and more competitive environment than the console
industry. In the creation of video games you have two different companies. You have the
Publishers who sometimes provide the funding to the developers to create the games. Publishers
are all relatively large and usually have contracts with certain well known developers to develop

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exclusively for the publisher. Some well known publishers are 2K Games, Activision and EA
Games. Publishers are able to get funds together to finance certain projects but to the dismay of
the consumer, Publishers tend to attach strings to those Funds. The strings are usually ideas that
were created in a think tank room. Well known developers have offices full of employees
dedicated to one project but small developers can be working on one computer from their home.
This is what makes the game development industry so competitive because anyone with an idea
can find the means to get there game made.
Developers come in many shares and sizes; here are some of the top players in today’s
market. Capcom is an industry leader that has been around for over 25 years. Founded in 1979,
Capcom became a company with a reputation for “introducing cutting-edge technology and
software to the video game market.” Capcom is known for games such as Street Fighter,
Resident Evil and newer games like Lost Planet and Dead Rising. Some have criticized Capcom
for not creating its own platform and relying on consoles that are currently on the market,
however Capcom has been able to create games that are well received and perfected over time.
Capcom is a company that does development, production and sales of its own games.
In 1994 Marvel started working with Capcom to create a game for their X-Men series and
the concept of Street Fighter Characters vs. X-me the Game was created. This incarnation of the
game is currently called Marvel vs. Capcom and is one of the hottest games in the market by this
company.
Electronic Arts (EA) is one of the largest videogame companies but differs from
companies like Nintendo and Capcom in the sense that it is an independent developer that uses
outside video game publishers to complete their games. This allows for the company to promote
the designer/publisher as much a game developer. EA, as it is known, focuses on repackaging the
same game year after year. “Repackage essentially the same game year after year, adjusting its
roster and adding a few mechanics to stay current, and sell it for full price over and over – it was
a whole new model for game publishing.” Games like FIFA (soccer), Madden NFL and NHL are
a few of the games that are an example of repackaging, year after year these games are released
with accommodation for player trades, plays and even allow for more recent trades to be
accounted for due to internet updates. Repackaging is a large market share of these companies’
earnings. However, EA does also work on new concepts and new games that have brought it
great acclaim like The Sims, Rockband, and Dead Space. EA isn’t met with hard criticism due to
its declining quality and poor reviews.
Electronic Arts and Activision will probably fall to the fourth and fifth spot and still
remain in the top five. The main reason Activision will remain in the top five is because of their
game Call of Duty, “ For the past several years, Activision's Call of Duty franchise has been the
videogame industry powerhouse — dominating the sales charts not only during the critical
holiday sales period, but also carrying that momentum well into the following year” (cnbc.com).
Also the last two Call of Duties to come out ““Modern Warfare 2" and "Black Ops" — the
previous two installments in this blockbuster series — set sales records.”(cnbc.com). Electronic
Arts, Madden and Battlefield are always at the top of the charts with Call of Duty every year
keeping Electronic Arts in the top five in the future.

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 Even though big developers have a larger share of the market, independent developers
do not mind. Independent developers are able to develop games for less than half the cost that the
large developers spend, so the independent developers don’t need to sell has much to see equal
profit. Some well known independent developers are; Eurocon, Firefly Studios, Insomniac
Games, and Playdead. These developers have in house funding and have full creative control
over their games. They have all created very successful and well liked games.

Competitive Analysis (Strategies and Barriers):

Two forms of strategy are used while trying to market to average game consumer. A
direct form which is a straight line to the gamer, which could be in a form of a commercial,
walkthrough (recorded actual play) or other forms of advertisement. Another form is an indirect
method, this could be in the form of product placement during a TV show or movie that portrays
said game/console as fun and interactive to create a want for a need they can supply.
Barriers for hardware or console manufactures are currently pretty constricting. These
consoles take a lot of research and development to create a sharp looking and well-constructed
device. The research and developments costs reach hundreds of millions of dollars. This is the
reason most companies don’t venture into that industry. The future may hold a different of
environment. With the inception of cloud computing and other advance technologies, games will
soon be accessed by smaller low cost devises or directly through you television.
Barriers for software manufactures are a lot less restricting because there are so many
mediums to produce games for. One possible way is to follow in the steps of companies like
Electronic Arts and Activision who started as third-party developers because all they would do is
start the project with an existing video game producing and developing firm and slowly start
adding developing studios or go head to head with existing firms and with games costing 40 to
100 million on the developing and producing, entry into this industry would prove challenging.
On the other side independent developers are able to produce money making games with less
resource than there bigger counter parts.

