The Business of Video Games
Recently, the Global Games Market Report was released to explore the market trends shaping and driving
the landscape of the game, and further zoom in on the latest developments per segment and region for the
upcoming year and beyond.
The report indicates that the way consumers engage with and through games is constantly changing that
leads to entirely new segments of game enthusiasts. There are now more than 2.5 billion gamers across
the world. Combined, they would spend $152.1 billion on games in 2019, representing an increase of
+9.6% year on year.
According to the newest report, the U.S. has overtaken China as the world’s largest gaming market by
revenues. Overall, the U.S. games market would generate $36.9 billion in 2019, predominantly driven by
its +13.9% growth in console game revenues. Among top 10 video game publishers by game revenues,
major US companies are Sony, Apple, Microsoft, Nintendo, Google, Activision Publishing (AP), and
Electronic Arts (EA).
Video games are played on various platforms of smartphone, console, boxed, tablet and browser. Console
will be the fastest-growing segment this year, growing +13.4% year on year to $47.9 billion in 2019. If
we break that prediction down by platform, the largest segment, 36%, will be generated by smartphone
games, while the smallest segment of the market, 2%, will go to Browser PC Games. The prediction is
that browser-based games will continue to lose market share over the next few years. The total market
share has console games accounting for 32% of the revenue and will actually grow faster than smartphone
games in the coming years. Regardless of this increased growth console games will not overtake
smartphone games any time soon.
So, what does this all mean for the future of gaming publishers in the US market? Smartphone game
development will continue to be explosive. With this much potential behind it, every game developer will
be looking for an investment in the next big game. Also, you can probably look forward to critical
improvements of gaming platforms that can blow your minds in the next year or two. In addition, you can
expect a new generation of gamers from millennials to Z fairly soon and that might be for a big change.
As the CEO of a gaming publisher, you are supposed to perform a five forces analysis of the online video
game industry. Use search engine or other information sources to answer the following questions.
1. Identify players in each of the five forces of rivalry among competitors, buyer groups,
suppliers/providers, domestic/international new entrants, and substitute products.
2. Explain the competition among your major rivalry, bargaining power of buyers, bargaining power
of suppliers, threat of new entrants, and threat of substitutes. Hint: you can use SWOT to get
insight of these forces if necessary.
3. Briefly explain which of business strategies – cost leadership, product differentiation, focused
niche – is best suited for your company.
4. How has your company used information systems to compete more effectively and/or efficiently?
Hint: break down the information systems into its four components and then explain how the
company utilize the four components. Alternatively, apply the value chain to explain how
information systems help primary and support activities to add values.
Sources
https://www.forbes.com/sites/kevinanderton/2019/06/26/the-business-of-video-games-market-share-for-
gaming-platforms-in-2019-infographic/#25fc8dba7b25
https://newzoo.com/insights/articles/the-global-games-market-will-generate-152-1-billion-in-2019-as-the-
u-s-overtakes-china-as-the-biggest-market/
https://newzoo.com/insights/rankings/top-25-companies-game-revenues/
https://www.gartner.com/en/marketing/insights/daily-insights/gaming-goes-global
2. Explain the competition among your major rivalry, bargaining power of buyers, bargaining
power of suppliers, threat of new entrants, and threat of substitutes. Hint: you can use SWOT to
get insight of these forces if necessary.
Major rivalry: as Google is one of the largest search engines around the world, the company has a lot of
competitors, but the biggest competitor is Apple.
Bargaining power of buyers: is weak, because of the small size of individual buyers and the moderate
information´s quality and increasing demand from the buyers. For Apple, the strong bargaining of buyers
is strong because of the low switching-cost and the high level of information to buyers.
Bargaining power of suppliers: it´s really weak for the reason that there are a number of suppliers to
select from. For Apple, it´s weak too because the high number of suppliers.
Threat of new entrants: this force is moderate for Google, because despite the fact that the entry barriers
are low, it is really difficult to compete directly with Google, due to the accumulated experience and the
great reputation that it has. For Apple it is also moderate, due to the high level of capital required and the
large investment that Apple has made in brand development.
Threat of substitutes: the threat of substitute products for Google is high, because existing products have
similar functions and as Google has said: "competition is a click away", therefore substitutes are readily
available. On the other hand, for Apple the threat of substitute products is low due to the technology it
has, online services and customer service it has.
