Monday, March 5, 2012

Video Game Industry

Unlike the other industries we have discussed in class, the video game industry has maintained considerable growth by tapping into new and re-articulated media forms. Whether it be through a traditional console, the internet, or mobile device, the video game industry has been able to commodify the consumers experience. The primary revenue streams that support this model are through in-store sales, digital subscriptions and advertising placement. A major threat that is posed to this this model is the greater influx of social media and mobile application platforms offering games/services for free. However, that harm is mitigated for those companies by offering advertisement space much like the three-party model of network television.
However, the traditional business model of high cost barriers of entry for creation and distribution associated with the industry is reworking itself in order to adapt to such changes. First, video creators are looking to merge pre-existing media forms with their technology in order to garner a competitive advantage. This is demonstrated by Mötley Crüe who released their new single in 2008 on iTunes and the "Rock Band" platform; sales on "Rock Band" outweighed iTunes 5:1 according to Billboard. Moreover, the mergers of not only content but businesses has allowed many new technologies to emerge and become  vertically integrated within the industry (Example: Activision & Vivendi). What is also interesting is the shift to a non-cyclical business model for many companies as the virtual reality created by video games becomes more and more life-like that the habitual attitude and competitive nature of playing requires daily use.
As I see the industry, the commodification of the experience will most likely make a greater shift where activities performed in these virtual worlds will produce rewards in the physical world. I would suggest that brands and consumer products utilize the mobile geo-location capabilities and the fanatic fandom of video game platforms to reward customer loyalty by awarding gifts or coupons within the virtual space that can be redeemed in real-life. This has been done for many of the female video games and big brands such as Procter and Gamble available for fashion and cultural purposes but I foresee an even greater profit margin to be made when brands can find greater synergy between the virtual and real worlds by using virtual distribution in order to lower costs in the front end.

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