External Market Environment:

Economic Environment:

Nobody new in the 1970’s that Atari and Magnavox had given rise to a billion dollar
industry but that is exactly what they did. Video games have taken center stage within the entire
entertainment industry. On November 12th 2012, Halo 4 broke all Movie records by “bringing in
$220 million in global sales on its launch day.” Movie releases and Concerts tickets used to be
the only time you would see masses of people lining up to see the latest spectacles. Now video
game developers have started to gain rock star status; With the launch of Warcraft: Mists of
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Pandaria on September 25th of this year, more than a thousand people lined up at the Irvine
Spectrum, all hoping to meet the designers to get autographed copies of the game. It was the first
time in years that people had such disposable income and had time to wait for the rock stars of
the video game industry. The local, Irvine-based company, Blizzard, which launched the game,
has been at the center of innovation and creativity in the video business since 1991 and with a
fan base willing to stand in line for hours, this year the game sales reflected their spending
patterns. “Within the first week of release, prior to the launch in China [on October 2nd] Mists of
Pandaria already sold approximately 2.7 million copies, with over 10 million players subscribed
around the world” (Blizzard Entertainment), and as of July of the year, the total of revenue for
Blizzard Games reached $3.8 billion dollars worldwide (Statistic Brain). 

Of course, serious videos games have not ever been considered the norm in the industry,
and although they have contained rich content and most certainly raise the bar for designers,
gaming for fun is what has traditionally had gamers gravitating to gaming in the first place. In
2002, the forecast for video games was big. Each year prior, games and consoles were surpassing
that of the years before, as the big video game companies responded to consumer complaints in
all regards. Although prices were consistently getting lower with every generation of gamers, in
2002 a demographic change took hold and across generations the prices remained rather even.

The illustrious history of the video game business has not always been as glorious as to warrant
faithful followers of a video game, nor have autographs been as feverishly sought out and
coveted by gaming fans. 

Far from the days of Donkey and Pac Man are how the video game industry has survived and
flourished, and how it has been a marker of the economy and how well it has done. If we look at
the Warcraft fan lines of this year 2012, but consider how the video games took a blow at the
beginning of the year 2000, we see how gamers had to again prove themselves and wade through
rough and murky waters of the video industry. Since their inception, video games have had both
an impact on the economy than we might first believe. Not surprisingly, “real annual growth
among game makers [themselves] topped 10 percent between 2005 and 2009” which is more
than seven times the growth the entire United States economy saw in those years (Morris, 1).
Much of the boom had to do with offering incentives to prospective employees, and luring them
to various states than otherwise might not have appeal. On a global level the video game market
has been historically strong as well, and more than the United States, Asia Pacific has trended the
biggest market for video games, “with the three of the top four countries being Japan, China and
South Korea, respectively. To that end, the “online game segment is growing very fast in China,
overtaking Japan…” (Simon, 3).

Within the console industry, right now Nintendo is at the top of the video game industry
having 59.2% of the gaming console market (sites.duke.edu); Nintendo got to the top after the
release of their game console the Wii (softwaretop100.org). The Wii changed the way gamers
played video games by not using the standard controller and pressing buttons, but by using the
motions of your body. This new technology appealed to a much great audience which propelled
Nintendo right to the top. After the release of the Nintendo Wii, Microsoft and Sony incorporated
that new technology into their gaming consoles making it so that you could play either with a

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standard controller or by your body’s motion. Nintendo is also the only company that makes
video games and a gaming console.

