The Video Game Industry in the United States
A huge industry within the United States economic market is the video game industry. This industry includes hardware, which is the console that the games are played on and software, which is the game itself. There are divisions and sub industries within the market such as board games, card games, role-playing games, and more. Gaming has flourished under technological advancements such as virtual reality headsets, portable gaming consoles, mobile game applications, and application extension games. These advancements have aided the game industry’s exponential growth with trends suggesting that it will not slow down any time soon. Within the technological industry is the video game market which has shifted from a small industry to a mainstream business once gaming consoles became more widely available (Marchand and Henning-Thurau 141). This shift can be seen in the worldwide video game market as positive projections for the next few years show that the value of the industry could increase from $137.9 billion in 2018 to $180.1 billion by 2021 (Sharma). The Chinese, American, Japanese, South Korean, and German markets dominate this worldwide video game market (Sharma). Prominent companies from these regions of the world include Nintendo Co., Huya Inc., Take-Two Interactive, and Sony Corp. (Sharma). In 2012 alone, global revenues for video games were at an estimated sixty – seven billion dollars (USD) for consoles as well as portable hardware and software (Marchand and Henning-Thurau 141). In the same year, virtual good sales within the games were estimated at fifteen billion dollars globally (Marchand and Henning-Thurau 141).
Specifically, in America, the video game market has been growing immensely with “…2,711 video game company locations across eighty – four percent of the congressional districts…” (2018) (ESA). As of 2018, there are 65,678 workers who earned an average compensation of $97,000 per year that are employed at game software publisher and developer locations (ESA). The video game industry benefits the entire economy and provides employment for individuals who are looking to support themselves. The United States’ gross domestic product for the video game industry in 2018 was valued at more than $11.7 billion (ESA). Gross domestic product is defined as the total of goods and services provided in a country over the course of a year (ESA). With these figures, it is apparent that the video game industry is flourishing.
In 2018, the Entertainment Software Association (ESA) provided statistics regarding the video game industry (ESA). Sixty – four percent of United States households own a type of device that is utilized for gameplay (ESA). On average, about sixty percent of Americans play video games daily on a variety of consoles (ESA). The personal computer was the most popular console with forty – one percent of gaming households playing on this device compared to the less popular, virtual reality devices at eight – percent (ESA). In 2017, the total amount that consumers spent on the video game industry was $36 billion (ESA). This total can be divided into $29.1 billion on content, $4.7 billion on hardware, and $2.2 billion on accessories (ESA).
The video game market thrives on what is known as system goods (Maruyama and Ohkita 105). System goods can be defined as “…several complementary components combined through specified interfaces with competing providers of each component…” (Maruyama and Ohkita 105). Video game businesses typically have video game consoles which is hardware that uses embedded programming. In addition, businesses also have game titles which is software that uses complex computer code as well as algorithms to create a product that users are able to interact with (Maruyama and Ohkita 105). By diversifying and creating goods that are only compatible with specific goods, video game companies can continuously create new items and make a profit at the same time. This practice of utilizing system goods can especially be seen through the Japanese gaming company, Nintendo Corporation.
Nintendo Corporation was founded by Fusajiro Yamauchi and started as a hanafuda gambling card company in 1889 (Stezano). Yamauchi passed down the company to his grandson, Hiroshi who transformed the company into the video game giant that it is known for today (Tan). In 1977, Nintendo created the Color TV-Game console that sold about three million copies in three years (Tan). Eventually, Nintendo released another console in the United States, the Nintendo Entertainment System (NES) in 1986 (Tan). This system was released with an additional seventeen games which included the very first game of the Mario Bros franchise, “Super Mario Bros” (Tan). From this moment on, many versions of Mario focused games have been produced over generations of hardware. As Nintendo’s games advanced, so did their consoles with the Gameboy, Gameboy Advance, Nintendo DS, GameCube, Wii, Nintendo Switch, and more (Tan).
Nintendo revolutionized the structure of software platforms in the home video game industry (Maruyama and Ohkita 105). Their interpretation of system goods can be categorized by three main points: “…incompatibility of software, …software licensing…, and … the practice of software development for a single platform…" (Maruyama and Ohkita 105). Incompatibility of software essentially means that their games are unable to be used across multiple devices that are not Nintendo gaming systems (Maruyama and Ohkita 105). This design allows them to monopolize the market in that the only way that consumers will be able to use their products is to buy additional forms of hardware. Nintendo uses software licensing in that they “…license other firms to develop video games for their systems in return for the payment of royalties to Nintendo” (Maruyama and Ohkita 105). Software development for a single platform means that the games created by Nintendo are exclusively available for use with a specific hardware system (Maruyama and Ohkita 105). With this type of business model, decisive licensing, and continuous modernization Nintendo has been able to exponentially grow throughout the years.
Through this economic data collection as well as analysis it is clear to theorize that video games are developing at an exponential rate with the rise of technology and are prominent within society today. From an economic point of view, it is apparent that the video game industry will continuously grow in conjunction with the rate at which technology is developing. Worldwide, the gaming industry has boomed and is expected to continue growing. Specifically, in America, Glu Mobile, which was incorporated in 2016, is already one of the most valuable game companies in the market (Sharma). In China, Huya Inc., incorporated in 2014, is one of the most valuable game companies with a worth of almost four billion dollars (Sharma). Along with this, game companies like Sony Corp. and Huya Inc. are continuously showing positive annual returns as well as an increasing stock price, which is evidence that suggests that the industry is not going to slow down its transcontinental reach. As a whole, video games and their vast variety of accessories, hardware, and software in combination with high demand are reasons why this market will continue to be prominent in the entertainment industry in the future.
Works Cited
ESA. “2018 SALES, DEMOGRAPHIC, AND USAGE DATA ESSENTIAL FACTS ABOUT THE COMPUTER AND VIDEO GAME INDUSTRY.” The Esa, 2018, www.theesa.com/wp-content/uploads/2019/03/ESA_EssentialFacts_2018.pdf.
Marchand, André, and Thorsten Hennig-Thurau. “Value Creation in the Video Game Industry: Industry Economics, Consumer Benefits, and Research Opportunities.” Journal of Interactive Marketing, vol. 27, no. 3, 2013, pp. 141–157., doi:10.1016/j.intmar.2013.05.001.
Sharma, Rakesh. “Top Video Game Company Stocks of 2018–2019.” Investopedia, Investopedia, 4 Dec. 2019, www.investopedia.com/news/top-video-game-stocks-2017/.
Stezano, Martin. “How Super Mario Helped Nintendo Conquer the Video Game World.” History.com, A&E Television Networks, 25 Oct. 2017, www.history.com/news/super-mario-history-nintendo-donkey-kong-facts.
Tan, Matthew. “ARTG80H: The History of Mario and His Impact on Popular Culture.” Medium, Medium, 1 Feb. 2019, medium.com/@matthewtan_81032/artg80h-the-history-of-mario-and-his-impact-on-popular-culture-84f44fe86d4c.
Maruyama, Masayoshi, and Kenichi Ohkita. “Platform Strategy of Video Game Software in Japan, 1984-1994: Theory and Evidence.” JSTOR, Mar. 2011, www.jstor.org/stable/41060644.
