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Of Video Games, iPhones, and Entrepreneurs
By Marc Tracy
This New York Times article on the changes and flattening afoot in the video-game industry takes primarily the perspective of the established video-game companies--the Electronic Arts and Take-Twos of the world, as well as much larger corporations, such as Microsoft and Sony, with extensive positions in selling, respectively, their Xbox and Playstation modules. These big businesses face the strange paradox of a sector that is radically expanding (with older people in particular beginning to partake) and robustly growing (video-game sales were up 19% in 2008 over 2007) combined with the increasing difficulty of actually turning a profit on games, which tend to require large investments and are therefore expensive to retail. Not unlike the world of book publishing, the video-game industry is moving in an increasingly blockbuster-reliant direction. So things do indeed look, if not grim, at least challenging for even such mainstays as Nintendo.
But there is, of course, another side to the story, which the article touches on several paragraphs down: "But game companies say there is a bigger force at work: the proliferation of consumer choice in the game industry prevents them from raising prices on console games. Games for iPhones are considerably cheaper; indeed, many are free." It might have added that games for iPhones are stupendously popular: a quick check on our iPhone revealed that the significant majority of the top 25 most-downloaded applications are games of one kind or another, and that many of these are simpler types of games that probably cost very, very little to make (and which appear to be sold by unheard-of start-ups).
The point is not just that, as we've written many times before (here's one particularly salient example), iPhone apps are a great place for ambitious, talented entrepreneurs to look to start making names (and money) for themselves.
The point is that, generally, new technology over the past decade or two has reached the point where, on the hand, the old-line, staid corporations are not quite flexible enough to move as quickly as the times, whereas, on the other hand, the barriers to entry for extremely small companies have shrunk to next to nothing, or to just plain nothing.
The flattening of the video-game industry may just prove a harbinger of a larger trend, surely only exacerbated by the current recession (which is damaging big companies and giving a lot of brilliant laid-off folks a bit more time and incentive to strike out on their own), in which we will increasingly see an advantage go to the little guy. Should be exciting to watch.
Comments (0)March 30, 2009 1:23 PM
