I have always had an interest in computer games. As a gamer (Xbox) but also as a source of innovation. Hence “One Up: Creativity, Competition, and the Global Business of Video Games”. A book that gives an in-depth analysis of the trends and developments in the gaming industry. An industry, which is now leading up to the ninth generation of console hardware.
Evolution or revolution
The book describes the evolution of the gaming industry. From gaming software on par with that same effort in music, cinematography, and poetry to digital platforms, platform-agnostic, mobile gaming, social gaming, cloud gaming, free to play, pay to play, game-as-a-service, merchandising, tournaments, gaming TV, celebrity gaming, in-game advertising, subscriptions and soon streaming of gamings (Netflix). The changes in marketing, client retention, publishing, distribution (Gamestop) and business models. From Commodore 64 (my first computer) to Fortnite. From product to service. From CD to full-scale publishing concepts (Pokemon). Atari, Activision, Electronic Arts, Nintendo, Rovio, Valve, Sony, Zynga, Supercell, Just Cause, Half-life, Grant Theft Auto and Doom.
The statistics
- Several of the world’s largest firms—Apple, Microsoft, Sony, Tencent—rely heavily on interactive entertainment for their success. According to its financials, Sony relies on its PlayStation division for about 23 per cent of its $75 billion in annual income.
- Publisher Riot Games earned billions with a free-to-play called League of Legends, which at its peak was actively played by almost 100 million people.
- Globally, advertisers spend around $650 billion on media and entertainment.
- Two billion people actively play games across mobile, console, and PC devices.
- By some 2017 estimates, around two thousand five hundred studios are active in the United States, which has likely grown in recent years.
- Today, China knows a string of smaller firms that generate anywhere between $100 million and $600 million annually that did not exist before 2016.
- Chinese gamers spend around $30 billion annually. Mobile gaming accounts for roughly half of the worldwide video game market.
- WoW has generated more than $10 billion in revenue, making it one of the top-grossing game franchises of all time.
- A handful of global media conglomerates dominates the category on YouTube: media firms account for 84 per cent of total video plays, compared with agencies (8 per cent) and game publishers (3 per cent).
- The top five organisations are Bertelsmann, The Walt Disney Co., AT&T (through its recent acquisition of Time Warner), Groupe Marc de Lacharrière, and Omnia Media. By itself, the German firm Bertelsmann alone accounts for 31 per cent of total video plays with more than one hundred billion compared with the second runner-up, Disney, at fifty-nine billion and 17 per cent of the total.
- As a rule of thumb, between 2 per cent and 5 per cent of players actually spend money.
The challenges
The issues around hardware, development cost, cross-platform, payment, security, IP, licensing, data, cloning, regulation, piracy, and localisation cost. The setting up an appropriate server infrastructure to host players and facilitate a smooth playing experience, uninterrupted by latency issues. This goes hand in hand with setting up customer service centres around the world. But also the issue around culture (Japan and Korea have a very different gaming cultures). These aspects are easily neglected but of considerable strategic value for titles like League of Legends and World of Warcraft.
The ethics
The ethics of gaming. Games can have addictive properties, and games are created, intentionally or not, to exploit players who are subject to certain addictive behaviour. The views on video games (especially those that catered to younger audiences) as a steppingstone toward gambling.
Winners take all
The winners take all. Budgets for projects run between $50 and $150 million. A popular title will generate disproportionally more revenue than its immediate peers.
New marketing medium
Games are a universal, social activity. This is common knowledge to the average social scientist, but, as it turns out, it is brand new information to media professionals. The quadrupling of consumer spending and widespread digitalisation of interactive entertainment has resulted in the emergence of new economic complexities and the development of novel properties.
The leadership lessons
- The most important driver behind a title’s success and critical acclaim is the makeup of a studio’s talent pool. Acquiring and retaining the best talent
- Moved decision-making downward and gave individual teams almost complete freedom to pursue a project.
- At regular intervals, share progress and garner feedback from the rest of the company.
- Establish a culture of trust.
- Allow people to work on their projects rather than working to satisfy any corporate administrative needs.
- Be the least powerful CEO in the world.
- Be open about the company’s overall performance. Share key performance metrics across all of its titles and company.
- Actively encourages collaboration among teams.
- Set up an extensive onboarding process for new hires.
- Institutionalise a flat structure.
AR and VR
AR and VR are not mentioned in the book. AR and VR will exacerbate the technology trends, fragmentation, changing customer behaviour, the increasing importance of distribution, and even more novel revenue models. In that, the gaming industry is not different from yours. Read the second paragraph (Evolution or revolution) again. It is disruptor or disrupted.
