Financial Issues and Market Trends in the Games Industry

Financial Issues in the Games IndustryIn the games industry there are a lot of financial issues. Whether it is an online game like a Flash title on Miniclip.com or a full retail game that you can only get in stores like Call of Duty Modern Warfare 2. The developer actually earns the least. They only get profit form selling a game if they pay everyone else before them. This diagram may help.

£ = RevenueP = Product

As you can see the developers the last person who gets there cut of the consumer’s money. I’ll give an example. Let’s go back to Modern Warfare 2 again.

The developer in this case is Infinity Ward. Publisher is Activision. Distributor is Royal Mail. Retailer is Game. And the consumer me.

As Infinity Ward think of the idea for the sequel to CoD4 they need someone to publish it. As Activision published CoD4 it was the first choice. The publisher will then deal with the advertising and over view the development of the game over the period. Once the game is up and ready to go the publisher will then hire a Distributer. The common one in this case in the UK would be Royal Mail. But of course there are many to choose from. That will either go straight to the consumer if lets say someone ordered the game online. The cost would still go through the Retailer just not physically. Otherwise the game would go to the retail store. In this case I would be GAME. The consumer will then purchase Modern Warfare 2. The money that the retailer earns will be split and sent back down the line and it will pay off like this. The developer will get no money until they pay the publisher off and publisher will get no money until they’ve paid off the distributer. The publisher won’t have a problem with paying the distributer off and will usually do it very quickly. But the developer may get no money at all depending on how the game sells. Infinity Ward will be very happy hence they made $310 Million in the first 24 hours. Infinity Ward broke the record books that day. It was also the first ever game to get its own premiere.

Financial Issues in the Games Industry

Online Gaming

The online version is a lot more complex, and the chances of the maker getting paid or even being recognised full stop are a lot tougher. Hopefully this diagram will help.

£ = RevenueP = Product

Financial Issues in the Games Industry

In this case, the publisher, advertiser and developer are all linked together by the Online Gaming Website. In this case we’ll say it’s Miniclip.com. If the game makes it big on Miniclip it may then get bigger and possibly appear as an Indy Game on networks such as Xbox LIVE. Money paid to purchase the game will go to the Developer. Also on online games the Developer does not pay either the publisher or the advertiser. That’s the responsibility of the Online Gaming Website.

Financial Issues in the Games Industry

Market Trends in the Games Industry

With the start of 2012, there are some strong trends that are changing the game industry in a big way. We take a look at some of them and what to expect.

Smartphones and tablets are changing the portable gaming market in a big way. Although most games on iOS and Android are smaller experiences than say Uncharted on the PSP (or the newly released PS Vita or 3DS), there is no doubt that games on the iOS and Android ecosystems are exploding in terms of development support, user base, and revenue coming into 2012. Smartphones and tablets are offering ways for smaller and indie developers to get noticed and sell their game to potentially millions without needing a huge budget or marketing campaign. Expect a lot more Android tablets and continued strong sales of the iPad to push games on larger 5-11″ screens. As Android devices are now pushing 720p resolutions, expect Apple to not lag behind in this area too much longer. Market share for Android devices sky rocketed in 2011, and we expect the Google OS to grab even more of the market in 2012. This means more developer support from game developers.

Say hello to the PlayStation Vita. 2012 will usher in a lot more power to handhelds with the release of Sony’s true successor to the original PSP. The big question though remains…. Are gamers really interested in that much power in a handheld, or will the 3DS at a much lower price outpace Sony’s latest offerings like it did with the DS? There seems to be a big push as mentioned previously that the mobile market is garnering a lot of attention from developers and gamers alike. Is the PS Vita going to take the gaming world by storm, or will it lose market share to devices like the iPhone and Android devices… Time will tell. What we can expect though is Sony pushing the PS Vita hard to gamers and developers. A price cut might be needed though to get it the market penetration they are seeking.

Different ways of interacting with video games will also take center stage in 2012. Kinect is coming to PCs, and others like Apple with Siri are taking voice controls first offered from Kinect seriously. The industry clearly is heading into a direction towards different ways of playing and interacting with games and media. Expect this to continue in 2012 with several companies offering competing technologies that offer the gamer and content consumer ways to get immersed into digital content.

Market Trends in the Games Industry

All in all, expect a lot of focus and attention towards the mobile sector for the game industry. I think it’s safe to say we will see a lot of competing products fail, and a few moving forward taking the spoils of war. Also we should continue to see voice integration as well as motion controls make a big push in 2012.

Market Trends in the Games Industry