The primary revenue stream for video games is a combination of software and hardware sales. Gamers need to buy the hardware (xbox 360, PS3, etc.) before they can play any of the games. Once they have the hardware the majority of their purchases until their next system are games, the software portion of sales. The software portion of the industry is doing well, constantly coming out with new games or new versions of old games, but the hardware industry is not faring as well. Once a person has a system, they do not need another one for a while, and as technology gets better these systems' life spans are increasing. The longer a system lasts, the fewer get purchased and the hardware revenue begins to dwindle. In order to maintain profitability the industry has done a few things, the largest being making newer editions of games and consoles that are already profitable. Another big way to remain profitable is to create games specifically for your console, which guarantees that once a consumer buys your system, they must continue to buy the games you sell to match that system. Although they remain profitable, the industry is getting watered down with games that are all becoming too similar. The newest games are just updated versions of old games that are guaranteed to sell, which keeps the creativity to minimum and the content very stagnant.
Here is a link to an article describing a few creative video game producers trying to create games people "don't know they want yet"
If I were an executive I would continue to make new versions of games and consoles, but I would also look toward ways to make these games more accessible. Right now we are in an age where people want everything to come to them, wherever they are, and in order to do that the video game industry has to start looking for ways to make profits when their consumers are away from their consoles. That could be on computers, on phones, on tablets, or some other new technology, but that is where I would begin to look for new revenue.
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