Video game industry

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The video game industry (sometimes referred to as the interactive entertainment industry)[1] is the economic sector involved with the development, marketing and sales of video games. It encompasses dozens of job disciplines and employs thousands of people worldwide.[2]




Sound cards were developed for addition of digital-quality sound to games and only later improved for music and audiophiles.[3] Early on, graphics cards were developed for more colors.[3] Later, graphics cards were developed for graphical user interfaces (GUIs) and games; GUIs drove the need for high resolution, and games began using 3D acceleration.[3] They also are one of the only pieces of hardware to allow multiple hookups (such as with SLI or CrossFire graphics cards).[3] CD- and DVD-ROMs were developed for mass distribution of media in general; however the ability to store more information on cheap easily distributable media was instrumental in driving their ever higher speeds.[3]


Game industry value chain[edit]


  6. End-users layer: or the users/players of the games.[4]






The video game industry began in 1971 with the release of the arcade game, Computer Space[citation needed]. The following year, Atari, Inc. released the first commercially successful video game, Pong, the original arcade version of which sold over 19,000 arcade cabinets.[5] That same year saw the introduction of video games 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, sparking a renaissance for the video game industry and paving the way for the golden age of video arcade games.[6] The game's success inspired arcade machines to become prevalent in mainstream locations such as shopping malls, traditional storefronts, restaurants and convenience stores during the golden age.[7] Space Invaders would go on to sell over 360,000 arcade cabinets worldwide,[8] and by 1982, generate a revenue of $2 billion in quarters,[9][10] equivalent to $4.6 billion in 2011.[11]

Soon after, Space Invaders was licensed for the Atari VCS (later known as Atari 2600), becoming the first "killer app" and quadrupling the console's sales.[12] The success of the Atari 2600 in turn revived the home video game market during the second generation of consoles, up until the North American video game crash of 1983.[13] By the end of the 1970s, the personal computer game industry began forming from a hobby culture, when personal computers just began to become widely available. The industry grew along with the advancement of computing technology, and often drove that advancement.[citation needed]



The early 1980s saw the golden age of video arcade games reach 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,[14] with the arcade video game industry's revenue in North America tripling to $2.8 billion in 1980.[15] By 1981, the arcade video game industry was generating an annual revenue of $5 billion in North America,[6][16] equivalent to $12.3 billion in 2011.[11] In 1982, the arcade video game industry reached its peak, generating $8 billion in quarters,[17] equivalent to over $18.5 billion in 2011,[11] surpassing the annual gross revenue of both pop music ($4 billion) and Hollywood films ($3 billion) combined at that time.[17] This was also nearly twice as much revenue as the $3.8 billion generated by the home video game industry that same year; both the arcade and home markets combined add up to a total revenue of $11.8 billion for the video game industry in 1982,[17] equivalent to over $27.3 billion in 2011.[11] The arcade video game industry would continue to generate an annual revenue of $5 billion in quarters through to 1985.[18] The most successful game of this era was Namco's Pac-Man, released in 1980, which would go on to sell over 350,000 cabinets,[19] and within a year, generate a revenue of more than $1 billion in quarters;[20] in total, Pac-Man is estimated to have grossed over 10 billion quarters ($2.5 billion) during the 20th century,[20][21] equivalent to over $3.4 billion in 2011.[11] Video games were first created to make magic. Fun. Love.





Aside from technology, in the early part of the decade, licenced games became more popular,[23][24] as did video game sequels.[25]

The video game industry generated worldwide sales of $19.8 billion in 1993[26] (equivalent to $31 billion in 2011),[11] $20.8 billion in 1994[26] (equivalent to $32 billion in 2011),[11] and an estimated $30 billion in 1998[27] (equivalent to $41.5 billion in 2011).[11] In the United States alone, in 1994, arcades were generating $7 billion[28] in quarters (equivalent to $11 billion in 2011)[11] while home console game sales were generating revenues of $6 billion[28] (equivalent to $9 billion in 2011).[11] Combined, this was nearly two and a half times the $5 billion revenue generated by movies in the United States at the time.[28]