Over the last few years the United States has been in a recession, with high
unemployment rates and low disposable income. Like every industry the video game industry
was affected by it, having sales not as high as expected. All the major companies within the
industry such as Sony, Nintendo, Microsoft, Electronic Art, etc. are still seeing an increase in
sales over the years even during the rescission, just not a rate they had hoped. The United States
is slowly working its way out of the recession which will help boost the video game industries
future sales.

Video games every year are becoming more and more popular and in the future the video
game industry will have great success. In August of 2012 the United States average disposable
income increased by .1% or $12.5 billion and average personal consumption expenditures
increased by .5% or $57.2 billion (bea.gov). This is great news for the industry because if these
trends continue into the future, people will have more money to spend within the video game
industry. Those factors will help the industry continue to grow and by year 2013 the industry is
expected to have a market size of $76.1 billion (sites.duke.edu). In the future this industry will
have to expand to keep up with the demand of its consumers, meaning there would be a great
increase in the number of job that this industry will provide. The video game industry is
relatively new being about 35 years old and with all this new technology continuing to be
released this industry in the future is going to see great success. The video game industry has
become a global phenomenon and can be found in any corner of the earth, accounting for $67
billion and is expected to grow to $82 billion by 2017. While there has been a slight drop in
video game industry due to lack in sales of consoles, new releases from 2014 to 2015 will
reintroduce a solution to a depleting revenue stream. “However, the steadiest area of growth is on
the PC and mobile side” PC games are to reach a forecasted $20 billion this year and reach $25
billion in 2017. PC and mobile are the most common platforms globally for video games, despite
being a “relatively weak” in the US.

In the future Nintendo, Sony, and Microsoft will most likely be on top of the video game
market because all three of these companies have a new gaming console scheduled to be release
within the next year, which will greatly boost revenues. It might be hard for Nintendo to stay at
the top now that Sony and Microsoft have the motion technology in their gaming consoles that at
one point only the Nintendo Wii had. The Nintendo console is the only one that comes standard
with the motion technology and for the Sony and Microsoft consoles you would have to buy an
additional accessory to use the motion technology. The motion technology is just one of the
features that all three of these new gaming consoles will have. All three of these companies will
be fighting for the top spot in the future and its all depends on which company comes out with
the best console.

Technological Environment:
Technology is at the heart of the video game industry. The technology in the hardware
drives what the capability of what the developers can produce. On average the Video Game
Industry has had a 5 years console development cycle. Each new generation brings; Better

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Graphics capabilities, faster processors and connectivity. The 5 year development cycle is just
long enough to keep the markets interest from fading and becoming board with the current
generation. Only 10 years ago consoles had about 64 bits of RAM now consoles are able to have
more 1000 Megabytes. The current generation consoles were the first to produced high definition
picture, surround sound, and internet connectivity. It is these features that differentiate the
different hardware manufactures and make them more appealing to consumers.
When the current generation of consoles were released; Microsoft brought a very key
social environment called Xbox Live, Nintendo developed a new way to interact with games thru
motion sensing technology and Sony was the first to put a Blu-Ray. All these technologies
benefits the Industry as a whole but the markets saw them in a different light. Current Market
gamers really took to Microsoft’s Xbox live because it let people play multiplayer over an
internet connection which had only been done on the PC. It also allowed you to make
friends/rivals that you could speak to in really time while playing a game. It really changed the
game development process. Before they would really focus on the story and multiplayer was a
mere afterthought. But now it a lot of cases multiplayer has become the selling point of a new
game.
Microsoft’s current system is The Xbox 360 and is the second incarnation of the Xbox
(first generation name). Developed by Microsoft the 360 originally released in 2005 also released
a slim version in 2010. The Xbox 360 has sold over 70 Million units since September 30 2012
and ranges from $199.99 to $399.99. An Xbox 360 basic package comes with a console, a
controller, Audio-Video cables and a game. When looking at technical specifications the Xbox
360 and Playstation 3 are about tied. There are some differences between the Graphic Processing
Units and the Central Processing unit but when games are compared side by side the eye cannot
see the difference.
A year ago Microsoft released another technology called Kinect. The Kinect technology
was in response the Nintendo Wii’s huge success and there innovating motion controls. The
Kinect system is a motion-sensing device that is placed on a flat surface by a television and
allows a player to actively move and interact, without the use of a controller, with specialized
games developed for this system.
The Nintendo Wii opened a whole new market for the gaming industry. Dubbed the
original motion based console that was globally marketed, the Nintendo Wii was released in
2007. "Wii reached 5 million sold in the United States faster than any video game system in
history," the company said, "after only 12 months of availability." There Motion sensor controller
allowed people who were not any good at memorizing combos or button mashing to be able to
enjoy a video game. One demographic that never took to games before but loved the Wii is the
Baby Boomers. The reason for its success in this demographic is because of the interactive and
fun multiplayer elements that can entertain the whole family.
Now Nintendo just released a new addition to the Wii Family, the Wii U launched on
November 18 2012. The WII U uses a separate touch screen handheld game unit that is used as a

