Computer and video game industry
Encyclopedia
The video game industry (often referred to as interactive entertainment
Interactive entertainment
The phrase interactive entertainment also known as video games refers to the business of producing and distributing products and services, or the products and services, of which the entertainment value can be influenced by users through direct feedback.-Origins:Although Hal Halpin claims credit...

) is the economic
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...

 sector involved with the development, marketing
Marketing
Marketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments...

 and sales of video games. It encompasses dozens of job disciplines and employs thousands of people worldwide.

Overview

Considered by some as a curiosity in the mid-1970s, the computer and video game industries have grown from focused markets to mainstream. They took in about USD$
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....

9.5 billion in the US in 2007, and 11.7 billion in 2008 (ESA
Entertainment Software Association
The Entertainment Software Association is the trade association of the video game industry in the United States. It was formed in April 1994 as the Interactive Digital Software Association and renamed on July 16, 2003...

 annual report).

Modern personal computer
Personal computer
A personal computer is any general-purpose computer whose size, capabilities, and original sales price make it useful for individuals, and which is intended to be operated directly by an end-user with no intervening computer operator...

s owe many advancements and innovations to the game industry: sound card
Sound card
A sound card is an internal computer expansion card that facilitates the input and output of audio signals to and from a computer under control of computer programs. The term sound card is also applied to external audio interfaces that use software to generate sound, as opposed to using hardware...

s, graphics cards and 3D graphic accelerators, CD ROM and DVD-ROM drives, are a few of the more notable improvements.

Sound card
Sound card
A sound card is an internal computer expansion card that facilitates the input and output of audio signals to and from a computer under control of computer programs. The term sound card is also applied to external audio interfaces that use software to generate sound, as opposed to using hardware...

s were developed for addition of digital-quality sound to games and only later improved for music and audiophile
Audiophile
An audiophile is a person who enjoys listening to recorded music, usually in a home. Some audiophiles are more interested in collecting and listening to music, while others are more interested in collecting and listening to audio components, whose "sound quality" they consider as important as the...

s. Early on graphics cards were developed for more colors. Later, graphics cards were developed for graphical user interface
Graphical user interface
In computing, a graphical user interface is a type of user interface that allows users to interact with electronic devices with images rather than text commands. GUIs can be used in computers, hand-held devices such as MP3 players, portable media players or gaming devices, household appliances and...

s (GUIs) and games. GUIs drove the need for high resolution, games drove 3D acceleration. They also are one of the only pieces of hardware to allow multiple hookups (such as with SLI or CrossFire
ATI CrossFire
AMD CrossFireX is a brand name for the multi-GPU solution by Advanced Micro Devices, originally developed by ATI Technologies. The technology allows up to four GPUs to be used in a single computer to improve graphics performance.-First-generation:CrossFire was first made available to the public...

 graphics cards). 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.

Modern games are among the most demanding of applications on PC resources. Many of the high-powered personal computers
IBM PC compatible
IBM PC compatible computers are those generally similar to the original IBM PC, XT, and AT. Such computers used to be referred to as PC clones, or IBM clones since they almost exactly duplicated all the significant features of the PC architecture, facilitated by various manufacturers' ability to...

 are purchased by gamer
Gamer
Historically, the term "gamer" usually referred to someone who played role-playing games and wargames. Since they became very popular, the term has included players of video games...

s who want the fastest equipment to power the latest cutting-edge games. Thus, the inertia of CPU development is due in part to this industry whose games demand faster processors than business or personal applications.

Game industry value chain

Ben Sawyer of Digitalmill observes that the game industry value chain
Value chain
The value chain, is a concept from business management that was first described and popularized by Michael Porter in his 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance.-Firm Level:...

 is made up of six connected and distinctive layers:
  1. Capital and publishing layer: involved in paying for development of new titles and seeking returns through licensing of the titles.
  2. Product and talent layer: includes developer
    Developer
    Developer may refer to:*Software developer, one who programs computers or designs the system to match the requirements of a systems analyst*Game developer, a person or business involved in game development, the process of designing and creating games...

    s, designers and artists
    Game artist
    A game artist is an artist who creates art for one or more types of games. Game artists are responsible for all of the aspects of game development that call for visual art...

    , who may be working under individual contracts or as part of in-house development teams.
  3. Production and tools layer: generates content production tools, game development middleware, customizable game engines
    Game engine
    A game engine is a system designed for the creation and development of video games. There are many game engines that are designed to work on video game consoles and personal computers...

    , and production management tools.
  4. Distribution layer: or the "publishing
    Video game publisher
    A video game publisher is a company that publishes video games that they have either developed internally or have had developed by a video game developer....

    " industry, involved in generating and marketing catalogs of games for retail and online distribution.
  5. Hardware (or Virtual Machine or Software Platform) layer: or the providers of the underlying platform, which may be console-based, accessed through online media, or accessed through mobile devices such as the iPhone
    IPhone
    The iPhone is a line of Internet and multimedia-enabled smartphones marketed by Apple Inc. The first iPhone was unveiled by Steve Jobs, then CEO of Apple, on January 9, 2007, and released on June 29, 2007...

    . This layer now includes non-hardware platforms such as virtual machines (e.g. Java or Flash), or software platforms such as browsers or even further Facebook, etc.
  6. End-users layer: or the users/players of the games.