As computing and graphics power increased, so too did the size of development teams, as larger staffs were needed to address the ever increasing technical and design complexities. The larger teams consist of programmers, artists, game designers, and producers. Their salaries can range anywhere from $50,000 to $120,000 generating large labor costs for firms producing videogames[31] which can often take between one to three years to develop. Now budgets typically reach millions of dollars despite the growing popularity of middleware and pre-built game engines. In addition to growing development costs, marketing budgets have grown dramatically, sometimes consisting of two to three times of the cost of development.[32]

Some developers are turning to alternative production and distribution methods, such as online distribution, to reduce costs and increase revenue.[33]

Today, the video game industry has a major impact on the economy through the sales of major systems and games such as Call of Duty: Black Ops, which took in over $650 USD million of sales in the game's first five days and which set a five-day global record for a movie, book or videogame.[34] The game's income was more than the opening weekend of Spider-Man 3 and the previous title holder for a video game Halo 3.[35] Many individuals have also benefited from the economic success of video games including the former chairman of Nintendo and Japan's third richest man: Hiroshi Yamauchi.[36] Today the global video game market is valued at over $93 billion.[37]









The industry claims software piracy to be a big problem, and take measures to counter this.[40] However, digital rights management and other measures have proved noticeably unpopular with gamers.[41]

Creative control[edit]

On various Internet forums, some gamers have expressed disapproval of publishers having creative control since publishers are more apt to follow short-term market trends rather than invest in risky but potentially lucrative ideas.[citation needed] On the other hand, publishers may know better than developers what consumers want. The relationship between video game developers and publishers parallels the relationship between recording artists and record labels in many ways. But unlike the music industry, which has seen flat or declining sales in the early 2000s,[42][43][44] the video game industry continues to grow.[45] Also, personal computers have made the independent development of music almost effortless, while the gap between an independent game developer and the product of a fully financed one grows larger.


  1. A license to develop games for the console
  3. A separate license for each game




Gaming Conventions[edit]

Gaming conventions are an important showcase of the industry. The major annual gaming conventions include gamescom in Cologne (Germany), the E3 in Los Angeles, (USA)[46] the Penny Arcade Expo, and others.

International practices[edit]

World trends[edit]

International video game revenue is estimated to be $81.5B in 2014.[47] This is more than double the revenue of the international film industry in 2013.[48]

The largest nations by video game revenues are the United States ($20.5B), China ($17.9B), and Japan ($12.2B).[47] The largest regions are Asia ($36.8B), North America ($22.2B), and Western Europe ($15.4B).[47]


Gaming conventions are an important showcase of the industry. The annual gamescom in Cologne (Germany) is a major expo for video games. The E3 in Los Angeles (USA) is also of global importance, but is an event for industry insiders only.[46]

Other notable conventions and trade fairs include Tokyo Game Show (Japan), Brasil Game Show, EB Games Expo (Australia), KRI (Russia), ChinaJoy and the annual Game Developers Conference. Some publishers, developers and technology producers also have their own regular conventions, with BlizzCon, QuakeCon, Nvision and the X shows being prominent examples.




Main article: Video gaming in China
Tencent is the largest company in the world by video game revenue.[50]

China is the second-largest country by game revenue,[47] and has a gaming public that exceeds the population of the entire United States.[51] It is home to Asia Game Show, the largest game convention in the world by attendance.[52] In 2014, the Xbox One became the first new game console sold since China's ban on consoles in 2000.[51]


The gamescom in Cologne is the world's leading game trade fair.

Germany has the largest video games market in Europe, with revenues of 2.66 billion Euro generated.[53] The annual gamescom in Cologne is the Europe's largest gaming expo.

One of the earliest internationally successful video game companies was Gütersloh-based Rainbow Arts (founded in 1984) who were responsible for publishing the popular Turrican series of games. The Anno series and The Settlers series are globally popular strategy game franchises since the 1990s. The Gothic series, SpellForce and Risen are established RPG franchises. The X series by Egosoft is the best-selling space simulation. The FIFA Manager series was also developed in Germany. The German action game Spec Ops: The Line (2012) was successful in the markets and received largely positive reviews. One of the most famed titles to come out of Germany is Far Cry (2004) by Frankfurt-based Crytek, who also produced the topseller Crysis and its sequels later.

