2. Global Economy and Supply Chain
Chapter 10
Global Economy and Supply Chain

3. Objectives Describe how video games are marketed and sold.
Explain the relationship between video game publishers, developers, distributors, marketers, and retailers.
Identify how globalization has impacted the design and production of video games.
Describe how video games affect the economy.

4. Objectives (Continued)
List various employment opportunities available in the global video game design field.
Identify the requirements of various jobs in the video game design field.

5. Early Economy
The barter system of trade occurred before the invention of currency
To some degree, it still exists today
The invention of currency (money) made exchanging goods and services easier
A supply chain consists of the links where a product or service is transferred from producer to end user

6. Video Game Supply Chain
The links in the video game industry supply chain can be divided into five main categories
Development
Production
Wholesale distribution
Retail distribution
Consumer
There may be many different suppliers at each link in the supply chain

7. Video Game Supply Chain (Continued)
The purpose for the developer is to make a game and deliver a gold master
The marketing effort done by the developer is aimed at selling to producers and wholesalers
Developers often release beta (trial) versions of the game to generate consumer interest
To get paid, a developer typically receives a royalty from the producer

8. Video Game Supply Chain (Continued)
The producer adds value to a product by completing the manufacturing
Packaging is a very important part of the production group’s role
Producers are responsible for most of the effort of marketing the game to the end user
The typical customer in the supply chain for a producer is a wholesaler or middleman

9. Video Game Supply Chain (Continued)
The value wholesalers add involves moving bulk items, warehousing, and distribution
Another major role of a wholesaler is the assumption of risk
A regional warehouse system may be used to reduce travel time and costs
To make a profit, the wholesaler must increase the unit price with a markup
Discounts encourage higher-volume sales

10. Video Game Supply Chain (Continued)
Retail is the stage in distribution that sells directly to the consumer
Most retailers purchase from wholesalers and middlemen
In general, the video game industry does not allow price competition on new release games or game consoles
Retailers must also abide by the release date rules

11. Video Game Supply Chain (Continued)
In direct marketing, the developer or producer sells directly to the end user
This process cuts out the wholesaler, middleman, and retailer
A direct marketing media that is very profitable for the developer and individual designer is the application (app)
There is no supply chain for the production of an app

12. Video Game Supply Chain (Continued)
The final link in any supply chain is the end user or consumer
Each link in the supply chain adds value to the product in either price, promotion, place, or product
In the used video game market, consumers sell their video games to other consumers
A popular way to try new games without buying them is the rental game market

13. The Four P’s of Marketing
Goodheart-Willcox Publisher

14. Changes in Video Game Supply Chain
Recently, the video game industry began looking for ways to make changes to the supply chain
Important related topics include
Combining supply with other electronic media
Downloadable games and media
Handheld markets
Avoiding piracy
Globalization

15. Piracy
Piracy is the illegal copying and distributing of games, with or without money exchanging hands
Each game that is pirated takes money away from the supply chain
If a developer does not get the royalties from the games sold, it will go out of business
It is in the best interest of the supply chain to eliminate piracy to safeguard profitability

16. Piracy
Goodheart-Willcox Publisher; images: Clipart.com

17. Globalization
Globalization means that other countries, in addition to the United States, are involved in production or purchase of products
Sometimes, a labor-cost differential allows a company to produce a game cheaper
Outsourcing refers to using other people or companies to do work rather than company employees

18. Globalization (Continued)
Global labor is also used due to the need for specialized skills or a skill differential
People with more skills or education in a specialty area will get the work regardless of where they live
Technology and currency are the two main reasons why production and sales can exist globally

19. Jobs in the Global Video Game Economy
There are many job openings in the expanding global marketplace for video games
One of the newest forms of spectator sport is the video game tournament
Each career has a set of criteria unique to the position
Those criteria almost always start with the formal training needed in high school and college

20. Jobs in the Global Video Game Economy (Continued)
Regardless of your education and training, you need to know where to look for your next job
Guidance counselors at your school may provide information on internships and jobs
Many companies advertise on job websites
Trade magazines are a good place to look for jobs
You will need to have a résumé and a portfolio available to send to an employer

21. Have you sold one of your video games to another consumer or purchased a video game from another consumer? Describe the experience.
What formal education, training, or experience have you had that would help prepare you for a career in the video game industry?