Disciplines

The game industry employs those experienced in other traditional businesses, but some have experience tailored to the game industry. For example, many recruiter
Recruiter
A recruiter is someone engaging in recruitment, or the solicitation of individuals to fill jobs or positions within a corporation, nonprofit organization, sports team, the military, etc. Recruiters may work within an organization's human resources department or on an outsourced basis...

s target just game industry professionals. Some of the disciplines specific to the game industry include: game programmer
Game programmer
A game programmer is a software engineer, programmer, or computer scientist who primarily develops codebase for video games or related software, such as game development tools. Game programming has many specialized disciplines all of which fall under the umbrella term of "game programmer"...

, game designer, level designer, game producer
Game producer
A video game producer is the person in charge of overseeing development of a video game.The earliest documented use of the term producer in games was by Trip Hawkins, who established the position when he founded Electronic Arts in 1982...

, game artist
Game artist
A game artist is an artist who creates art for one or more types of games. Game artists are responsible for all of the aspects of game development that call for visual art...

 and game tester. Most of these professionals are employed by video game developer
Video game developer
A video game developer is a software developer that creates video games. A developer may specialize in a certain video game console, such as Nintendo's Wii, Microsoft's Xbox 360, Sony's PlayStation 3, or may develop for a variety of systems, including personal computers.Most developers also...

s or video game publisher
Video game publisher
A video game publisher is a company that publishes video games that they have either developed internally or have had developed by a video game developer....

s. However, many hobby
Hobby
A hobby is a regular activity or interest that is undertaken for pleasure, typically done during one's leisure time.- Etymology :A hobby horse is a wooden or wickerwork toy made to be ridden just like a real horse...

ists also produce computer games and sell them commercially. Recently game developers have begun to employ those with extensive or long-term experience within the modding communities.

1970s

The video game industry began in 1971 with the release of the arcade game
Arcade game
An arcade game is a coin-operated entertainment machine, usually installed in public businesses such as restaurants, bars, and amusement arcades. Most arcade games are video games, pinball machines, electro-mechanical games, redemption games, and merchandisers...

, Computer Space
Computer Space
Computer Space is a video arcade game released in November 1971 by Nutting Associates. Created by Nolan Bushnell and Ted Dabney, who would both later found Atari, Inc., it is generally accepted that it was the world's first commercially sold coin-operated video game — and indeed, the first...

. The following year, Atari, Inc. released the first commercially successful video game, Pong
Pong
Pong is one of the earliest arcade video games, and is a tennis sports game featuring simple two-dimensional graphics. While other arcade video games such as Computer Space came before it, Pong was one of the first video games to reach mainstream popularity...

, the original arcade version of which sold over 19,000 arcade cabinets. That same year saw the introduction of video games to the home market with the release of the early video game console
Video game console
A video game console is an interactive entertainment computer or customized computer system that produces a video display signal which can be used with a display device to display a video game...

, the Magnavox Odyssey
Magnavox Odyssey
The Magnavox Odyssey is the world's first home video game console. It was first demonstrated on May 24, 1972 and released in August of that year, predating the Atari Pong home consoles by three years....

. 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
Taito Corporation
The is a Japanese publisher of video game software and arcade hardware wholly owned by publisher Square Enix. Taito has their headquarters in the Shinjuku Bunka Quint Building in Yoyogi, Shibuya, Tokyo, sharing the facility with its parent company....

's Space Invaders
Space Invaders
is an arcade video game designed by Tomohiro Nishikado, and released in 1978. It was originally manufactured and sold by Taito in Japan, and was later licensed for production in the United States by the Midway division of Bally. Space Invaders is one of the earliest shooting games and the aim is to...

, released in 1978, sparking a renaissance for the video game industry and paving the way for the golden age of video arcade games. The game's success inspired arcade machines to become prevalent in mainstream locations such as shopping mall
Shopping mall
A shopping mall, shopping centre, shopping arcade, shopping precinct or simply mall is one or more buildings forming a complex of shops representing merchandisers, with interconnecting walkways enabling visitors to easily walk from unit to unit, along with a parking area — a modern, indoor version...

s, traditional storefronts, restaurant
Restaurant
A restaurant is an establishment which prepares and serves food and drink to customers in return for money. Meals are generally served and eaten on premises, but many restaurants also offer take-out and food delivery services...

s and convenience store
Convenience store
A convenience store, corner store, corner shop, commonly called a bodega in Spanish-speaking areas of the United States, is a small store or shop in a built up area that stocks a range of everyday items such as groceries, toiletries, alcoholic and soft drinks, and may also offer money order and...

s during the golden age. Space Invaders would go on to sell over 360,000 arcade cabinets worldwide, and by 1982, generate a revenue of $2 billion in quarters
Quarter (United States coin)
A quarter dollar, commonly shortened to quarter, is a coin worth ¼ of a United States dollar, or 25 cents. The quarter has been produced since 1796. The choice of 25¢ as a denomination, as opposed to 20¢ which is more common in other parts of the world, originated with the practice of dividing...

, equivalent to $4.6 billion in 2011.