Other well-known current and former developers from Germany include Ascaron, Blue Byte, Deck13, Phenomic, Piranha Bytes, Radon, Related, Spellbound and Yager Development. Publishers include Deep Silver (Koch Media), dtp entertainment, Kalypso and Nintendo Europe. Bigpoint Games, Gameforge, Goodgame Studios and Wooga are among the world's leading browser game and social network game developers/distributors.




In recent years consoles and arcade games have both been overtaken by downloadable free-to-play games on the PC and mobile platforms.[54][55]

United Kingdom[edit]

The UK industry is the third largest in the World in terms of developer success and sales of hardware and software by country alone but fourth behind Canada in terms of people employed.[49] In recent years some of the studios have become defunct or been purchased by larger companies such as LittleBigPlanet developer, Media Molecule[56] and Codemasters.[57] The country is home to some of the world's most successful video game franchises, such as Tomb Raider, Grand Theft Auto, Fable, Colin McRae Dirt and Total War.


United States[edit]

Activision Blizzard is the world's largest video game company by market value.

The United States has the largest video games market in the world in terms of revenue and total industry employees.[49][61] In 2004, the U.S. game industry as a whole was worth USD$10.3 billion.[62] U.S. gaming revenue was estimated to be $20.5B in 2014.[47]


Magnavox is credited for releasing the first video game console, the Odyssey. Activision was the first developer to create independent/third-party video games. Once the fastest-growing American company, Atari crashed in spectacular fashion, resulting in the North American video game crash of 1983. This resulted in the domination of the Japanese video game industry worldwide throughout the 1980s and 1990s.


Today the U.S. is home to major game development companies such as Activision Blizzard (Call of Duty, World of Warcraft), Electronic Arts (FIFA, Battlefield, Mass Effect), and Take-Two Interactive (Borderlands, Grand Theft Auto). ZeniMax Media (Doom, Quake) is the world's largest privately held video game company.[63]

Microsoft operates one of the largest game console hardware franchises, the largest mobile gaming platforms are operated by Google, and Apple Inc.,[64] and Valve Corporation operates the largest PC gaming platform.

Advanced Micro Devices has become the most important console processor vendor, with all three of the eighth generation home consoles using AMD GPUs, and two of them use AMD CPUs. Microsoft, Nintendo, and Sony were not aware that they were all using AMD processors until all their consoles were announced.[65] Notable game engine developers include Epic Games (Unreal Engine) and Unity Technologies (Unity).


The West Coast is home to important video game conventions, such as Electronic Entertainment Expo (E3), one of the largest video game industry-only events in the world, and Penny Arcade Expo (PAX Prime), the largest public video game convention in North America. The West Coast is also home to many of the major American video game industry companies, particularly the regions of Los Angeles, San Francisco Bay Area, and Seattle. Major game development centers outside of the West Coast include the Northeast and Texas.


Shigeru Miyamoto originally wanted the love triangle of Mario, Pauline and Donkey Kong to be Popeye, Olive Oyl, and Bluto, however Nintendo did not acquire the rights in time for development of Donkey Kong. The Walt Disney Company, including subsidiaries Pixar and Lucasfilm, licenses several notable characters to other development companies, while developing their own games as well. Disney created the video game oriented movie Wreck-It Ralph in 2012, featuring characters from several famous video game franchises. Threshold Entertainment have produced movies based on Mortal Kombat, and are working on an upcoming action movie based on Tetris.


Several important game development personalities were born in or moved to the United States. Notable developers include Ralph H. Baer (Magnavox Odyssey, the "Father of Video Games"), Jonathan Blow (Braid), John D. Carmack (Doom, Quake), and Alexey Pajitnov (Tetris). Mario is named after Mario Segale, a former landlord of Nintendo of America. Some right-wing and left-wing activists, including Jack Thompson and Anita Sarkeesian, have met extreme resistance from the gaming public in response to the perceived politicizing of their art form.[66]


The United States recognizes eSports players as professional athletes.[67] Major League Gaming has eSports arenas and studios across the nation.[68] Robert Morris University has a League of Legends varsity team, whose members are eligible for scholarships.[69]








See also[edit]

Further reading[edit]


