The Future is Virtual: A Video Game Small Business
By Harrison Greenspan
Many industries are struggling to adapt to serving customers digitally and to preserve demand until the unrelenting pandemic dwindles. However, portions of the entertainment industry that are focused on digital content have found themselves better positioned to weather the storm, and in some cases, are thriving. While many Americans set up camp on their couch to grind through countless hours of video games during shelter-in-place orders, the video game industry has been busy at work taking advantage of the situation. As a result, the videogame industry has seen a boom in business.
Steam (a video game digital distribution service) recorded the highest number of concurrent users since the platform’s conception, and Verizon has noted an increase in gaming traffic of 75% during peak hours, compared to increases of 12% increase in digital video traffic and 20% in web traffic. Meanwhile, data from Streamlabs shows that streaming platforms like Twitch, YouTube Gaming, and Facebook Gaming have also experienced a surge in growth, with around a 20% increase in usage hours reported across services.
“Gaming is one of those areas that people are diverting to from other activities that they would have done in a normal world,” said Mat Piscatella, an analyst at the NPD Group, which tracks the sales of video games. “The game sales that are coming out are breaking franchise records.” Overall, video game sales in March approached $1.6 billion, representing a 35% year over year increase, according to NPD. The explanation for gaming’s recent surge is straightforward. “People are at home, they have nothing to do, they are not commuting,” says Michael Pachter, an analyst at Wedbush Securities, explaining the growth. “You have more time and you’re bored.” Although Pachter sees core gamers reducing their pandemic-level gameplay when the world’s pandemic crisis ends, he thinks the long-term value to the industry comes from acquiring new fans to their consumer base. “A person who was playing zero hours a week and they’re now playing one or two, you may have won them over forever,” he said.
From a bird’s eye view, the global video game market is forecast to be worth $159 billion in 2020, which is around four times box office revenues ($43 billion in 2019) and almost three times music industry revenues ($57 billion in 2019). The biggest market by revenue is the Asia-Pacific with almost 50% of the games market by value, while North America accounts for a quarter of revenue, which amounts to about three out of four people in the U.S. playing some amount of video games. That’s 244 million people — up by 32 million from 2018. Among those who play, 39% are light gamers, playing less than five hours a week; 32% are classified as moderate, at five to 15 hours, and 20% play more than 15 hours a week, putting them in the heavy camp. On average, gamers surveyed played around 14 hours a week, up from the 12 hours reported in 2018. Now that you understand how much potential the video game industry has, let’s take a look at the basics to comprehend what you might be working with when launching a video game small business.
Video Game Platforms You Need to Know About
When you think of a video game, an Xbox or PlayStation might come to mind, as these are video game consoles (platforms on which you can play video games on) that are standard when finding your little cousin locked-in on a television screen with a console controller in hand. However, the industry has evolved from your clunky classic arcade Pac-Man machines to video games being played on computers, and now even through VR (virtual reality) headsets. These platforms provide gamers different experiences: some immersing you into a fictional world by way of a VR headset, while others are simple puzzle teasers that can be played on your mobile device. Although some games can be developed to be played on a variety of platforms, others are specifically tailored to a particular platform. Here is a list of all the possibilities:
· PC (personal computer), which is your standard computer you might use for a variety of tasks, such as searching the Internet, reading emails, and even watching Netflix. For gaming, however, a PC offers many advantages, including higher-quality visuals (especially on gaming-specific PCs), as well as versatility. For example, you can use your keyboard and mouse for gameplay, but you also have the option to use a controller.
· Consoles are specifically made to play video games and typically nothing else (although some allow for the streaming of movies now). Three companies dominate the market: Nintendo (with its latest console being the Switch), Microsoft (the Xbox One), and Sony (the PlayStation 4). A 2018 study from the Pew Research Center states that “84% of teens say they have… access to a game console at home.”
· Mobile, which includes your smart phone or tablet such as an iPad. Games on a mobile device are usually less expensive to buy (due to their performance capabilities), and are often free (with in-app purchases that add more to the respective game). Popular games, such as Pokémon GO, take advantage of a mobile phone’s camera to use Augmented Reality (AR), where the objects that reside in the real world are enhanced by computer-generated perceptual information.
· VR is typically a headset that immerses you into a virtual world that is interactive. Oculus, Sony, HTC, Samsung, and many more brands offer different types of VR headsets. You’ll also use controls that allow you to “move around” in the virtual world. This type of gaming is new and yet to come close to reaching its full potential, as more and more uses for VR (and AR) are being found every day. As an example, a PwC report last year predicted that nearly 23.5 million jobs worldwide would be using AR and VR by 2030 for training, work meetings or to provide better customer service.