Soon after, Space Invaders was licensed for the Atari VCS
Atari 2600
The Atari 2600 is a video game console released in October 1977 by Atari, Inc. It is credited with popularizing the use of microprocessor-based hardware and cartridges containing game code, instead of having non-microprocessor dedicated hardware with all games built in...

 (later known as Atari 2600), becoming the first "killer app" and quadrupling the console's sales. 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. By the end of the 1970s, the personal computer game
Personal computer game
A PC game, also known as a computer game, is a video game played on a personal computer, rather than on a video game console or arcade machine...

 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.

1980s

The early 1980s saw the golden age of video arcade games reach its zenith. The total sales of arcade video game
Arcade game
An arcade game is a coin-operated entertainment machine, usually installed in public businesses such as restaurants, bars, and amusement arcades. Most arcade games are video games, pinball machines, electro-mechanical games, redemption games, and merchandisers...

 machines in North America increased significantly during this period, from $50 million in 1978 to $900 million by 1981, with the arcade video game industry's revenue in North America tripling to $2.8 billion in 1980. By 1981, the arcade video game industry was generating an annual revenue of $5 billion in North America, equivalent to $12.3 billion in 2011. In 1982, the arcade video game industry reached its peak, generating $8 billion in quarters, equivalent to over $18.5 billion in 2011, surpassing the annual gross revenue of both pop music
Pop music
Pop music is usually understood to be commercially recorded music, often oriented toward a youth market, usually consisting of relatively short, simple songs utilizing technological innovations to produce new variations on existing themes.- Definitions :David Hatch and Stephen Millward define pop...

 ($4 billion) and Hollywood
Cinema of the United States
The cinema of the United States, also known as Hollywood, has had a profound effect on cinema across the world since the early 20th century. Its history is sometimes separated into four main periods: the silent film era, classical Hollywood cinema, New Hollywood, and the contemporary period...

 films ($3 billion) combined at that time. 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, equivalent to over $27.3 billion in 2011. The arcade video game industry would continue to generate an annual revenue of $5 billion in quarters through to 1985. The most successful game of this era was Namco
Namco
is a Japanese corporation best known as a former video game developer and publisher. Following a merger with Bandai in September 2005, the two companies' game production assets were spun off into Namco Bandai Games on March 31, 2006. Namco Ltd. was re-established to continue domestic operation of...

's Pac-Man
Pac-Man
is an arcade game developed by Namco and licensed for distribution in the United States by Midway, first released in Japan on May 22, 1980. Immensely popular from its original release to the present day, Pac-Man is considered one of the classics of the medium, virtually synonymous with video games,...

, released in 1980, which would go on to sell over 350,000 cabinets, and within a year, generate a revenue of more than $1 billion in quarters; in total, Pac-Man is estimated to have grossed over 10 billion quarters ($2.5 billion) during the 20th century, equivalent to over $3.4 billion in 2011.

The early part of the decade saw the rise of home computing, and home-made games
Homebrew (video games)
Homebrew is a term frequently applied to video games or other software produced by consumers to target proprietary hardware platforms not typically user-programmable or that use proprietary storage methods...

, especially in Europe (with the ZX Spectrum
ZX Spectrum
The ZX Spectrum is an 8-bit personal home computer released in the United Kingdom in 1982 by Sinclair Research Ltd...

) and Asia (with the NEC PC-88
NEC PC-8801
The NEC PC-8801 was an early Zilog Z80-based computer exclusively released in Japan, where it became very popular, by NEC Corporation in 1981. It was informally called the "PC-88"....

 and MSX
MSX
MSX was the name of a standardized home computer architecture in the 1980s conceived by Kazuhiko Nishi, then Vice-president at Microsoft Japan and Director at ASCII Corporation...

). This time also saw the rise of video game journalism, which was later expanded to include covermount
Covermount
Covermount is the name given to storage media or other products packaged as part of a magazine or newspaper...

ed cassettes and CDs.
In 1983, the North American industry crashed due to the production of too many badly developed games (quantity over quality), resulting in the fall of the North American industry. The industry would eventually be revitalized by the release of the Nintendo Entertainment System
Nintendo Entertainment System
The Nintendo Entertainment System is an 8-bit video game console that was released by Nintendo in North America during 1985, in Europe during 1986 and Australia in 1987...

, which resulted in the home console market being dominated by Japanese companies such as Nintendo
Nintendo
is a multinational corporation located in Kyoto, Japan. Founded on September 23, 1889 by Fusajiro Yamauchi, it produced handmade hanafuda cards. By 1963, the company had tried several small niche businesses, such as a cab company and a love hotel....

, while a professional European computer game industry also began taking shape with companies such as Ocean Software
Ocean Software
The British company Ocean Software was one of the biggest European video game developers/publishers of the 1980s and 90s...

. The latter part of the decade saw the rise of the Game Boy
Game Boy
The , is an 8-bit handheld video game device developed and manufactured by Nintendo. It was released in Japan on , in North America in , and in Europe on...

 handheld system. In 1987, Nintendo lost a legal challenge against Blockbuster Entertainment, which enabled games rentals in the same way as movies.

1990s

The 1990s saw advancements in game related technology. Among the significant advancements were:
  • The widespread adoption of CD
    Compact Disc
    The Compact Disc is an optical disc used to store digital data. It was originally developed to store and playback sound recordings exclusively, but later expanded to encompass data storage , write-once audio and data storage , rewritable media , Video Compact Discs , Super Video Compact Discs ,...

