Video Games Industry Overview The Downstream Market The downstream market begins at the distribution stage; again it is to be examined in terms of software and hardware offerings. In the software sector distribution to retailers is organized by publishers. Publishers must obtain a license for the rights to sell a game pertaining to a particular console and must pay the manufacturer royalties for each sold game. As such manufacturers must examine the optimal cost structure for their company to determine whether the costs/benefits of in-house publishers outweigh the costs/benefits of outsourcing to Independent or Third Party publishers. Within the industry Microsoft has their own in-house publishers, Microsoft Game Studios and is therefore identified as the only player who integrates all three functions of software development, hardware manufacturing and publishing. In contrast Sony and Nintendo rely on independent publishers for distribution. At the 2007 year end US based Electronic Arts was identified as the largest independent publisher by sales volume. In second was the Japanese company Konami, followed by US based Activision, French based Vivendi, US based Take-Two, and French based Ubisoft. In December 2007 Vivendi and Activision merged, creating a super publishing house able to compete with the dominant industry leader Electronic Arts (Nuttall, 2007).
Independent Publisher Global Market Analysis 2007 Sales Revenue in Billions USD Market Share Electronic Arts $ 3,091 19.9% Konami $ 3,066 19.7% Activision $ 1,513 9.7% Vivendi $ 1,074 6.9% Take-Two $ 982 6.3% Ubisoft $ 908 5.8% Others $ 4,892 31.5% Total $ 15,526 100.0% All data taken from web home page annual reports of companies
Industry Leaders By Country US 31%
36%
Japan France
13%
20%
Others
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