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The Rise and Rise of Video Games Empires

Video Games: A brief history

Video games have evolved from the experimental hijinks of academics with access to exorbitantly expensive computers in universities, to the highly personal ubiquitous games found today on smartphones. Since the first video games on oscilloscopes in the 50s, the gaming experience has moved in line with hardware costs, be-coming a very accessible industry – worth tens of billions of dollars, and growing every year.

In the early days of video games, public arcades meant that hundreds of people could play for the cost of a few coins on a machine that would cost the equivalent of several months’ worth of the average household wage. Multiple machines meant that gamers had an entire library to choose from, and it was in the industry’s interest to keep updating the arcades with the newest titles. The public setting also allowed a competitive edge to evolve, with players competing to leave their high score on the home screen for all to see.

But as the cost of computing power decreased the distribution model shifted to a more personal experience, on dedicated gaming machinery which is end user owned. This gave rise to the consoles of the 80s that have persisted to the present day, as well as video games on PCs.

These pre-broadband consoles moved from the gladiatorial and high score focused games (perfect for the public arena) into story-driven and narrative video games, with the Super Mario and Zelda Series being perhaps the most notable examples of this period in video game history, before consoles utilized home broadband connections.

While Microsoft’s Xbox and Sony’s PlayStation 2 had a few titles near the end of their lives that could allow gamers to play against other players in online arenas, it was the following generation of the Xbox 360 and the PlayStation 3 that really embraced online multiplayer. In a similar time frame, around 2006, social media websites began adopting browser-based Flash games as significant page view generators, and as smartphones emerged into mass market devices, these sorts of Flash games migrated across from PC web browsers to smart phone apps.

It was only when smartphone hardware had caught up with PCs and older generation consoles that gaming could become a prominent

New Approaches: the Freemium model  and the rise of mobile gaming.

This is because in the smartphone and app store era, most games on handsets are offered for free and hope to convince players to spend small amounts of cash in game on virtual bonuses. These micro-transactions are a core part of the Freemium business model, which hopes to entice gamers through the door with no upfront charge and then make a few dollars here and there as players are subjected to the increasing difficulty or longer waiting times to replenish either abilities or lives/credits (‘cool downs’) that are inherently built into the games to encourage micro-transactions.

The Freemium approach has also been found on console and PC gaming, especially in the world of ‘free-to-play’ (F2P) massively multiplayer online games (MMOs) which are frequently criticized as being ‘pay-to-win’ (P2W) rather than F2P thanks to the advantages given to players who use micro-transactions to purchase better in-game items and abilities.

The other approach to game design is to charge nothing for the game but to insert advertising into the experience, usually in the form of banner ads at the bottom of the screen (conveniently near to key buttons to encourage accidental click-throughs, some would say) or to put adverts on loading screens. Viral sensation Flappy Bird cost nothing for gamers to download but was so popular that the single hobbyist developer was reportedly making tens of thou-sands of dollars each month in ad revenue before he pulled the game from the app stores due to the overwhelming response.

iPhones with the app installed were selling for thousands of dollars after the app was no longer available, and really it allgot a bit weird. Flappy Bird is now set to return as an Amazon Fire TV app, which is something of a win for Amazon in terms of exclusivity but perhaps a little late given that viral sensations have incredibly short shelf lives.

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The Rethink Difference—and Method                                                                                        2

Contents                                                                                                                                       4

Video Games: A brief history                                                                                                      5

New Approaches: The Freemium Model and the rise of Mobile gaming                                7

Threats to the industry: Imitation, Stagnation, Hardware Agnosticism                                    9

Recent events: DLC, Micro-transactions, Gamer resentment                                                   11

Static gaming vs. Mobile gaming                                                                                                13

New consoles and subscription services: a Netflix for games?                                               14

The Emerging Model: Cloud-based, hardware agnostic, subscription service                      16

Gaming’s influence: eSports and spectatorship, Amazon buying                            17

The shift from a one-off fee to an ongoing payment relationship                                            19

Why supplemental subscriptions are key to the console platform                                           21

‘When the Consoles Die, What Comes Next?’
– the landscape of the post-console world                                                                               22

New markets: Children’s gaming, Oculus and Samsung’s Virtual Reality                               23

In Conclusion                                                                                                                               25

About Rethink Technology Research                                                                                         26

Contact Details                                                                                                                            26