Video Game Industry History Some Numbers 65 of

Video Game Industry

History

Some Numbers. . . • 65% of US households play • 80 K employees directly, 250 K in US • 9 games per second • Average player age is 35, 40% female, 60% male • 778 titles released in 2009 • 2009=$19. 6 B in US ($10. 5 B H, $9. 1 B S) • $76 B by 2013

Compared to other Industries • Recorded music= $17 B global • Movie ticket sales= $29. 9 B global • Book sales= $35. 9 B in US • Newspapers ad revenues= $37. 85 B in US • Magazine ad revenues= $19. 45 B in US • Cable Revenue= $89. 9 B in US • Global video game market= $46. 5 B-$55 B

Digital Games • Console • Handheld • Computer • Arcade

Arcade?

The Big 3 • Xbox: – • Nintendo: – • 24. 3%, $58 B (17% of Microsoft) 1889, 47. 4%, $18. 9 B Playstation: – 28. 8%, $10. 7 B/$79 B

The Big Three Are? ? ? • Horizontally Integrated? ? ? • Vertically Integrated? ? ? • Diversified/Diagonally Integrated? ? ? • Synergism? ? ? • Market IS? ? ?

Hardware • Online Play • More than just a game player • Accessories/Peripheral market • “Loss Leaders”. . . not Nintendo! • Play exclusive/3 rd party games • Planned obselesence, 5 -10 yrs • New hardware sales=Software demands • Royalty Structure. .

Development • $10 M for one platform, $18 -28 for multiple • Get advance, 2 -3 years, 20% avg. of sales profits • First Party: internal teams • Second Party: publisher's concept/license/contract • Third Party: develop and sell. Hired by publishers on contract basis. Advance/Royalty system. • Publisher's and creative control/Franchising

Publishing • Marketing/Promotion/Sales • Main Investors in game/Retain IP • Franchising/Branding. . . “Hit Driven” • Product Placement or IGA. . . $1 B, Demo? ? ? • Licensing content • Publishing license to console manufacturer ($5 -8 per game manufactured) • Distro= store, ship, and sales

Publishing • Nintendo • Activision Blizzard/ Vivendi Games $5 B • EA $4. 2 B • Ubisoft $1. 4 B • Take-Two Interactive $968 M • Sony #6, Microsoft #10, MTV Games #14, WB #16, Disney #17, Lucas. Arts #20

Retail • “Real Estate” • Antagonism with Publishers/Distro • Gamestop 21% of market, Wal-Mart, Best Buy, EB Games, Game Crazy • $2. 5 B used market, most profit$ • Holiday season=50% of sales • MDF (Marketing Development Funds)

$60 Game Cost Breakdown • $15 to retail • $7 to returns, “price protection” and MDF • $4 to distro as shipping and COG • $7 to platform royalty fee • $27 to publisher, 10 -70% paid to 3 rd party developer against advance • Every game sold $12 is lost to piracy or used games (Pub/Devel hate used games!!!) • In-house/Vertical integration? ? ?

Intellectual Property • Piracy: $3. 5 B on hard goods – 2007, $945 M Nintendo • Royalty System • Open Source Games/ Self Publishing • Mergers and “Acquisitions” • Licensing • Essentially videogames are ALL IP!

• “The ESA offers a range of services to interactive entertainment software publishers including a global anti-piracy program, business and consumer research, government relations and intellectual property protection efforts. The ESA also owns and operates the E 3 Expo. ”

Market • -8% in 2009 in 3 largest markets • “Family Entertainment” genre #1 • Console= 60% • PC= 16% • Mobile= 4% • Portal= 11% • Online Subscription= 8%

Synergism • Cross-industry licensing • Super Mario • Tomb Raider • Harry Potter/LOR • Star Wars/Indiana Jones Legos • Reproduction? • DJ Hero