The Evolution of Business Models in the Video Game Industry
12.6 Conclusions
In the end, with the seemingly unstoppable rise of online and mobile games, are high quality boxed games going to disappear entirely and, with them, their creators as well?
The debate, fostered by data like those seen in Fig.12.1, is very lively and pes- simistic views tend to be common among analysts and industry insiders alike. Indeed, many companies were recently forced to significantly scale down or close altogether, bringing further consolidation in the industry.
Anyway, we should not forget that we are talking about a sector still worth several billion dollars so, while a significant downsizing is most likely going to continue, boxed games won’t disappear completely: in a way not dissimilar to the passionate communities who, today, keep collecting and buying old classic games, a sizable
12 The Evolution of Business Models in the Video Game Industry 107 group of players will always be interested in boxed games delivered on a physical medium.
Under this scenario, specialty shops selling “Collector’s Limited Edition” of video games will still have a significant niche of customers, notwithstanding the fact that a downloadable “standard edition” of the game itself will likely be the main distri- bution method to reach an audience big enough to justify a quality production and, henceforth, securing a proper development budget.
Most importantly, though, the recent evolution we are witnessing is also offer- ing plenty of opportunities to smaller developers for entering the industry, also in developing and emerging countries.
The barrier of entry, in fact, has never been so low, with platforms counting hundreds of millions of users who are easily reachable.
Indeed, studios focusing on mobile and social games have recently spawn all around Asia, not only in fully developed countries like Singapore and Japan, but also in emerging countries like Vietnam, Thailand and Indonesia, where we can count hundreds of small companies and start-ups developing games and related services for these new platforms.
In this burgeoning environment many opportunities may be available for discov- ering new niche audiences, like the online video and music distribution models over the last couple of years have shown, where long tail models have created vast op- portunities for many niche content producers that meet the demand for more such segmented content. The low barrier to entry, which allows even a single developer to release a new game, quickly and with almost zero budget, gives opportunity for many niche games to target a smaller player group.
The other side of the coin, unfortunately, is that all this also means higher com- petition and lower visibility for most products, regardless of their quality, like the Oyatsukai case study showed.
As the market becomes more and more crowded, a need for discriminating good from bad and give proper visibility to worthy products becomes of paramount im- portance to keep players interested as well as allowing talented teams to be profitable and develop new content.
How can this be achieved?
Most likely, the various app stores will have to find new ways to give exposure to titles and simplify searches but developers also have to understand how to capitalize on the popularity of the different platforms by finding a synergy between them.
This might be achieved also thanks to the help of a new breed of smaller pub- lishers who are not concerned about providing big funding for AAA projects but, instead, can help in the marketing and cross promotional activities together with the ability, as discussed in, of offering a consistent gaming experience of a given title across multiple platforms. In this way players can seamlessly switch between social networks on PC to mobile while playing the same game and discover new ones as well.
A helpful step in this direction seems offered also by the latest effort from Mi- crosoft with the newly launched Windows 8, providing a common platform for applications and games across PCs, phones and tablets.
108 R. Dillon and O. Cohen In any case, the console manufacturers are definitely not giving up: Nintendo releasing the Wii U, in November 2012, Sony announcing the PS4 in February 2013, and Microsoft expected to announce the new XBOX during the year as well. Some predict that those would be the last generation of consoles as we know them but 2013 would be most likely an exciting year for the industry with such large announcements.
It would be very interesting to see how these companies are planning to regain their relevancy and maintain their market share. If their strategy turns out to be successful, we could expect an even larger growth in the industry in the coming years.
References
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2. The Economist. (18/12/2008). Play on. http://www.economist.com/node/12815694. Accessed 7 Dec 2012.
3. Cifaldi, F. (2012). Even a new console launch couldn’t stop November steep decline. gama- sutra.com. www.gamasutra.com/view/news/183062/Even_a_new_console_launch_couldnt_
stop_Novembers_steep_decline.php. Accessed 7 Dec 2012.
4. Dillon, R. (2011). The golden age of video games (p. 146). CRC Press.