· Smart TVs now also offer the ability to play games which provide the experience of playing a video game on a big screen TV without needing an expensive console (which are usually no less than a $200 price tag at retail). Games will be downloaded in a similar fashion to how you download games on a mobile device, and some will require a gaming controller as opposed to just the TV remote.
· Arcade machines may seem like a dying gaming platform, but are still in demand thanks to places like Dave & Busters. Many of the new arcade machines involve classics such as Donkey Kong, Galaga, and Pac-Man, but with new twists and features to interact with.
· Web Browsers have thousands of free games throughout the world wide web, especially those that are for educational purposes. These games tend to be supported by advertisement banners throughout the website they’re played on.
· Streaming is very new to the gaming world. Google is looking to make gaming more like Netflix with its cloud gaming service, Stadia. Instead of housing games on one platform, Stadia allows you to game across many platforms by streaming the games in 4K. This would make video games the latest piece of technology to move into the cloud, making gaming easier than ever before by allowing you to play wherever you want with a monthly subscription.
Potential Hurdle Thanks to the Pandemic
A major logistical hurdle for video games in 2020 will be getting through certification, a process required by the three major console manufacturers, Nintendo, Microsoft and Sony. Before any developer can release a game on Switch, Xbox or PlayStation, those companies want to ensure that there are no game-breaking glitches. Although certification testers at those companies are now working remotely, there has been questions raised about security and productivity. Developers worry that with just about everything taking longer than it normally does, a backlog may emerge. However, I do not expect this type of hurdle to impede the launch of a video game small business, as video games tend to take years of planning and development. Although already established gaming companies and developers alike are taking advantage of the shelter-in-place orders, as aforementioned, the gaming industry is on the rise across the board. Thus, I believe it is still a fantastic small business to launch as long as the right kind of people are involved.
Roles and Skills Needed to Establish a Video Game Small Business
Launching a video game small business requires a variety of skills to accomplish developing and releasing a video game to the public for sale. Unless you possess these skills and thus are an expert in the profession, it’ll be up to you to hire those with these skills. These skills can be broken up into three distinct roles for developing a video game: Game Developer, Producer, and Publisher/Distributor.
A Game Developer is often known as the writer or game designer, meaning they are responsible for creating the game concepts, general rules of gameplay, identifying the target audience, as well as the target platforms for which the game is played on. This can be you, an individual, or even a team of developers coming up with the next hit game design! Moreover, the Game Developer will also be responsible for licensing any IP to be used. To determine whether or not your game should be looking to license particular IP, please click HERE for some helpful tips!
The Producer is responsible for getting the game made, which generally requires two crucial skills: Programming and Art/Animation/Graphic Design. Programming requires substantial skill in software engineering and computer programming in a given programming language (there are many computer programming languages, and the most popular for game development are C++ and Java), as well as specialization in one or more of the following areas: simulation, computer graphics, artificial intelligence, physics, audio programming, and input. Art, Animation, and Graphic Design are all essential to a game’s development, whether that be to make it aesthetically appealing, or even realistic by way of a character’s movements of limbs while running around a colorful virtual world.
And lastly, the Publisher or Distributor is the one who takes the completed game and makes sure it gets into the hands of the consumer (primarily your target audience), whether that be indirectly through retailers such as GameStop, Walmart, and Amazon.com, or directly though digital downloads in an App store. Further, the producer typically handles any post-release complaints from consumers, implements a marketing campaign (as examples, TV commercials or website advertisement banners), secures the appropriate industry ratings in each country in which the game is distributed, as well as tracks down and litigates game piracy. A Distributor might additionally be responsible for testing the game by means of a Quality Assurance Manager, which can be done internally or by way of letting a limited number of public consumers through a Beta version of the game.
While all three of these roles are essential to developing and releasing a video game, it is up to you whether or not you want your small business to simply focus on one role of the video game process (as one role can still require a team of people depending on everyone’s skill level), or employ enough people to fill all three roles.
Costs Involved in Opening a Gaming Small Business
The costs will depend on the type of games you are wanting to produce, but also whether or not you want your small business to accomplish all three roles of the process itself. However, a high-powered computer and specialized software might get the job done if you are simply launching and creating the game from home or remotely through the pandemic and beyond.
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While you might think that only particular people will be your audience, it will entirely depend on the type of game(s) your business wants to create. That might be educational games for those who are younger, fast-paced action games for those who are in their teens and beyond, as well as puzzles for those who are older. Because of the accessibility of video games these days, your target audience can be practically anyone!
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