The computer and video game industry (formally referred to as interactive entertainment and generally as the games industry) is the economic sector involved with the development, marketing and sale of video and computer games. It encompasses dozens of job disciplines and employs thousands of people worldwide.

Overview

Once a niche market and considered by some as a curiosity in the mid-1970s, the video game industry took in about USD$31 billion worldwide in 2003. ^{citation needed]}Contrary to the popular belief, the video game industry is not bigger than Hollywood. The US film industry as a whole made about $44 billion in the same year, and the worldwide film industry is worth an estimated $200 billion per year. ^{citation needed]}Game industry figures also include the sales of hardware, which skews the data favorably in popular comparisons, but in fact software sales account for less than 20 billion dollars per year worldwide^{citation needed]}, showing the game industry is about 10-12% of the size and worth of the film industry.

The modern computing world owes many modern computing innovations to the game industry. The following computing elements owe their lineage and development to the game industry:

• Sound cards: developed for addition of digital-quality sound to games. Later improved for music and audiophiles.
• Graphics cards and 3D graphic accelerators: were developed for graphical user interfaces (GUIs) and games. GUIs drove the need for high resolution, games drove 3D acceleration. They also gave one the opportunity to use SLI graphics cards, or two graphics cards in one computer.
• CD Rom drives: were developed for mass distribution of media in general, however games use is probably instrumental in driving their ever higher speeds.
• Joysticks were developed mainly for playing games.

In addition, many of the higher powered personal computers are purchased by gamers who want the fastest equipment to power the latest cutting-edge games. Modern games are some of the most demanding on PC resources, so the latest hardware is often targeted at this sector likely to purchase and make use of the latest features. Thus, the inertia of CPU development is due in part to this industry whose applications demand faster processors than traditional applications.

Disciplines

The game industry employs those experienced in other traditional businesses, but some have experience tailored to the game industry. For example, many recruiters target just game industry professionals. Some of the disciplines specific to the game industry include:

• Game programmer
• Game designer
• Level designer
• Game producer
• Game artist
• Game tester

Most of these professionals are employed by video game developers or video game publishers. However, many hobbyists also produce computer games and sell them commercially.

History

The emergence of the video game industry can be traced to Pong in 1971—the first widely available video game. From this point, the video and computer game industry formed into a hobby culture in the late 1970s when personal computers just began to become widely available. The industry grew along with the advancement of computing technology, and often drove that advancement. 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.

Economics

The video game industry is currently facing financial strains^{citation needed]} as it attempts to fairly compensate its talent, while continuing to turn a profit. The result is that the game developer, the traditional source of new games, is essentially dying out or being incorporated into large publishers. The game industry is currently experiencing a phase of consolidation and vertical integration as a reaction to spiralling costs. This climate has also given birth to vibrant indie game developers comprising of tiny companies trying to use the internet rather than traditional retail channels to reach an audience.

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 on the games sold. Many early game publishers started from this economic climate, such as Origin Systems, Sierra Entertainment, Activision and Electronic Arts.

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 engines 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, to reduce costs.

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 forebearers, 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, who fund the developers, much more important than in the music industry.

Breakaways

A particularly famous case is the "original" independent developer Activision, founded by former Atari 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 née Infogrames).

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

Economic problems remain today with regard to publisher-developer contracts (see copyright: transfer of rights). Typically, developers receive around 20% of royalties, 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.

Creative control

Some people disapprove of publishers having creative control 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 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 while producing both low-quality, unoriginal games, and innovative and popular titles such as the Grand Theft Auto series and The Sims series. 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 games industry is a more closed one, and a game developer must have up to three licenses from the console manufacturer:

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 developer. 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 or open source model over the Internet. However, it remains to be seen whether freely made and distributed games can survive in the era of multi-million dollar productions.

Japanese video game industry practices

The Japanese video game industry is markedly different from the industry in the US and Europe.

Generally, games occupy greater cultural attention in Japan than the U.S., and its market share of total entertainment in Japan is higher than the U.S. Japanese publishers are often known for highly demanding standards on published titles, with Nintendo probably especially well known in this area. High-quality voice acting (on par with that of movies) was seen in Japanese games several years before American teams began to seriously think about it. Japan has created some of the largest and most expensive titles ever made, such as Final Fantasy X and the Metal Gear Solid series of games, and will probably continue to lead the way worldwide in terms of high production values and large teams.

Arcades

Video game arcades are still relatively popular in Japan; for every arcade game 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 in general. In particular, the arcade scene in Japan has caused them to lag behind in the field of sound effects and sound design, because this is less important in an arcade. For example, a modern game like Tekken 4 still uses 16 kHz samples like the original arcade release.

Media

Consoles and arcade games are the main media for Japanese game design; PC games are nowhere near as popular. This necessarily dictates that there are fewer independently developed games coming from Japan, as its far 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 far 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 far different. For example, Japanese game design teams had a dedicated designer, (which they called a "director") far earlier then American design teams adopted the practice. Yet it was clear that even with this centralized design process level designers and character designers were given a lot of leeway to work within their boundaries as much as possible. For example, almost every level in Super Mario Bros. 3 has new gameplay concepts within it.

Secondly Japanese game designers throughout history generally had far more people working on a particular game then a comparable western design team. For example, Mortal Kombat, an American title, was developed by four people: a programmer, an artist, a musician, and a background artist. Street Fighter 2, a comparable Japanese title, had almost one artist working on every character in the game, plus two programmers, plus a musician with the result being a team of twenty or more people.

See also

• List of gaming topics
• Game Developer Magazine

External links

• comp.games.development.industry (Google Groups)
• GameDev.net
• Gamasutra.com
• International Game Developers Association
• Playing the Game: The Economics of the Computer Game Industry (Cambridge University Press)
• Sloperama: Game Biz Advice (Tom Sloper)