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controller concurrently with the WII U’s new wireless controllers. Though sales numbers have
not been release the latest console from Nintendo has been met with praise from industry gurus.
Sony’s Playstation 3 took a different approach to differentiate them from the competition.
They wanted to develop a powerhouse. The PlayStation 3 is the third version of this system
developed by Sony Computer Entertainment and was released 2006, with a slim version released
in 2009 and a Super Slim version in 2012. With built in WIFI and a graphic user interface the
PlayStation became a contender as one of the best consoles on the market. Sony has sold over
63.9 million units as of March 31 2012. They took all the latest technology of the time and put
into one decent sized package. Sony was able to put a Blu-ray player, 1024 MB of RAM,
dedicated graphics card, and all the latest wireless technology. There only problem with their
approach was that it came at a cost to them and the consumer. When it was release it was the
most expensive console on the market and Sony was still making a loss on it. The video games
industry thrives on introduction of new technology; it keeps things fresh and keeps the market
looking to the future.

Future innovations are a major part to every industry. Companies are always looking into
the future to try and meet the demands of its consumer. With technology advancing at such a
rapid pace it allows industries to continue to change and upgrade their products. This especially
applies to the Video Game industry, where they constantly are working on future innovations to
help greater the overall gaming experience. The video game market is huge and with video
games becoming more popular each year, companies within this industry must continue to
innovate to keep up with it consumers wants and needs. Some of the most anticipated new
innovations are the Playstation 4, XBOX 720, and the improvements of the games played on
these consoles such as games being 3D.

Sony’s rumored Playstation 4 is a gaming console that is scheduled to come out within
the next year and is going to change the future of video gaming. Playstation 4 is going to have a
minimum cost anywhere from $500-$1000 (sonyPS4.com) and will one if not the top gaming
consoles on the market. Playstation 4 is going to have a lot of new features that the current
Playstation 3 does not, some of those features are: Fully 3D capable, 1.5 TB hard disk drive, The
newest graphic technology, Improved RAM, Automatic shut off and sleep mode, Much more
Eco-Friendly.
Sony has worked a lot on the Playstation 4 to make it very eco friendly, having 60% of
the gaming console made up of recycled plastic (sonyPS4.com). Sony has also added features to
make the Playstation 4 be much more energy efficient. Sony is hoping that by making the
Playstation more eco friendly it will give it that extra edge over it main competitor Microsoft,
who is scheduled to release its new gaming console the XBOX 720 around the same time.
Another added feature is that Playstation 4 games will be available in the Playstation store,
which can be accessed from the gaming console. This allows you to download the game straight
to you console without having to go buy the actual game disk from a store.
Sony’s Playstation 4 is going to be far more advanced than its current Playstation 3
gaming console on the market. It is going to change the way people play video games and greatly
enhance the gaming experience. It is going to be a must have for people who love to play video
games.

