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Tuesday, 26 March 2013

Video Game Industry

Overview of the video game industry, find out what it makes, the major types of participants and their characteristics.

There are four major categories in the game industry: (1) game developers; (2) game publishers; (3) distributors / wholesalers; and (4) retailers.


1. Game Developers, as it implies from their name, they are the ones who create games. These are mostly creative studio type companies, which employ designers, programmers, scripters, coders, voice actors, etc., who create characters, design their appearance, give them voices, bring them to life by creating scripts, etc. Usually developers need help of the next category, i.e. the publishers, for financing the game creation process.

2. Publishers are the producers and owners of games. They provide the financing and the business management, and in most cases they own all the titles and the rights on the created work. The game creation process is usually dual, in one extreme a game developer may create a game and offer it to publishers, and in another extreme, a publishers may approach a game developer and order to create a particular game. The real life process is somewhere in between these extremes, it usually involves both developers and publishers, who jointly go through all the processes from the idea

generation to a ready marketable product, coordinating the work with each other.

3. Distributors and Wholesalers. After game is ready and before it gets to the retail shelves, it often passes through another industry component, the wholesales and distributors. Their role, often underestimated, though is quite important. Often they act as dealers, especially with back catalog existing titles. They may keep large quantities of stock and move it between distant geographical locations.

For many publishers it is easier and more feasible to deliver their titles through distributors, in order to avoid the hassle of logistics, warehousing, transportation, and delivery. Especially when selling to small and medium customers. For small and medium retailers, the distributors and wholesalers are the most probable source of supply, since publishers unlikely to sell to small and medium retailers. Distributor often supply large retail customers too. They have a well organized channels of distribution, including delivery. With back catalog items distributors often can offer items, which publishers do not have in stock. 

4. Retailers. Games get into the

hands of the end users through the retail. Retailers can be small, such as a local street stores or ebay stores set up as complimentary evening activity to a full time job. They can be large such as national chains of super and hypermarkets. Retailers are the last category in the distribution chain, and the front line of interacting with the end consumers, they are the final category in the B2B process, and in some regard they are the creators of the business demand with all the other categories. In other words, it is what the retail is able to sell that ultimately forms what studios and publishers create, and what wholesalers stock.


In most cases any game passes
through all four layers before it reaches the end customer. Since doing business in different layers require varying qualifications and skill set, most of companies in the industry perform functions only in one category. In other words it is unlikely for a developer that specializes in creating games to also specialize in distribution or retail. Some large publishers may also develop games, though they mostly may outsource to specialized studios. Or they may have their distribution channel, though they will most probably deliver only to the largest retailers, and smaller customers will have to buy through wholesalers and distributors.

The online distribution is changing the shape of the industry. Sites such as Steam, unite unprecedented before functions in one place, they create demand, distribute, and sell to the end user. With further development and better access of high-speed Internet, the share of digital distribution will only increase. Not only PC games but also increasingly console games will get distributed online. We are planning a separate discussion about this exciting subject, please stay tuned!


Related: 
Video game industry contacts
Where to Buy Wholesale Video Games

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