    -based storage and software distribution
  • Widespread adoption of GUI
    Graphical user interface
    In computing, a graphical user interface is a type of user interface that allows users to interact with electronic devices with images rather than text commands. GUIs can be used in computers, hand-held devices such as MP3 players, portable media players or gaming devices, household appliances and...

    -based operating system
    Operating system
    An operating system is a set of programs that manage computer hardware resources and provide common services for application software. The operating system is the most important type of system software in a computer system...

    s, such as the series of Amiga OS, Microsoft Windows
    Microsoft Windows
    Microsoft Windows is a series of operating systems produced by Microsoft.Microsoft introduced an operating environment named Windows on November 20, 1985 as an add-on to MS-DOS in response to the growing interest in graphical user interfaces . Microsoft Windows came to dominate the world's personal...

     and Mac OS
    Mac OS
    Mac OS is a series of graphical user interface-based operating systems developed by Apple Inc. for their Macintosh line of computer systems. The Macintosh user experience is credited with popularizing the graphical user interface...

  • Advancement in 3D graphics technology, as 3D graphic cards
    Graphics processing unit
    A graphics processing unit or GPU is a specialized circuit designed to rapidly manipulate and alter memory in such a way so as to accelerate the building of images in a frame buffer intended for output to a display...

     became widely adopted, with 3D graphics
    3D computer graphics
    3D computer graphics are graphics that use a three-dimensional representation of geometric data that is stored in the computer for the purposes of performing calculations and rendering 2D images...

     now the de facto
    De facto
    De facto is a Latin expression that means "concerning fact." In law, it often means "in practice but not necessarily ordained by law" or "in practice or actuality, but not officially established." It is commonly used in contrast to de jure when referring to matters of law, governance, or...

    standard for video game visual presentation
  • Continuing advancement of CPU speed and sophistication
  • Miniaturisation of hardware, and mobile phones, which enabled mobile gaming
  • The emergence of the internet, which in the latter part of the decade enabled online co-operative play and competitive gaming

Aside from technology, in the early part of the decade, licenced
Brand licensing
Licensing means renting or leasing of an intangible asset. Examples of intangible assets include a song , a character , a name or a brand . An arrangement to license a brand requires a licensing agreement...

 games became more popular, as did video game sequels.

2000s

Today, the video game industry is a juggernaut of development; profit still drives technological advancement which is then used by other industry sectors. Though maturing, the video game industry is still very volatile, with third-party video game developers quickly cropping up, and just as quickly, going out of business.. Nevertheless, many casual game
Casual game
A casual game is a video game targeted at or used by a mass audience of casual gamers. Casual games can have any type of gameplay, and fit in any genre. They are typically distinguished by their simple rules and lack of commitment required in contrast to more complex hardcore games...

s and indie game
Indie game
Independent video game development is the process of creating video games without the financial support of a video game publisher. While large firms can create independent games, they are usually designed by an individual or a small team of as many as ten people, depending on the complexity of the...

s have been developed and many have become popular and successful, such as Braid
Braid (video game)
Braid is a platform and puzzle video game developed by independent software developer Jonathan Blow. The game was released on August 6, 2008 for the Xbox 360's Xbox Live Arcade service. A Microsoft Windows version was released on April 10, 2009. Hothead Games ported and released the game to Mac OS...

, Limbo
Limbo (video game)
Limbo is a puzzle-platform video game and the premiere title of independent Danish game developer Playdead. The game was released in July 2010 as a platform exclusive title on Xbox Live Arcade, and was later re-released as part of a retail game pack along with Trials HD and Splosion Man in April...

, or Minecraft
Minecraft
Minecraft is a sandbox-building independent video game written in Java originally by Swedish creator Markus "Notch" Persson and now by his company, Mojang, formed from the proceeds of the game. It was released as an alpha on May 17, 2009, with a beta version on December 20, 2010...

. Games are also made for mobile phones and social networking sites. For example, a Facebook
Facebook
Facebook is a social networking service and website launched in February 2004, operated and privately owned by Facebook, Inc. , Facebook has more than 800 million active users. Users must register before using the site, after which they may create a personal profile, add other users as...

 game developer, Zynga
Zynga
Zynga is a social network game developer located in San Francisco, United States. The company develops browser-based games that work both stand-alone and as application widgets on social networking websites such as Facebook and MySpace....

, has raised in excess of 300 million.

Economics

Early on, development costs were minimal, and video games could be quite profitable. Games developed by a single programmer, or by a small team of programmers and artists, could sell hundreds of thousands of copies each. Many of these games only took a few months to create, so developers could release several titles each year. Thus, publishers could often be generous with benefits, such as royalties
Royalties
Royalties are usage-based payments made by one party to another for the right to ongoing use of an asset, sometimes an intellectual property...

 on the games sold. Many early game publishers started from this economic climate, such as Origin Systems
Origin Systems
Origin Systems, Inc. was a computer game developer based in Austin, Texas that was active from 1983 to 2004...

, Sierra Entertainment
Sierra Entertainment
Sierra Entertainment Inc. was an American video-game developer and publisher founded in 1979 as On-Line Systems by Ken and Roberta Williams...