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 The Xbox 720 is the game console that Microsoft plans to release sometime next year
that will impact the video game industry in a big way. In the making of the new generation of
the Xbox, Microsoft target is to make the Xbox the Only box you need for premium living room
entertainment. Its potential price is said to be $299, which is substantially cheap compared to
other game consoles. The Xbox 720 will have new and improved features that could potentially
over take Microsoft’s current competitor Sony. Some of the features include: Smart Glass, Cloud
Gaming, Improved graphic technology, 3D gaming, and Multi task console.
A new feature that Microsoft plans to release is called Smart Glass. This new technology
will let you share a variety of media from your tablets and mobile devices to your TV. It will
also work as “companion content” for example with the video game NFL Madden, the entire
playbook of a team would be located on the tablet or mobile device and you will be able to draw
the play from it and make it happen in the game (nbcnew.com). Microsoft is adding features to
the console that will enrich the gamers experience during game play.

Besides the new consoles there are some major technological advances that may help out the
industry as a whole. Cloud Gaming is one feature that is changing the video game industry.
Cloud Gaming allows you to download games online and then are stored on the hard drive rather
than on discs. This makes the life of a gamer much easier by making shopping for video games a
click away. It stores the games in alphabetical order in the hard drive, which avoids games being
lost or damaged. Cloud Gaming is going to change the way gamers purchase video games which
can potentially shut down stores like GameStop.
3D games are another feature that has made a slight appearance in the video gaming
industry. 3D games are still a work in progress but in the future might start to make a much
bigger appearance in the industry. Sony is one of the main companies working with 3D
technology and in the last year released their first 3D games for the Playstation 3. Nintendo also
is a company that is working in the 3D gaming industry. In March they released their first 3D
compatible console, the 3DS a hand held device, which does not require the use of 3D glasses
(gamespot.com). 3D games in the future will most likely have a much bigger impact on the video
game industry with the upcoming releases of Sony’s Playstation 4 and Microsoft’s XBOX 720,
which are both 3D capable.
The 3D video game industry does show some risk to companies such as Sony because it
depends on how popular 3D televisions become, because a 3D T.V. would be required to play the
3D game. Also the 3D glasses that would be required to play these games might be annoying and
uncomfortable for certain people. The benefit of 3D games is that it enhances the graphics and
gives the player a much more realistic feel for the game. Making the player feel like he or she is
a part of the game and tremendously enhancing the gamers’ overall experience.
3D games have only scratched the surface of the gaming industry but should become
much more present in the near future. It is a technology that is still a work and progress that
major companies such as Sony believe in and are going to continue to try and progress it. Sony
believes 3D games present great potential, as stated by Mick Hocking, Sony’s London studio
manager, “Looking at the future of 3D, I think we’ve only just begun to realize its potential as a
creative medium”.

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Political Environment:

Video games have not just been developed for pure entertainment and in viewing a cross sample
across ages and over two decades, video games often simulate the real world. Although not in all
cases, at times video games have addressed contemporary politics over time, and have long
“included the development of computer games for industries like health care, city planning, the
real world, motivate and educate players, and require them to make reasoned decisions” (Joseph
1). In fact, the inception for the company Games for Change (G4C) which was founded in 2004,
had its goal “to harness the power of video” and to consider what might be the most pressing
issues at any given time, such as the politics behind human rights, global conflict or climate
change (Joseph 1). Games from this company are targeted to children of all ages, many of which
ask the player to consider serious issues of the day. Take for example, PosOrNot.com, a video
game launched in May of 2008. It was touted as the “most depressing use of Internet meme ever”
by gamers and critics alike (Pastorek 1). It was a game in which visitors were asked to decide
whether the people, attractive and young, were HIV positive or negative. Hardly a game as most
would see it, but certainly a sign of the times. The aim was to ensure that the shocking truth
about

HIV/AIDS was not swept under the rug. This game was not the reflection necessarily of a
disposable income, but more of a reflection of social and political concerns. 

