![]() Grand Theft Auto V, for instance, was several years in the making and cost $265m, split evenly between development of the game and marketing. Yet most games barely break even a few huge blockbusters make up for the losses on most other games. Gamers want to play the games that other gamers are playing, so successful titles enjoy a so-called positive-feedback loop. Blockbusters compensate for losersįortnite is also an example of the sector’s ‘Hollywood Economics’. Following the court battle, the judge ruled in favour of Apple, though Tim Sweeney of Epic Games has vowed not to bring Fortnite back to Apple until it has reduced its charge and passed the savings on to gamers. Although Fortnite is free to play, it generated $4bn in revenues in the first two years across all platforms (including mobile) as players paid for premium features. Alphabet, Google’s parent, which owns the Play store, has followed a similar strategy, despite not manufacturing the majority of Android phones.Įpic Games, maker of the popular free-to-play Fortnite, a multi-player ‘last-man-standing shoot-em-up’ game, has baulked at the 30% revenue share, last year filing lawsuits against Apple and Google claiming their behaviour is anti-competitive. Apple handles payments, promotion and distribution but charges a 30% cut of app developers’ sales in return. The majority of app-store downloads are games. It makes a profit on hardware (Macs, iPhones and iPads) and encourages programmers to build apps as a complementary asset that increases the value of its devices. ![]() Aside from the consoles, gamers also play games on PCs, and more recently mobile-phone games have taken off.Īpple goes the opposite way. Consoles – computers specifically designed for playing videogames – are often sold at a loss the hardware manufacturer makes profits from licensing a revenue share of games sold and played on the consoles. The three console makers, Microsoft (Xbox), Sony (Playstation) and Nintendo (Switch) are capital-intensive and have long release cycles. The basic business models of videogame companies More recently, women and other ages have joined the party in droves, particularly when it comes to games played on a mobile phone. This was partly because gaming industry executives lacked the imagination to see that they were missing an opportunity by defining their customers’ demographic so narrowly. Historically, gamers have tended to be male, aged between 16 and 30, and single. The global number of gamers is rocketing there will be 3.3 billion in 2024, according to Devolver Digital, up from 1.3 billion in 2015. The pandemic has benefited games companies, as people trapped at home had few other options. Today there are four listed videogame companies on Aim, the London Stock exchange’s junior market, collectively worth just under £4bn: Devolver Digital, Frontier Developments, Keywords Studios and Team17 (more on these below). A decade later, its Grand Theft Auto V, released in 2013, earned $750m from players downloading the game and a further $2bn over five years from additional content. Edinburgh-based studio DMA Design was acquired by US company Take Two Interactive for just $11m in 1999. There have been missed opportunities, too. Deep Mind is now solving important problems in areas such as nuclear fusion, but Hassabis first taught his neural network to think by playing videogames such as space invaders. The industry employs 50,000 highly skilled staff in the UK, mostly outside London. The associated spin-off benefits include the Raspberry Pi Foundation, a charity promoting the study of computer science in schools, and Deep Mind, an artificial intelligence (AI) company acquired by Google’s parent Alphabet for $500m. It was founded by Demis Hassabis, who in his gap year before going to Cambridge became a computer-game developer specialising in strategy games. Unlike manufacturing, games are a knowledge industry, unaffected by supply-chain difficulties or border red tape. Gaming is a global market, so overseas revenues are an important source of earnings.
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