Video Game and Software Industry

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The video game industry is very broad in scope and continuously growing at a rapid pace (Exhibit 1) with billions of dollars to be made. Although the large potential for growth cushions rivalry amongst the existing competitors in this industry, video game companies constantly focus on differentiating their products and seize new opportunities to gain and secure their customers loyalty in order to continue in the business. Most of these new opportunities are created through advancements in technology which have a huge impact on the video game industry by enforcing constant growth. Aside, threats like new competitors, substitutes, and regulation influence the video gaming and software industry every day, making the market even more competitive, while an increasing desire for fun and unique products on the customer side force companies to steadily create new and innovative technology. Therefore, competition among companies in this industry can be fierce, with each video game company struggling against the others for market share.

According to the Entertainment Software Association (ESA) (Exhibit 2) game sales hit $7.0 billion in 2005 for total sales in the U.S. game software market for game consoles (PlayStation, XBOX, etc.) and PC games. With $6.06 billion, the lion's share of the overall sales came from console game sales, while $.953 billion were cumulated through PC game sales. Expressed in units of games sold, in 2005 190.5 million units were sold for console systems compared to 38 million units for PC games. Historically sales of video games have grown in almost every year since 1996. US based sales (Exhibit 1) in 1996 were $2.6 billion (74.1 million units) and rose to $7.4 billion in 2004 (250 million units), which was an increase about roughly 300%. For 2006, statistics show that 42% of the target audience purchased or planned to purchase one or more games. The following games are the top selling game titles for 2005...
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