Some of the serious video games have given pause to larger issues and are now speaking to
larger audiences than just serious gamers bent on fun.  TechGroups such as libraries and schools
have been taking note of the video game industry, with hopes of enlightening a younger
population as to the political issues that continue to affect us on an individual and group basis. In
fact, with the support of Microsoft, the group Global Kids, a New York City-based educational
organization, is committed “to supporting urban youth to become global citizens” whereby
introducing librarians to the concepts of gaming. They can be educated about the widespread
uses of video games them by reading such texts such as “The Librarian’s Guide to Gaming” and
deferring to websites which was developed by the American Library Association with support
from Verizon (Joseph, 2).

Gaming has addressed political issues over the years, which in some cases might be something
that the youth finds banal. For example, issues which challenge the youth to test their distraction
factor while driving, hence strengthening the case for outlawing texting and driving, have been
developed into video games so as to have appeal. There are also games that measure the ability
of a family of five, over the course of four years to feasibly live in a rural community. Other
politics that are addressed in video games are the attention to the heroes in their own cities who
responded to Hurricane Katrina when our own federal government did not so quickly respond.
More than just the games, if you are already aware of youth who are intent on the video game
genre, you know that there have never been websites dedicated to these innovators where they
can design their own serious games for free, but have begun to take hold with the help of
companies like Scholastic (Joseph, 3).

It is not surprising that over time politics became connected with the video game industry.
“Islamic extremists are using realistic war-based action games such as Call of Duty to plot

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terrorist attacks in secret” (Damien). The cumulative sales for Call of Duty have reached 14.67
million as of the 10th of November (VGChartz, Ltd). Warfare and combat are not new concepts
to video development or to real life, especially when looked at in historical context. Games like
the board game War on Terror are similar to war games that were played with precision 2000
years ago in ancient civilizations. If you have watched YouTube at all in the past decade, you
might have even seen in Monopolies and Mergers the British government confiscating the board
game, finding it lethal in its own right. Video games have become the sole culprit, the deadly
connection from the video game to terrorism and violence, but the connection is not only of this
decade or of this particular mind-set that we seem to think is so new. When Terrorist was
developed and released for Apple in 1980, it was not blamed for terrorist activity, but rather it
was touted as an educational tool and that it might be consider for use in a college history or
political science class. John Martellaro, a former U.S. Air Force officer and employee of NASA,
wrote for Peelings II that he felt as if the video would help students understand the complexities
of terrorism. But a controversial video released in 2009 began to call this kind of gaming into
question. There was much graphic violence in one particular scene and players were part of a
bloody attack on civilians “where the player walks with four other terrorists and opens fire on
innocent people” (NBC4 Staff, 1). Graphics have certainly become more realistic over the years,
but violence has occurred for as long as man has been on the planet. With the graphic leap in
video games the violence portrayed is more and gives more reason for people to link violence
and desensitization to video game usage.

In the video game world there have been many conflicts between the government and the
video game industry. They have been fighting on who should purchase certain games and who
should play certain games. “The Entertainment Software Rating Board (ESRB) rating provides
guidance about video games and apps so that consumers, especially parents, can make informed
choices about the ones they deem suitable for their family” (esrb.org). The ratings system is
categorized by the age appropriateness of the game. The ratings are as follows; Everyone,
Everyone 10+, Teen 13+, Mature 17+, Adults only 18+, Rating Pending. The Rating system
gives the industry a set of standard and deems what is appropriate for certain age groups. Rating
systems have been in movies and music for ages, so it is a clear set for the Video Game Industry.
It also provides a legal safety net, in the occurrence of a legal battle regarding under aged
purchase of a mature rated video game. The Burden is now placed onto the retailer that sold the
game and not the developing company.

