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Why is the Game Industry Exploding?
By: Bruce   Friday, September 05, 2008 10:23 AM
Sectors: Computer and Technology
Symbols: MSFT, SNE
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 Last year the global growth in video gaming was vastly more than even the most optimistic analyst predicted. So they upped their estimates for this year. And again the growth is vastly outstripping any one’s wildest dreams. So what has happened to cause this?

  • Nintendo have been brave enough to create a succession of games intended for non traditional (or sometimes broader) demographics. Far more than this, they have been even braver and put big marketing spend behind these games so as to reach these demographics. This has been a massive unleashing of the potential that is interactive entertainment.
  • We have escaped from the Sony monopoly. By dominating the market for the PS1 and PS2 generations they had no need to compete or take risks. So they held the market back for over eight years, which is several lifetimes in this industry. Capitalism and competition is great. But when it is hogtied, as happened during the Sony monopoly, everyone loses.
  • We have three platform holders going for it. Sony, Microsoft and Nintendo are now each investing billions and using the best brains that they can find both in product and in marketing so as to fight a three cornered console war. The stakes are enormous, this industry is still at its very beginning. Interactive entertainment will grow to be bigger than film and television combined. As in any war we see great advancement. World war two started with biplanes and finished with jets, in just six years. The same leap is happening in gaming right now.
  • MMOs mature. This has been an incredible phenomenon. MMOs have gone from text to 2D graphics to 3D graphics to immensely complex alternative existences with hugely powerful social networking. At the same time with games like Habbo, Runescape and Maple Story they have sought out new demographics. There is now a range of MMOs for everyone. But still it is just the beginning. The genre is held back by its dependence on sword and sorcery themes. And commercially by the supposed $1 billion price tag that would be needed to take on World of Warcraft.
  • Casual gaming. This is the 800 pound gorilla that has come from nowhere to become a multi billion industry in just a few short years. Traditional gaming was too obtuse and too demanding of the player. The industry was committing self harm in a big way with its dependence on the niche that is hard core gaming. Now we have escaped from that and are reaping the rewards.
  • New business models. The industry was stuck for years in depending on high street sales of cardboard and plastic.
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