The Business of Gaming

Extracted 06JAN2012 from http://www.economist.com/node/21541161

New, more casual sorts of games are being picked up by a mass audience that would previously not have played at all...

So the industry has branched out into a bewildering variety of sub-sectors and niches. At one extreme, companies in the traditional sector are still charging $50 or $60 for high-end console games with ultra-realistic graphics and cinematic game play. At the other, a shoal of smaller firms is developing simpler, more casual games aimed at a much larger and more diverse group of customers. In between, a mix of established firms and start-ups are testing new ways to develop games and new business models for selling them.

One of the biggest changes has been the rise of the mobile phone as a gaming device. Games specifically designed to be played on mobile phones already account for $8 billion of the $56 billion global games market, even though they typically sell at less than a tenth the price of a traditional console game... The potential market is huge. The number of mobile-phone subscriptions worldwide is over 5 billion. Last year 1.6 billion handsets were sold, a 31% rise on 2009...

Even more dramatic has been the rise of social-networking sites as venues for video gaming. As with mobile phones, one attraction for developers is the potential size of the audience. Facebook, the biggest, claims 800m users each month, most of whom are fairly new to gaming... One reason why these games are so successful is that they help people do something they are already keen on: keeping up with their friends online...

the designers are able to collect lots of information on exactly how users are playing the games online and can tweak them to suit the players’ latest whims... By contrast, a typical console game may cost $20m-30m to make and take several hundred people and two years or more to develop..

This is now an expensive, risky and hit-driven business, so the developers have become deeply conservative, preferring to build on past successes rather than try something new. Every one of the ten bestselling console games in America last year was a sequel or a development of an existing franchise... The only safe bet about the future is that it will be more fragmented and more diverse than the past.