Legal Environment:
Like most industries, legal battles are common nature and the Video Game Industry is no
different. Ever since the 80’s when Atari released its first console, the patent wars began. Today
is no different, with developers and hardware manufacturers trying to stay relevant they are
always borrowing ideas from the current leaders, to try and take some of their market share.
When Nintendo released the DS which has “sold over 47 million worldwide” (1up, 2010), Sony
tried to capture some of that success by creating the PSP which was met with mediocre sales.
More recently when Nintendo release the extremely successful Nintendo Wii, Sony and
Microsoft both created their own motion sensing technology. Borrowing and adding to a

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competitors design is not all bad, it helps the industry move more quickly with each company
trying to stay in front of the other in terms of staying fresh and relevant. But what happens more
often than not is when a competitors design or technology infringes on a certain patent, the
battles begin.
(Geek) Recently Motorola brought a suit against Microsoft saying that there Xbox 360
infringed on 5 of their patents. Patents’ ranging from the way the Xbox Decodes video to the way
the Xbox wirelessly interacts with its peripherals. After a long legal battle the U.S. International
Trade commission found that the Xbox does infringe on 4 of 5 of the patents. With this outcome
Motorola is trying to conjure a sales ban of the Xbox 360. You can bet that Microsoft is going to
try and stop this from happening even if it means paying Motorola royalties for every Xbox 360
sold. If they win the banning case, Microsoft could have to pay around $5.00 per Xbox, last
month “Microsoft just announced that it has sold over 70 million consoles worldwide.” If
Microsoft were to have to pay that amount it would be devastating to their Xbox Division and
probably set back the release of their newest Console.
Many companies including Google have petitioned the patent systems and whether it
gives an “incent for innovation and really promotes consumer friendly policies.” They believe
that in its current state it is too easy to bring about a patent suit which’s leads to a decline in
technological advances. This make since because a company could be spending more money on
legal battles than on research or the company could be too afraid to proceed in a certain direction
because they fear patents suits. On the other side of the argument it is crucial to respect the work
that other companies have spent time and resources to develop and to blatantly copy a company’s
technology should be punished and frowned upon.

Culturally Social:
Today’s Video game culture is very different from when Atari first released their system.
No longer are gamers imagined as Geeks or 30 year olds living in moms’ basement. People and
Families from all Social and Cultural backgrounds can and do enjoy video games from time to
time. But it is the level of interest that divides the market into categories.
First people who have grown up playing video games and have always waited in line at
midnight releases to get the latest games, this group of people is referred to as “Hardcore”
gamers, they range from Teens to Generation X’s. This market like the big blockbuster games
with incredible graphic and high replay values.
Second, you have the “Casual” gamer; they are growing in numbers and in interest to
developers. The reason for their rapid growth was the introduction of the I Phone and Facebook.
With just those two new platforms a whole new market for developers opened up. Developers
can now focus on making short, low cost games for people who don’t want to shell out money
for a machine that only plays video games. With this new market opening up we have started
seeing new startup companies like Zynga develop only low cost games for Facebook. .

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 Lastly, since the release of the Kinect for the Xbox 360 in 2010 and the Nintendo Wii,
families have changed the way they play video games and how they spend quality time with one
another. They have family game nights, where many of them play or do fitness together. The
video game industry currently targets the tweens, teens, generation X and baby boomers and will
continue to in the future. These new devices have been doing well in the market, due to the fact
that many parents like the idea that they can spend time with their children in what they think is
fun. Video games are not just for children. They are for parents too. Parents like that they can
play with their children and know that their children are playing positive and educational games.
In games and family life the author’ state, when asked why they play video games with their
children, parent response were: 90 percent said because it’s fun for their entire family, About 80
percent said because their asked to, 75 percent said because it’s a good opportunity to socialize
with their children or to monitor game content and 48 percent said because they enjoy playing
video games as much as their children.

Conclusion:
The video game industry is young, vibrant and strives for innovation at every turn. In just
35 years a multi-billion dollar industry has secured it spot as an entertainment industry heavy
weight where movies and music once held torch. The current industry competitors are willing to
spend huge sums of money to make sure their devices or games are the most wanted items.
Whether it is a better online social service, implementation of cloud gaming or just the latest
graphics technology. The Video game industry is going to have a long a prosperous history. The
way the consumer’s play games will change overtime which may remove the need for console
manufactures altogether but with the increase in the industries demographics and mediums
available to create games for, new developers will have no problem getting into the video game
industry.

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