1. Video Game Industry

2. History

3. Some Numbers... 65% of US households play
80K employees directly, 250K in US
9 games per second
Average player age is 35, 40% female, 60% male
778 titles released in 2009
2009=$19.6B in US ($10.5B H, $9.1B S)
$76B by 2013

4. Compared to other Industries
Recorded music= $17B global
Movie ticket sales= $29.9 B global
Book sales= $35.9 B in US
Newspapers ad revenues= $37.85B in US
Magazine ad revenues= $19.45B in US
Cable Revenue= $89.9B in US
Global video game market= $46.5B-$55B

5. Digital Games
Console
Handheld
Computer
Arcade

6. Arcade?

7. The Big 3 Xbox: Nintendo: Playstation: 24.3%, $58B (17% of Microsoft)
28.8%, $10.7B/$79 B

8. The Big Three Are??? Horizontally Integrated???
Vertically Integrated???
Diversified/Diagonally Integrated???
Synergism???
Market IS???

9. Hardware Online Play More than just a game player
Accessories/Peripheral market
“Loss Leaders”...not Nintendo!
Play exclusive/3rd party games
Planned obselesence, 5-10yrs
New hardware sales=Software demands
Royalty Structure....

10. Development $10M for one platform, $18-28 for multiple
Get advance, 2-3 years, 20% avg. of sales profits
First Party: internal teams
Second Party: publisher's concept/license/contract
Third Party: develop and sell. Hired by publishers on contract basis. Advance/Royalty system.
Publisher's and creative control/Franchising
Consolidation to compete w/ Big 3 or Big 5
Gamers As developers

11. Publishing Marketing/Promotion/Sales Main Investors in game/Retain IP
Franchising/Branding... “Hit Driven”
Product Placement or IGA...$1B, Demo???
Licensing content
Publishing license to console manufacturer ($5-8 per game manufactured)
Distro= store, ship, and sales

12. Publishing Nintendo Activision Blizzard/ Vivendi Games $5B EA $4.2B
Ubisoft $1.4B
Take-Two Interactive $968M
Sony #6, Microsoft #10, MTV Games #14, WB #16, Disney #17, LucasArts #20

13. Retail “Real Estate” Antagonism with Publishers/Distro
Gamestop 21% of market, Wal-Mart, Best Buy, EB Games, Game Crazy
$2.5B used market, most profit$
Holiday season=50% of sales
MDF (Marketing Development Funds)

14. $60 Game Cost Breakdown $15 to retail
$7 to returns, “price protection” and MDF
$4 to distro as shipping and COG
$7 to platform royalty fee
$27 to publisher, 10-70% paid to 3rd party developer against advance
Every game sold $12 is lost to piracy or used games (Pub/Devel hate used games!!!)
In-house/Vertical integration???

15. Intellectual Property
Piracy: $3.5B on hard goods
2007, $945M Nintendo
Royalty System
Open Source Games/ Self Publishing
Mergers and “Acquisitions”
Licensing
Essentially videogames are ALL IP!

16. “The ESA offers a range of services to interactive entertainment software publishers including a global anti-piracy program, business and consumer research, government relations and intellectual property protection efforts. The ESA also owns and operates the E3 Expo.”

17. Market -8% in 2009 in 3 largest markets
“Family Entertainment” genre #1
Console= 60%
PC= 16%
Mobile= 4%
Portal= 11%
Online Subscription= 8%

18. Synergism Cross-industry licensing Super Mario Tomb Raider
Harry Potter/LOR
Star Wars/Indiana Jones Legos
Reproduction?
DJ Hero