This week I've decided to take a break from blogging about security, and have instead written about the PC gaming industry with a little info on mobile gaming.
The PC gaming industry is a segment of the overall video game industry, and usually refers to only the sales of the software titles produced by game designers. Unlike the console market which includes the sales of the actual hardware systems, the PC gaming industry does not because virtually any modern computer can install the software needed to have a ‘gaming’ system and it’s hard to define what percentage of computer’s are purchased for solely gaming due to the computer’s multifunctional abilities. Nevertheless, as I will explain later, hardware manufacturers such as Intel, Nvidia,
Players in the PC gaming industry
Hardware – As mentioned above, since the hardware needed to play games are not specific any manufacturer, every PC and component manufacturer [from Dell to Logitech (who makes pc game controllers)] has at least a minor stake in the PC gaming industry. Therefore to keep things short, I’ll mainly focus on two components that are the primary beneficiaries of the PC gaming industry: CPUs and Video cards.
1. CPUs – The central processor unit does as its name suggests and there are two major suppliers of the chips: Intel and AMD. Intel is the giant in the CPU market with revenue last year of $35 billion which declined from $38 billion in the previous year due to significant market share losses across all markets (Dell used to ship only Intel based systems), but more importantly lost market share in the lucrative server market to AMD who now possesses approx 21% (see link here). AMD is the underdog of the CPU market who dared to challenge Intel’s near monopoly power over the industry, and last year posted sales of $5.6 billion, but in recent years has had cash and operating losses which has marred its financial performance.
2. Video cards/GPU – as the demands of gamers push for more realistic environments it quick becomes apparent that the CPU isn’t enough, so manufacturers came up with a separate device which has graphics logic programmed into it (to draw all the polygons, smooth texture, and imitate physics). The three major players in this arena are Intel (38% MS), Nvidia (29% MS), and ATI (24% MS – see link) who recently merged with AMD (see link here). Initially, you wouldn’t think of Intel as a dominant player in the graphics industry since its products are poor performers compared to Nvidia and ATI, but the fact still remains that many computers were not meant for gaming and use Intel’s onboard graphics for daily use. AMD's merger with ATI indicates the feasting of Intel’s core markets will continue.
Software developers – while there are many small software design studios, according to Hoovers the three big developers in the entertainment and games segment of the software market are EA, Activision, and Take-Two (see industry link). These names probably sound familiar because they are the same developers who make the popular titles you see in playstation, xbox 360, and the Wii. The following sales figures are of the entire company as a whole and not exclusively for the PC/mobile gaming divisions. Since most of the games are ported over to PC/MAC/Mobile, they are mentioned here.
1. Electronic Arts – last year EA had sales of $2.9 billion which was more than the combine sales of its top two competitors. Most of EA’s top titles come from perennial sports favorites such as Madden 07, NBA 07, NHL 07, but also include popular film titles such as Lord of the Rings: battle for middle earth, Harry Potter, and the Godfather. What is common about all these popular titles is that they all require licensing fees to be paid to their respective owners (more will be talked about this in the competitive dynamics). In a move to capture the evolving mobile gaming platform EA acquired mobile game leader JAMDAT in 2006 and has formed subsidiaries such TOM Online to distribute mobile games in India, while also forming a strategic alliance with QUALCOMM’s mobile gaming division, Brew (see link to EA).
2. Activision – tracing its roots back to the Atari 2600 system and the popular title Pitfall, Activision also is a major licensee of games titles such Star Wars, Shrek, and Marvel comic’s film franchises, including: Spiderman, Fantastic Four, etc. Last year Activision posted sales of $1.4 billion (see link to Activision).
3. Take-Two – unlike the above two competitors who rely heavily on the popularity of licensed titles to support sales, Take-two and its subsidiaries 2K and Rockstar are driven by developing in house IP titles such as Grand Theft Auto, Civilization, and Rollercoaster Tycoon, but does have a small collection of licensed games. Last year Take-two posted sales of $1 billion (see link to Take-Two).
Licensors – these are the owners of IP content. In the gaming industry this content often follows whatever is in the popular media today, from the Harry Potter films (which were licensed from JK Rowlings) to popular icons such as Tony Hawk. Since these licensors are generally fragmented, I will not list any players in particular, but it is important to keep in mind that the licensing costs vary greatly and are a big concern in development costs.
Advertisers – this is just about every company that has a product to sell. In recent years companies are just beginning to invest in advertising within video games because, according to
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