  1. ^ Bob Johnstone. "Video Games Industry Infographics". ESRB Infographics. ESRB. Retrieved 2014-08-01. 
  3. ^ a b c d e Bob Johnstone. "Didi Games". Research on Video Games. Didi Games. Retrieved 2009-04-01. 
  8. ^ Jiji Gaho Sha, inc. (2003). "Asia Pacific perspectives, Japan" 1. University of Virginia. p. 57. Retrieved 2011-04-09. At that time, a game for use in entertainment arcades was considered a hit if it sold 1000 units; sales of Space Invaders topped 300,000 units in Japan and 60,000 units overseas. 
  10. ^ "Space Invaders vs. Star Wars". Executive (Southam Business Publications) 24: 9. 1982. Retrieved 2011-04-30. According to TEC, Atari's arcade game Space Invaders has taken in $2 billion, with net recipts of $450 million. 
  15. ^ "Electronic Education". Electronic Education (Electronic Communications) 2 (5–8): 41. 1983. Retrieved 2011-04-23. In 1980 alone, according to Time, $2.8 billion in quarters, triple the amount of the previous years, were fed into video games. 
  18. ^ Ellen Goodman (1985). Keeping in touch. Summit Books. p. 38. ISBN 0-671-55376-3. Retrieved 2011-04-23. There are 95,000 others like him spread across the country, getting fed a fat share of the $5 billion in videogame quarters every year. 
  19. ^ Kevin "Fragmaster" Bowen (2001). "Game of the Week: Pac-Man". GameSpy. Retrieved 2011-04-09. Released in 1980, Pac-Man was an immediate success. It sold over 350,000 units, and probably would of [sic] sold more if not for the numerous illegal pirate and bootleg machines that were also sold. 
  21. ^ Chris Morris (May 10, 2005). "Pac Man turns 25: A pizza dinner yields a cultural phenomenon - and millions of dollars in quarters". CNN. Retrieved 2011-04-23. In the late 1990s, Twin Galaxies, which tracks video game world record scores, visited used game auctions and counted how many times the average Pac Man machine had been played. Based on those findings and the total number of machines that were manufactured, the organization said it believed the game had been played more than 10 billion times in the 20th century. 
  22. ^ YS Top 100 from World of Spectrum
  31. ^ "Top Gaming Studios, Schools & Salaries", Big Fish Games
  32. ^ Superannuation. "How Much Does It Cost To Make A Big Video Game?". Kotaku. Gawker Media. Retrieved 30 October 2014. 
  33. ^ Kain, Erik. "Why Digital Distribution Is The Future And GameStop Is Not: Taking The Long View On Used Games". Forbes. Retrieved 30 October 2014. 
  37. ^ van der Meulen, Rob. "Gartner Says Worldwide Video Game Market to Total $93 Billion in 2013". Gartner. Retrieved 30 October 2014. 
  45. ^ Video game industry growth still strong: study from Reuters
  46. ^ a b "E3 is Obsolete, But it Doesn't Matter". Forbes. 2012-06-08. Retrieved 2012-10-18. 
  47. ^ a b c d e "Top 100 Countries Represent 99.8% of $81.5Bn Global Games Market". newzoo. 
  50. ^ "Game Revenues of Top 25 Companies up 17%, Totaling $25Bn". newzoo. 
  51. ^ a b "Xbox One Hits China Today Following 14-Year Console Ban". GameSpot. 
  52. ^ "The World's Biggest Games Show Isn't In Germany. Not Any More.". Kotaku. 
  53. ^ "With 2.66 billions of revenue, Germany is Europe's top video game market, new data by Newzoo and G.A.M.E.". G.A.M.E. Association. 2014-03-01. Retrieved 2014-10-01. 
  54. ^ "Japan fights back". The Economist. 17 November 2012. 
  55. ^ "Market Data". Capcom. Retrieved 5 October 2012. 
  63. ^ "Zenimax Claims Carmack Stole Oculus VR, Facebook Barks Back". 
  66. ^ Allum Bokhari (September 25, 2014). "#GamerGate – An Issue With Two Sides". TechCrunch. Retrieved September 27, 2014. 
  67. ^ "The U.S. Now Recognizes eSports Players As Professional Athletes". Forbes. 
  68. ^ "Major League Gaming announces its own arena in Columbus, Ohio". VentureBeat. 
  69. ^ "Illinois university makes League of Legends a varsity sport". Gamasutra. 

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