, Capcom
Capcom
is a Japanese developer and publisher of video games, known for creating multi-million-selling franchises such as Devil May Cry, Chaos Legion, Street Fighter, Mega Man and Resident Evil. Capcom developed and published Bionic Commando, Lost Planet and Dark Void too, but they are less known. Its...

, Activision
Activision
Activision is an American publisher, majority owned by French conglomerate Vivendi SA. Its current CEO is Robert Kotick. It was founded on October 1, 1979 and was the world's first independent developer and distributor of video games for gaming consoles...

 and Electronic Arts
Electronic Arts
Electronic Arts, Inc. is a major American developer, marketer, publisher and distributor of video games. Founded and incorporated on May 28, 1982 by Trip Hawkins, the company was a pioneer of the early home computer games industry and was notable for promoting the designers and programmers...

.

As computing and graphics power increased, so too did the size of development teams, as larger staffs were needed to address the ever increasing graphical and programming complexities. Now budgets can easily reach millions of dollars, even if middleware and pre-built game engine
Game engine
A game engine is a system designed for the creation and development of video games. There are many game engines that are designed to work on video game consoles and personal computers...

s are used. Most professional games require one to three years to develop, further increasing the strain on budgets.

Some developers are turning to alternative production and distribution methods, such as online distribution
Digital distribution
Online distribution, digital distribution, or electronic software distribution is the practice of delivering content without the use of physical media, typically by downloading via the internet directly to a consumer's device. Online distribution bypasses conventional physical distribution media,...

, to reduce costs.

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
Call of Duty: Black Ops
Call of Duty: Black Ops is a first-person shooter video game developed by Treyarch, published by Activision and released worldwide on November 9, for Microsoft Windows, Xbox 360, PlayStation 3, Wii consoles, with a separate version for Nintendo DS developed by n-Space. Announced on April 30, 2010,...

, which took in over USD
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....

$650 million of sales in the game's first five days, which set a five-day global record for a movie, book or videogame. The game's income was more than the opening weekend of Spider-Man 3
Spider-Man 3
Spider-Man 3 is a 2007 American superhero film written and directed by Sam Raimi, with a screenplay by Ivan Raimi and Alvin Sargent. It is the third film in the Sam Raimi Spider-Man trilogy based on the fictional Marvel Comics character Spider-Man...

and the previous title holder for a video game Halo 3
Halo 3
Halo 3 is a first-person shooter video game developed by Bungie for the Xbox 360 console. The third installment in the Halo franchise, the game concludes the story arc begun in Halo: Combat Evolved and continued in Halo 2...

. Many individuals have also benefited from the economic success of video games including the former chairman of Nintendo
Nintendo
is a multinational corporation located in Kyoto, Japan. Founded on September 23, 1889 by Fusajiro Yamauchi, it produced handmade hanafuda cards. By 1963, the company had tried several small niche businesses, such as a cab company and a love hotel....

 and Japan's third richest man: Hiroshi Yamauchi
Hiroshi Yamauchi
is a Japanese businessman. He was the third president of Nintendo, joining the company in 1949 until stepping down on May 31, 2002, to be succeeded by Satoru Iwata. Yamauchi is credited with transforming Nintendo from a small hanafuda card-making company in Japan to today's multi-billion dollar...

.

Practices

Video game industry practices are similar to those of other entertainment industries (e.g. the music recording industry), but the video game industry in particular has been accused of treating its development talent poorly. This promotes independent development, as developers leave to form new companies and projects. In some notable cases, these new companies grow large and impersonal, having adopted the business practices of their forebears, and ultimately perpetuate the cycle.

However, unlike the music industry, where modern technology has allowed a fully professional product to be created extremely inexpensively by an independent musician, modern games require increasing amounts of manpower and equipment. This dynamic makes publishers
Video game publisher
A video game publisher is a company that publishes video games that they have either developed internally or have had developed by a video game developer....

, who fund the developers
Video game developer
A video game developer is a software developer that creates video games. A developer may specialize in a certain video game console, such as Nintendo's Wii, Microsoft's Xbox 360, Sony's PlayStation 3, or may develop for a variety of systems, including personal computers.Most developers also...

, much more important than in the music industry.

Breakaways

A particularly famous case is the "original" independent developer Activision
Activision
Activision is an American publisher, majority owned by French conglomerate Vivendi SA. Its current CEO is Robert Kotick. It was founded on October 1, 1979 and was the world's first independent developer and distributor of video games for gaming consoles...

, founded by former Atari
Atari
Atari is a corporate and brand name owned by several entities since its inception in 1972. It is currently owned by Atari Interactive, a wholly owned subsidiary of the French publisher Atari, SA . The original Atari, Inc. was founded in 1972 by Nolan Bushnell and Ted Dabney. It was a pioneer in...

 developers. Activision grew to become the world's second largest game publisher. In the mean time, many of the original developers left to work on other projects. For example, founder Alan Miller left Activision to start another video game development company, Accolade (now Atari
Atari
Atari is a corporate and brand name owned by several entities since its inception in 1972. It is currently owned by Atari Interactive, a wholly owned subsidiary of the French publisher Atari, SA . The original Atari, Inc. was founded in 1972 by Nolan Bushnell and Ted Dabney. It was a pioneer in...

 née Infogrames
Infogrames
Infogrames Entertainment SA was an international French holding company headquartered in Paris, France. It was the owner of Atari, Inc., headquartered in New York City, U.S. and Atari Europe. It was founded in 1983 by Bruno Bonnell and Christophe Sapet using the proceeds from an introductory...

