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Revenue Generation in the Gaming Industry

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  • 0:05 What Is the Gaming Industry?
  • 1:04 History of the Gaming Industry
  • 3:12 Revenue Generation in Gaming
  • 6:45 Lesson Summary
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Lesson Transcript
Instructor: Elizabeth Wamicha

Elizabeth teaches undergraduate courses in Business and Information Technology for the last 7 years. She is currently on course to completing a Doctorate in Information Systems

If you've ever wondered how the gaming industry generates profit, then look no further than this lesson. You'll learn about the growth of the gaming industry and the strategies used to generate nearly $100 billion in revenue in 2016.

What Is the Gaming Industry?

In the past, the term gaming industry was used to describe brick and mortar casinos and online gambling platforms. Now the term has expanded to include computer and video games. It is also interesting to note that the gaming industry is considered an entertainment business. For the purpose of this lesson, we'll use the term gaming industry to refer to online and offline computer and video games, regardless of platform.

To illustrate the industry's rapid growth, let's consider Newzoo's Global Games Market Report that indicates gamers around the world are likely to generate no less than $99.6 billion in 2016. This revenue is higher than that generated in 2015 by a whopping 8.5%. Furthermore, mobile gaming generates the most revenue in this market: $36.9 billion this year, a global increase of 21.3% in recent years.

History of the Gaming Industry

Why is the gaming industry so successful and why does it continue to grow steadily year after year? The market for online and offline computer and video games has seen expansive growth in the last few years. When did this growth start, you may ask? Well, let's start from the beginning by examining a brief history of the gaming industry.

Since the 1970s, the gaming industry has made great leaps and bounds in terms of its evolution. Some of the earliest computer games in the 1970s were Computer Space, an arcade game, as well as Atari's Pong.

In 1977, the industry saw a slow down in growth, but then a growth spurt occurred in the early 1980s when Space Invaders made $2 billion in 1982. Despite this success, the 1980s were turbulent for the gaming industry, especially because of the industry crash in 1983. One reason for the crash was that computer game developers were making substandard games. Towards the end of the 1980s, however, the now famous Japanese company Nintendo entered the market, and through their games consoles such as the Nintendo Entertainment System and the portable Gameboy, they brought a significant revival to the gaming industry.

Later, the 1990s saw a number of advancements in the industry, such as widespread use of the compact disc, otherwise known as the CD. These storage devices were used to store and distribute gaming software, including that of the first Sony Playstation. This decade also saw the increased use of graphical user interfaces, or GUI, which allows a user to interact with software using pictures or icons. These advancements fueled the resurgence in gaming.

Which brings us to the present. The 21st century has thus far been known for the growth of mobile gaming. Mobile gaming software is developed primarily for devices running the Android operating system and iOS, so these games are usually played on cell phones, smartwatches, and tablets. Today, PC and mobile gaming continue to grow in popularity, and therefore, companies making these games continue to generate impressive revenue.

Revenue Generation in Gaming

So, yes, gaming is popular, but how do companies make so much money? Let's imagine we own Global Gaming, a hypothetical company in the industry. As part of its revenue generation plan, Global Gaming offers three main types of gaming products: console gaming, PC gaming, and mobile gaming. First, we'll look at the types of games our company makes, and then we'll look at Global Gaming's options for making money.

a) Console Gaming: These games are played on a device called a video game console that is mostly devoted to games. Users interact with the console, usually with a controller, in order to play the game. The consoles Global Gaming offers can also be used to browse the Internet and to play blue-rays, DVDs, and CDs.

b) PC gaming: These games are also known as personal computer games and can be played using a computer keyboard or mouse. Most of these games have a GUI for players to play the game. Global Gaming offers both online and offline PC gaming options.

c) Mobile gaming: These are games developed for use on a mobile device. They can be downloaded to the device through an app store or the player can play these games online by accessing them through the cloud.

And of course, certain games can be accessed through both a mobile device and a PC. Rovio's Angry Birds is an example of this type of game. Now that we know what kinds of gaming products our company makes, let's look at Global Gaming's revenue generation options for its products.

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