To start, let's actually define what we're talking about. According to Wikipedia, a "console game" refers to a specialized single purpose electronic device that connects to a standard TV or video monitor (as opposed to a stand-alone handheld device or PC game designed for your computer). Game multimedia usually comes in the form of a cartridge, or more recently, higher capacity CDs. Newer systems allow games and demos to be downloaded directly from the internet, while older consoles came with a fixed selection of built-in games.
Though this form of entertainment may appear to be all fun and games, it is in fact big business. According to an article on Gamespot, in 2004 video game sales reached $5.2 billion (160.7 million units). Twelve game titles sold more than 1 million units each in 2004 (see below for a fuller list of the top selling titles). The 3 largest markets for computer and video games are the United States, Japan, and the United Kingdom, also in that order as the largest producers of video games.
With 3 major console manufacturers fighting for a slice of the gaming market pie, competition is ferocious. Recently, it became clear that the competitive landscape has shifted in favor of Nintendo, as the original creator of Mario hit it on the money with the Wii by creating an
innovative system that translates players' motions (punching, serving, slicing, ducking, etc.) onto the screen. This is in contrast to Sony's PS3, which gave gamers high-resolution graphics and near-TV quality picture, which lost significant profit at Nintendo's benefit. In fact, the shortage of Nintendo's Wii, which was released in limited quantities for the holiday shopping season, continues today, with consumers still paying hefty premiums to be able to jump around in front of their own TVs in Nintendo's version of tennis in WiiSports. The numbers speak for themselves: during the holiday quarter, Nintendo shipped 3.2 million Wii consoles and sold 17.5 million games; Sony shipped 1.84 million PS3s and sold 5.2 million copies of game software for the console.Examining this industry from a business perspective leads us to inquire about pricing strategy and revenue streams. Clearly, console manufacturers charge consumers for the physical hardware - $249 for a Nintendo Wii, $499 for a Sony Playstation 3, $299 for a Microsoft Xbox - but what is surprising is that all of these industry players barely break even, if not even lose money, on each console sold. The reason for this is that the real money in this segment is made on the royalties they each charge the software developers for every game produced for their respective gaming systems. With games averaging $50 a pop, this is what translates into the billions of dollars that makes this market so lucrative.
However, both software developers and console manufacturers are constantly looking for new avenues of growth. The most promising trend to offer significant payback is advertising.
According to a recent article from The Wall Street Journal, the market for delivering ads into games - such as a virtual billboard on a racetrack or a poster in a boxing arena - is still in its infancy, but major games publishers such as Electronic Arts believe it could be a lucrative business and many are pursuing it aggressively. Sending ads over the Internet is just now becoming more feasible through Sony's PlayStation 3 and Microsoft's Xbox 360, which are designed to be connected to the Internet.So what does the future hold in store for video games? One trend that has been emerging recently is that of games based on popular films - and vice-versa. Movies Lara Croft: Tomb Raider took its origins from the popular video game, whereas a game like GoldenEye was inspired by the popular James Bond 007 film series. But this is just one of the few things we've seen happening lately in the game industry. An essay on PBS on the Future of Video Gaming proposes a few directions that this form of entertainment may take us in: "It's feasible that millions of people will soon compete in a virtual world for the right to become Donald Trump's
Apprentice. Perhaps an enterprising designer will create an educational game that rivals the social significance of Sesame Street. And maybe a group of prescient developers will make a game series that allows participants to see what it's like to perform in a real-life ER. As the music industry looks for new ways to recapture its youthful audience, record labels will find even greater ways to cross-promote. Want to hear the latest Beastie Boys single? The place to hear it first could be in Grand Theft Auto 6." Most important, the average age of the gamer is rapidly approaching 30. As people in their 30s and 40s continue to play video games into their senior years, the genres of games will expand to accommodate those audiences and their discretionary income. Who knows, one day we may be playing a game of some activity that 50-somethings do on a regular basis - shuffleboard on a Caribbean cruise, anyone?
