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Video Game Industry

Video Game Industry. History. Some Numbers. 65% of US households play 80K employees directly, 250K in US 9 games per second Average player age is 35, 40% female, 60% male 778 titles released in 2009 2009=$19.6B in US ($10.5B H, $9.1B S) $18.5B in 2010; $76B by 2013.

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Video Game Industry

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  1. Video Game Industry

  2. History

  3. Some Numbers... • 65% of US households play • 80K employees directly, 250K in US • 9 games per second • Average player age is 35, 40% female, 60% male • 778 titles released in 2009 • 2009=$19.6B in US ($10.5B H, $9.1B S) • $18.5B in 2010; $76B by 2013

  4. Compared to other Industries • Recorded music= $17B global • Movie ticket sales= $29.9 B global • Book sales= $35.9 B in US • Newspapers ad revenues= $37.85B in US • Magazine ad revenues= $19.45B in US • Cable Revenue= $89.9B in US • Global video game market= $46.5B-$55B

  5. Digital Games • Console • Handheld • Computer • Arcade

  6. Arcade?

  7. The Big 3 • Xbox: • 24.3%, $58B (17% of Microsoft) • Nintendo: • 1889, 47.4%, $18.9B • Playstation: • 28.8%, $10.7B/$79 B

  8. The Big Three Are??? • Horizontally Integrated??? • Vertically Integrated??? • Diversified??? • Synergism??? • Market IS???

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

  10. Development • $10M 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 • Consolidation to compete w/ Big 3 or Big 5 • Gamers As developers

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

  12. Publishing • Nintendo • Activision Blizzard/ Vivendi Games $5B • EA $4.2B • Ubisoft $1.4B • Take-Two Interactive $968M • Sony #6, Microsoft #10, MTV Games #14, WB #16, Disney #17, LucasArts #20

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

  14. Retail • “Real Estate” • Antagonism with Publishers/Distro • Gamestop 21% of market, Wal-Mart, Best Buy, EB Games, Game Crazy • $2.5B used market, most profit$ • Holiday season=50% of sales • MDF (Marketing Development Funds)

  15. $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 3rd party developer against advance • Every game sold $12 is lost to piracy or used games (Pub/Devel hate used games!!!) • In-house/Vertical integration???

  16. Intellectual Property • Piracy: $3.5B on hard goods • 2007, $945M Nintendo • Royalty System • Open Source Games/ Self Publishing • Mergers and “Acquisitions” • Licensing • Essentially videogames are ALL IP!

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

  18. “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 E3 Expo.”

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