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) $18.5B in 2010; $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: – 24.3%, $58B (17% of Microsoft) Nintendo: – 1889, 47.4%, $18.9B Playstation: – 28.8%, $10.7B/$79 B

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

9. Hardware Online Play More than just a game player Accessories/Peripheral market “Loss Leaders”...not Nintendo! Play exclusive/3 rd 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. Synergism Cross-industry licensing Super Mario Tomb Raider Harry Potter/LOR Star Wars/Indiana Jones Legos Reproduction? DJ Hero

14. 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)

15. $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 3 rd party developer against advance Every game sold $12 is lost to piracy or used games (Pub/Devel hate used games!!!) In-house/Vertical integration???

16. 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!

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

18. “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.”