The global games market is expected to generate $152.1bn in 2019, a 9.6% increase from the previous year, as the gaming industry becomes a multi-billion dollar industry that’s changing entertainment, according to a report by Newzoo. The growth has been driven by the rise of mobile gaming, the increasing popularity of esports and the launch of new game consoles. The sector generates revenue through several streams, including game sales, in-game purchases, advertising and sponsorships.
The Business of Gaming: Understanding the Multi-Billion Dollar Industry That’s Changing Entertainment Forever
Introduction
Gaming has become an integral part of our lives. We’ve all played games, whether they be on a console, mobile device, or desktop computer. And while gaming used to be seen as a simple recreational activity, it has evolved into a multi-billion dollar industry that’s changing entertainment forever.
The Growth of Gaming
The gaming industry has experienced tremendous growth in recent years. According to a report by Newzoo, the global games market is expected to generate revenues of $152.1 billion in 2019, a 9.6% increase from the previous year. This growth has been driven by several factors, including the rise of mobile gaming, the increasing proliferation of esports, and the launch of new game consoles.
Mobile Gaming
Mobile gaming has become a significant force in the gaming industry, with over 2.4 billion mobile gamers worldwide. The convenience of being able to play games on your smartphone or tablet anywhere, anytime, has revolutionized the way people play games. The popularity of mobile gaming has attracted big players like Tencent and Activision Blizzard, who have made significant investments in this sector.
Esports
Esports, or competitive video gaming, has exploded in popularity in recent years. Large-scale esports events can now fill stadiums and attract millions of viewers online. Esports has become so prominent that it has been added as a medal event in the 2022 Asian Games, showcasing its mainstream appeal. The growth of esports has led to many opportunities for companies to sponsor and invest in teams and events.
New Game Consoles
The launch of new game consoles like the PlayStation 5 and Xbox Series X has also contributed to the growth of the gaming industry. These consoles offer advanced graphics, faster processing power, and new features that provide players with a more immersive gaming experience. The launch of these new consoles has energized the gaming industry and driven sales of consoles and games.
The Business of Gaming Companies
The gaming industry is made up of companies that develop, publish, and sell games. These companies can be categorized into three main types: developers, publishers, and hardware manufacturers.
Developers
Developers are the creative minds behind the games. They design the game mechanics, create the artwork, and write the code that brings the game to life. Some developers are independent, while others work for larger companies. Developers include companies like Epic Games, which developed the mega-popular game Fortnite, and Valve Corporation, which created the Half-Life and Portal series.
Publishers
Publishers are responsible for marketing and distributing the games. They work with developers to bring the games to market, and they handle the logistics of producing physical copies of games. Publishers also manage relationships with retailers and online marketplaces. Publishers include companies like Electronic Arts and Ubisoft.
Hardware Manufacturers
Hardware manufacturers produce the gaming consoles and accessories that players use to play games. These companies include Microsoft, Sony, and Nintendo, which produce the Xbox, PlayStation, and Switch consoles, respectively.
Revenue Streams in Gaming
The gaming industry generates revenue through several streams, including game sales, in-game purchases, advertising, and sponsorships.
Game Sales
Game sales are a significant source of revenue for gaming companies. Players buy physical copies or digital downloads of games, and the publishers take a cut of the revenue. In 2018, the best-selling game of the year was Red Dead Redemption 2, which generated $725 million in its first three days of release.
In-Game Purchases
In-game purchases are becoming increasingly popular, with players spending money on virtual goods within games. These purchases can include items like skins, which change the appearance of a character, or loot boxes, which offer a random selection of virtual items. In 2018, the popular game Fortnite generated $2.4 billion in revenue from in-game purchases alone.
Advertising and Sponsorships
Advertising and sponsorships are also significant revenue streams for gaming companies. Esports events and players can attract sponsorship deals, and gaming companies often advertise their games and products during these events. Advertising and sponsorships are a way for companies to reach a large and engaged audience.
Conclusion
The gaming industry has grown from a simple hobby to a multi-billion dollar industry that’s changing entertainment forever. The proliferation of mobile gaming, the rise of esports, and the launch of new game consoles have all contributed to the growth of the industry. Gaming companies, including developers, publishers, and hardware manufacturers, generate revenue through several streams, including game sales, in-game purchases, advertising, and sponsorships. With the industry’s growth and ever-evolving landscape, it’s clear that gaming will continue to be an important part of our lives.