).

Activision was popular among developers for giving them credit in the packaging and title screens for their games, while Atari disallowed this practice. As the video game industry took off in the mid-80s, many developers faced the more distressing problem of working with fly-by-night or unscrupulous publishers that would either fold unexpectedly or run off with the game profits.

Economics

In 2004, the U.S. game industry as a whole was worth USD
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....

$10.3 billion.
However, economic problems remain today with regard to publisher-developer contracts (see copyright: transfer of rights). Typically, developers receive a royalty of around 20% of the sales profits, and the rest goes to the publisher. Rather than dividing royalties, many publishers buy the development studio outright. Some developers begrudge the tendency for the studio's original management to leave in the wake of a buyout, while the remaining employees try to finish the project only to be shut down after a few years. These buyouts often result in a big push to finish video game projects in time for the holiday purchasing season, and transfer of creative control to the publisher.

In June 2011, the global video game market was valued at USD$65 billion.

Piracy

The industry claims software piracy to be a big problem, and take measures to counter this. However, digital rights management
Digital rights management
Digital rights management is a class of access control technologies that are used by hardware manufacturers, publishers, copyright holders and individuals with the intent to limit the use of digital content and devices after sale. DRM is any technology that inhibits uses of digital content that...

 and other measures have proved noticeably unpopular with gamers.

Creative control

Some gamers have shown disapproval of publishers having creative control on various internet forums since they are more apt to follow short-term market trends rather than invest in risky but potentially lucrative ideas. 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
Recording Artists' Coalition
The Recording Artists' Coalition is an American music industry organization that represents recording artists, and attempts to defend their rights and interests. Compare and contrast with the RIAA, which represents the recording industry...

 and record labels in many ways. But unlike the music industry, which has seen flat or declining sales in the early 2000s, the video game industry continues to grow. 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.

In the computer games industry, it is easier to create a startup, resulting in many successful companies. The console
Video game console
A video game console is an interactive entertainment computer or customized computer system that produces a video display signal which can be used with a display device to display a video game...

 games industry is a more closed one, and a game developer must have up to three licenses from the console manufacturer
Console manufacturer
A console manufacturer is a company that manufactures and distributes video game consoles. It is also known as a first-party video game publisher...

:
  1. A license to develop games for the console
  2. The publisher must have a license to publish games for the console
  3. A separate license for each game


In addition, the developer must usually buy development systems from the console manufacturer in order to even develop a game for consideration, as well as obtain concept approval for the game from the console manufacturer. Therefore, the developer normally has to have a publishing deal in place before starting development on a game project, but in order to secure a publishing deal, the developer must have a track record of console development, something which few startups will have.

Alternatives

An alternative method for publishing video games is to self-publish using the shareware
Shareware
The term shareware is a proprietary software that is provided to users without payment on a trial basis and is often limited by any combination of functionality, availability, or convenience. Shareware is often offered as a download from an Internet website or as a compact disc included with a...

 or open source
Open source
The term open source describes practices in production and development that promote access to the end product's source materials. Some consider open source a philosophy, others consider it a pragmatic methodology...

 model over the Internet
Internet
The Internet is a global system of interconnected computer networks that use the standard Internet protocol suite to serve billions of users worldwide...

. However, it remains to be seen whether freely made and distributed games can survive in the era of multi-million dollar production.

Japanese video game industry practices

The Japan
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...

ese video game industry is markedly different from the industry in North America
North America
North America is a continent wholly within the Northern Hemisphere and almost wholly within the Western Hemisphere. It is also considered a northern subcontinent of the Americas...

 and Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...

.

Generally, games have a greater market share
Market share
Market share is the percentage of a market accounted for by a specific entity. In a survey of nearly 200 senior marketing managers, 67 percent responded that they found the "dollar market share" metric very useful, while 61% found "unit market share" very useful.Marketers need to be able to...

 of total entertainment in Japan than in the West. Japan has created some of the largest and most expensive titles ever made, such as the Shenmue
Shenmue
is a 1999 open-world adventure video game developed by Sega AM2 and published by Sega for the Dreamcast, produced and directed by Yu Suzuki. Suzuki coined a genre title, "FREE" , for the game, based on the interactivity and freedom he wanted to give to the player...

, Final Fantasy
Final Fantasy
is a media franchise created by Hironobu Sakaguchi, and is developed and owned by Square Enix . The franchise centers on a series of fantasy and science-fantasy role-playing video games , but includes motion pictures, anime, printed media, and other merchandise...

, Metal Gear
Metal Gear
Metal Gear is a series of video games.Metal Gear may also refer to:*Metal Gear , bipedal tanks appearing in the Metal Gear series-Metal Gear video game series:...

and Mario
Mario
is a fictional character in his video game series, created by Japanese video game designer Shigeru Miyamoto. Serving as Nintendo's mascot and the main protagonist of the series, Mario has appeared in over 200 video games since his creation...

series of games.

