Computer and video game industry

From Academic Kids

The computer and video game industry is the economic sector involved with the development, marketing and sale of video and computer games. It encompasses dozens of job disciplines and employs thousands of people worldwide.



Once a niche market and considered by some as a curiosity in the mid-1970s, the video game industry now takes in USD$10 billion per year worldwide. Contrary to the popular belief, the video game industry is not bigger than Hollywood. The film industry as a whole makes $180 billion per year, while book publishing makes $23 billion per year. However, the video game industry is a very young industry, and continues to grow every year.

The modern computing world owes most modern computing innovations to the game industry. The following computing elements owe their lineage and development to the game industry:

  • C: one of the most popular programming languages and the forerunner to the popular OO language C++ was developed because the programmers wanted to play an Asteroids-like game.
  • Sound cards: developed for addition of digital-quality sound to games. Later improved for music and audiophiles.
  • Graphics cards and 3D graphic accelerators: were developed for graphical user interfaces (GUIs) and games. GUIs drove the need for high resolution, games drove 3D acceleration.
  • CD Rom drives: were developed for mass distribution of media in general, however games use is probably instrumental in driving their ever higher speeds.
  • Joysticks were developed mainly for playing games.
  • Unix: developed so the programmers could play a space traveling game.

In addition, many of the higher powered personal computers are purchased by gamers who want the fastest equipment to power the latest cutting-edge games. Modern games are some of the most demanding on PC resources, so the latest hardware is often targeted at this sector likely to purchase and make use of the latest features. Thus, the intertia of CPU development is due in part to this industry whose applications demand faster processors that traditional applications do not require.


The game industry employs those experienced in other traditional businesses, but some have experience tailored to the game industry. For example, many recruiters target just game industry professionals. Some of the disciplines specific to the game industry include:

Most of these professionals are employed by video game developers or video game publishers. However, many hobbyists also produce computer games and sell them commercially.


The emergence of the video game industry can be traced to Pong in 1971—the first widely available video game. From this point, the video and computer game industry formed into a hobby culture in the late 1970s when personal computers just began to become widely available. The industry grew along with the advancement of computing technology, and often drove that advancement. Today, the video game industry is a juggernaut of development, profit and still drives technological advancement which is then leveraged by other industry sectors. Though maturing, the video game industry is still very volatile, with third-party video game developers quickly cropping up and, just as quickly, going out of business.


The video game industry faces unique financial strains as it attempts to fairly compensate its talent and at the same time, turn a profit significant enough to fund the development of future titles.

Early in its history, profits for video games were easy to make since computing power was so sparse. Most games could be developed by a single programmer and that programmer could sometimes develop all of the art as well. For games with higher graphic requirements, usually a single artist was all that was required. Games developed by such small teams would sell hundreds or thousands of copies each, generating significant profits. Also, many of these games only took a few months to create, so one developer could release several titles in one year. Thus, publishers could often be generous with benefits, such as royalties on the number of games sold. Many early game publishers started from this economic client, such as Origin Systems, Sierra Entertainment, Activision and Electronic Arts.

As computing and graphics power increased, so did the size of development teams. Game development team sizes ballooned as more experts were required to deliver the graphic and technical quality which their audiences demanded and, frankly, came to expect. Now a game development budget can easily reach millions of dollars (US dollars), even if middleware and pre-built game engines are used (which cost tens to hundreds of thousands of dollars to license). The required budget for games is still inflating and, while the target audience for games expanded quickly in the 1980s and 1990s, it has now slowed significantly. But game players continually demand higher graphic and technical quality in modern games, requiring game developers to hire even more experts and staff for each game developed. Today, most professional games require one to three years to develop, as opposed to the few months of early games. So, the publisher or developer must continually fund a game's development, hoping it will be a hit.

Normally, in most businesses, to increase profits one merely passes on the rising costs to the customer in higher prices. However game publishers are faced with one inescapable fact: few people will pay more than US$50 for a game. So raising prices to cover rising development costs is not an option.

The final exacerbating truth of the game industry is this: Only the top 5% of games make a profit, and the remaining 95% of games released lose money. Often, a small game developer cannot stay in business if it releases one failed title (since it poured all its profits from previous hits into a failure), which is why so many game development companies spring up, release a few games, then quickly go under. This is not as big a problem for large game publishers since highly successful games typically earn vast sums, and the profits from their successes are used to compensate for the losses incurred by any future titles.

Back in the 1980s and '90s, the developers were paid royalties for huge hits. Today, publishers find it hard to pay their developers bonuses since they want to hold onto the profits to cover their losses on any poor titles they release. This disgusts many talented game developers, who will often quit to go work for other game developers who promise greater compensation.

But even finding the real number of units sold is a massive, and sometimes impossible, undertaking. While ticket sales for movies are widely known and published, actual game sales numbers are closely guarded by publishers. If actual sales totals were widely known, developers could use the numbers to leverage more lucrative contracts for future game development deals with the publisher. Keeping the totals secret keeps most of the leverage in the publisher's hands.

Clearly, today's game development economic climate is a difficult balancing act, with a few winners and thousands of big losers.

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