Arcades

Video game arcades
Video arcade
An amusement arcade or video arcade is a venue where people play arcade games such as video games, pinball machines, electro-mechanical games, redemption games, merchandisers , or coin-operated billiards or air hockey tables...

 are still relatively popular in Japan; for every arcade game
Arcade game
An arcade game is a coin-operated entertainment machine, usually installed in public businesses such as restaurants, bars, and amusement arcades. Most arcade games are video games, pinball machines, electro-mechanical games, redemption games, and merchandisers...

 released in the US, nine are released in Japan. The history of the Japanese arcade is very significant in the story of the decline of the American arcade, and in the shape of game design
Game design
Game design, a subset of game development, is the process of designing the content and rules of a game in the pre-production stage and design of gameplay, environment, storyline, and characters during production stage. The term is also used to describe both the game design embodied in a game as...

 in general.

Media

Consoles
Video game console
A video game console is an interactive entertainment computer or customized computer system that produces a video display signal which can be used with a display device to display a video game...

 and arcade games are the main media for Japanese game design; PC
IBM PC compatible
IBM PC compatible computers are those generally similar to the original IBM PC, XT, and AT. Such computers used to be referred to as PC clones, or IBM clones since they almost exactly duplicated all the significant features of the PC architecture, facilitated by various manufacturers' ability to...

 games are nowhere near as popular. This necessarily dictates that there are fewer independently developed games coming from Japan, as it is much harder to develop independently for a console than it is for a PC.

Development environment

The structure and culture of a Japanese game developer is different from a western one. Throughout the history of Japanese game design, many developers have seen fit to remain mostly anonymous, even using pseudonyms to a large degree in video game credits.

Also, the division in labor for video game development is different. For example, Japanese game design teams had a dedicated designer (which they called a "director") much earlier than American design teams adopted the practice.
Secondly, Japanese game designers throughout history generally had far more people working on a particular game than a comparable western design team. For example, Street Fighter 2 (1991), a Japanese title, had almost one artist working on every character in the game, plus two programmers and a musician, with the result being a team of twenty or more people. Mortal Kombat
Mortal Kombat (video game)
Mortal Kombat is a 1992 fighting-game developed and published by Midway for arcades. In 1993, home versions were released by Acclaim Entertainment. Released in the Fall of 1994, the Microsoft Windows 3.1x version was released by Activision Interactive. It is the first title in the Mortal Kombat...

(1992), a comparable American title, was developed by four people: a programmer
Game programmer
A game programmer is a software engineer, programmer, or computer scientist who primarily develops codebase for video games or related software, such as game development tools. Game programming has many specialized disciplines all of which fall under the umbrella term of "game programmer"...

, an artist
Artist
An artist is a person engaged in one or more of any of a broad spectrum of activities related to creating art, practicing the arts and/or demonstrating an art. The common usage in both everyday speech and academic discourse is a practitioner in the visual arts only...

, a musician
Musician
A musician is an artist who plays a musical instrument. It may or may not be the person's profession. Musicians can be classified by their roles in performing music and writing music.Also....* A person who makes music a profession....

, and a background artist.

Video game industry in Canada

Canada has the third largest video game industry in terms of employment numbers. The video game industry has also been booming in Montreal since 1997, coinciding with the opening of Ubisoft Montreal
Ubisoft Montreal
Ubisoft Montreal is a Canadian video game developer owned by French publisher Ubisoft.Ubisoft's North American studio is located in Montreal, Quebec...

. Recently, the city has attracted world leading game developers and publishers studios such as Ubisoft
Ubisoft
Ubisoft Entertainment S.A. is a major French video game publisher and developer, with headquarters in Montreuil, France. The company has a worldwide presence with 25 studios in 17 countries and subsidiaries in 26 countries....

, EA
Electronic Arts
Electronic Arts, Inc. is a major American developer, marketer, publisher and distributor of video games. Founded and incorporated on May 28, 1982 by Trip Hawkins, the company was a pioneer of the early home computer games industry and was notable for promoting the designers and programmers...

, Eidos Interactive
Eidos Interactive
Eidos Interactive Ltd. is a British video game publisher and is a label of Square Enix Europe. As an independent company Eidos plc was headquartered in the Wimbledon Bridge House in Wimbledon, London Borough of Merton....

, Artificial Mind and Movement
Artificial Mind and Movement
Behaviour Interactive [formerly Artificial Mind and Movement ], founded in 1992 in Québec City, Québec as Megatoon Entertainment Group, is the largest independent game development studio in Canada, specializing in the production of 2D and 3D action/adventure games for the Xbox 360, PlayStation 3,...

, Bioware
BioWare
BioWare is a Canadian video game developer founded in February 1995 by newly graduated medical doctors Ray Muzyka, Greg Zeschuk, and Augustine Yip. BioWare is currently owned by American company Electronic Arts...

, and Strategy First
Strategy First
Strategy First is a software company based in Montreal, Canada. Founded in 1988, the company has published numerous well-known games, such as the Disciples series, Jagged Alliance series, Space Empires series, and Galactic Civilizations....

, mainly because video games jobs have been heavily subsidized by the provincial government. Every year, this industry generates billions of dollars and thousands of jobs in the Montreal area. Vancouver
Vancouver
Vancouver is a coastal seaport city on the mainland of British Columbia, Canada. It is the hub of Greater Vancouver, which, with over 2.3 million residents, is the third most populous metropolitan area in the country,...

 has also developed a particularly large cluster
Business cluster
A business cluster is a geographic concentration of interconnected businesses, suppliers, and associated institutions in a particular field. Clusters are considered to increase the productivity with which companies can compete, nationally and globally. In urban studies, the term agglomeration is used...

 of video game developers, the largest of which, Electronic Arts
Electronic Arts
Electronic Arts, Inc. is a major American developer, marketer, publisher and distributor of video games. Founded and incorporated on May 28, 1982 by Trip Hawkins, the company was a pioneer of the early home computer games industry and was notable for promoting the designers and programmers...

, employs over two thousand people.

UK video game industry practices

The UK
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...

 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. In recent years some of the studios have become defunct or been purchased by larger companies such as LittleBigPlanet
LittleBigPlanet
LittleBigPlanet, commonly abbreviated LBP, is a puzzle platformer video game, based on user-generated content, for the PlayStation 3 first announced on 7 March 2007, by Phil Harrison at the Game Developers Conference in San Francisco, California...

developer, Media Molecule
Media Molecule
Media Molecule is a British video game developer based in Guildford in Surrey. The studio was founded in January 2006 by former Lionhead Studios employees Mark Healey, Alex Evans, Dave Smith, and Kareem Ettouney...

 and Codemasters
Codemasters
The Codemasters Software Company Limited, or Codemasters is a British video game developer founded by Richard and David Darling in 1986...

. Though the country houses many of the world's most successful franchises such as Tomb Raider
Tomb Raider
Tomb Raider is an action-adventure video game developed by Core Design and published by Eidos Interactive. It was originally released in 1996 for the Sega Saturn, with MS-DOS and PlayStation versions following shortly thereafter...

, Grand Theft Auto
Grand Theft Auto (series)
Grand Theft Auto is a multi-award-winning British video game series created in the United Kingdom by Dave Jones, then later by brothers Dan Houser and Sam Houser, and game designer Zachary Clarke. It is primarily developed by Edinburgh based Rockstar North and published by Rockstar Games...

, Fable
Fable (video game series)
Fable is a series of action role-playing video games for Xbox, Xbox 360, Windows, and Mac OS X platforms. The series is developed by Lionhead Studios and is published by Microsoft Studios.-Setting:...

, Dirt
Colin McRae: Dirt
Colin McRae: Dirt has received largely positive reviews, IGN UK and U.S. awarding it a 9.0 and a 8.4, respectively. It has also received 9.0 from Official Xbox Magazine, 8.3 from GameSpot for the Xbox 360 and PC versions and 8.5 for the PlayStation 3 version, and 8 from Edge...

and Total War, the country is trying to find its identity, with many of the games without any cultural influence coming from the UK, with most influence derived from North America
North America
North America is a continent wholly within the Northern Hemisphere and almost wholly within the Western Hemisphere. It is also considered a northern subcontinent of the Americas...

.

The country also goes without tax relief, which means most of the talented development within the UK may move overseas for more profit, along with parents of certain video game developers which would pay for having games developed in the UK. Though in its current state it is large, at the rate the industry in the country is going it will lead to the country being moved down in the rankings and falling behind countries such as France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...

 and, recently overtook by, Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...

.

Latest trends in the game industry

A fairly recent practice, since the mid-1990s, of the video game industry is the rise of game players as developers of game content. The rise of video game players as fourth-party developers of game content allows for more open source
Open source
The term open source describes practices in production and development that promote access to the end product's source materials. Some consider open source a philosophy, others consider it a pragmatic methodology...

 models of game design
Game design
Game design, a subset of game development, is the process of designing the content and rules of a game in the pre-production stage and design of gameplay, environment, storyline, and characters during production stage. The term is also used to describe both the game design embodied in a game as...

, development and engineering. Game players create user modifications
Mod (computer gaming)
Mod or modification is a term generally applied to personal computer games , especially first-person shooters, role-playing games and real-time strategy games. Mods are made by the general public or a developer, and can be entirely new games in themselves, but mods are not standalone software and...

 (mods), which in some cases become just as popular, maybe even more popular, as the original game created. An example of this is the game Counter-strike
Counter-Strike
Counter-Strike is a tactical first-person shooter video game developed by Valve Corporation which originated from a Half-Life modification by Minh "Gooseman" Le and Jess "Cliffe" Cliffe...

, which began as a mod of the video game Half-Life and eventually became a published game that was very successful.

While this "community of modifiers" may only add up to approximately 1% of a particular game's user base, the number of those involved will grow as more games offer modifying opportunities (such as, by releasing source code
Source code
In computer science, source code is text written using the format and syntax of the programming language that it is being written in. Such a language is specially designed to facilitate the work of computer programmers, who specify the actions to be performed by a computer mostly by writing source...

) and as the international community of gamers rise. According to Ben Sawyer, as many as 600,000 established online game community developers will exist by 2012. This will effectively add a new component to the game industry value chain and if it continues to mature it will integrate itself into the overall industry.

External links

The source of this article is wikipedia, the free encyclopedia.  The text of this article is licensed under the GFDL.
 
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