Material updated January 2023

CADGI (C) 2019-2023 1

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THE VIDEO GAMES INDUSTRY

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 Video Games
“are experience information goods”

product evaluation process is ambigious

intangible products
high perceived value bias

and

about play
CADGI (C) 2019-2023 6
Storgards (2006) Brand Equity of Digital Games.
Role of Play
(behaviours)

New generations
grow up with idea
of games type life experience

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 1972
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However, it has no been always a growth
market.

While games industry started to grow

fast in the 80s and people started to buy
games there was a period of time that the
growth stagnated drastically and growth
almost stopped. This ‘Atari shock’
happened due to a recession in the games
industry in early 80s for the reason of too
many bad quality games published.

Only a few game studios were making

money and most of them went bankrupt.

Adopted from Wikipedia article (Video

game crash of 1983) Read more
https://en.wikipedia.org/wiki/Video_gam
e_crash_of_1983

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At early 80s Atari 2600 was the most
popular console system in the market.

However, due to their new policy, Atari

decided to give license agreements to 3rd
party developers.

The number of games in the market

suddenly jumped really fast but because
the public thought the games were bad
quality and many just fast copies of others’
ideas, Atari’s sales and market share
dropped drastically.

You can see the crash between 1982-1985

on the graph on the right.

Adopted from Wikipedia article (Video

game crash of 1983) Read more
https://en.wikipedia.org/wiki/Video_game_
crash_of_1983

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©2022 Newzoo Global Games Market Report 2022 CADGI (C) 2019-2023 14
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https://www.visualcapitalist.com/50-years-gaming-history-revenue-stream/
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 The industry
gaming
revenue

https://levvvel.com/biggest-video-game-companies/ (2021)
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Throughout the history of video games business, games
studios have been established and sold.

The fastest ever-growing company of all times is

Supercell (Finland), just with 3 games in the market
they were able to sell their company to Tencent for a
whopping 8.6 billion dollars!

It has made history in the video games industry and

also shows what is the potential of it.

However, keep in mind that over 1000 mobile games

are published every day so the market is brutally
competitive and you have to be very smart positioning
your game and use existing data to do so.
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Which platform is growing fastest?

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Just as an example, let’s look at mobile game
segment more closely.

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Fast growing subsector: game related accessories and ‘stuff’

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 Gaming Accessories
Gaming accessories is a great
example of sudden growth of a
games subsector that did not
basically exist few years ago
massively.

People are investing in ‘well-being’

and enhancing the gamer experience
by getting such equipment.

As eSports became a worldwide

phenomena, and PC gaming was
back from it’s downturn such
accessories became really popular.

Also, COVID19 had an impact as

people stayed more at homes playing
games.

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GWI Gaming Playbook 2022
Games industry is also an entrepreneurial ecosystem

R&D labs, International Investment

programs partners within the funds
industry value chain Public
funding

Business and science Incubators,

parks Accelerators,
Business support Mentor
providers (e.g. law and and Hubs
accounting firms) coaching Regional E&I
network ecosystem
Technology
transfer Serial
agencies entrepreneurs,
regional
Regional Interest champions, colleagu
Universities & development groups angels es
Education agencies around
focus
sectors friends

family

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GAME PLAYER BEHAVIOURS

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 Most played genres (2022)

1. Action
2. Role-playing games
3. Strategy games
4. Simulation games
5. Puzzle games
6. Sports games

https://sandvox.io/top-gaming-genres-2022/ CADGI (C) 2019-2023 29

 Gamer audiences

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GWI Gaming Playbook 2022
 Game genre statistics (2021)

Here you see that there are

differences between female and
male game player behaviours.

No genre is anymore on gender

genre, but we tend to prefer
different type of games.

Generally speaking, video game

playing is now 50%/50% split
between female and male players
(younger audiences <25years)

CADGI (C) 2019-2023 31

https://www.gamify.com/gamification-blog/not-all-games-are-created-equal-pt1
 Gaming penetration in the UK by age group and gender
This is a good example how generation has
an influence of our game playing
behaviours.

Note that we all obviously get older, and it

will move people from one age category to
another.

If you put myself on this, it would be

basically my generation and one older that
played games in the 80s (16-24) and the
rest of age categories would be empty.
According to a survey study 98% of UK
teenagers play games (under 16).

It is rare that those who never played

games would start playing games at older
age, but of course it happens. Conclusion
is that ‘older’ generations are not the best
audiences for developing games.

This is UK only, but it is good to remind

that countries and cultures do differ from
each other too.
CADGI (C) 2019-2023 32
https://www.statista.com/statistics/300513/gaming-by-demographic-group-uk/
 GAMES ARE DIVERSE,
CREATIVE MIX OF DIFFERENT SKILLS REQUIRED

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 Games are

Production
Ideation Publishing
Conceptualisation Business/ Marketing
Design Design and art Customer acquisition
Graphic design
Production
Sales and Revenues
Audio & Sound Data analytics
Design and graphic tools

Technology/
Engineering

Development platforms and tools

Coding
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2D/3D modeling 34
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WHO MAKE GAMES?

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 Games are made by great, skilled people

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https://elitegamedevelopers.com/games-company-culture-pyramid/
 Entrepreneur
We need many different type of skills
Sir Clive Marles Sinclair
to develop a successful video game
such as entrepreneurs, scientists and
artists. (born 30 July 1940) is an English entrepreneur
and inventor, most known for his work
in consumer electronics in the late 1970s and
Let me introduce you to first few early 1980s. He was based in Cambridge, UK.
types of people the games industry This is one of the first commercially successful
needs. home computers, mostly used for developing
and playing games, called ZX Spectrum.
Many of you have probably read or “In 1982 the ZX Spectrum was launched at £125
heard about ‘creative destruction’ for the 16 kB RAM version and £175 for the 48
kB version. In March 1982 the company made
(Schumpeter). an £8.55 million profit on turnover of £27.17
million.”
The idea simple but difficult to Source:hhttps://en.wikipedia.org/wiki/Clive_Sin
execute. Many of the most know clair
entrepreneurs (and start-ups) are
eager to develop something
completely novel that never existed
before. They take high risks but
expect high rewards or big impact.

The games industry has always been

in forefront of such developments.
CADGI (C) 2019-2023 38
We also need scientists, people who Scientists
work hard on research on new
topics including computer science,
mathematics, engineering to name
a few fields.

Without commitment of such

people, we would not have scientific
innovations and new products,
including video games.

As an industry, there are thousands

of patents in games, or the
technologies that make game
development possible.

The most important asset of a game

studio is it’s IP, that is Intellectual Alan Mathison Turing OBE FRS 23 June 1912 – 7 June 1954) was an English computer
Property. The knowledge the game scientist, mathematician, logician, cryptanalyst, philosopher and theoretical biologist.
studio holds to keep the studio (and Development of theoretical computer science, providing a formalisation of the concepts
the game) in the market place and of algorithm and computation with the Turing machine, which can be considered a model of a general
succeed. purpose computer. Problem of German naval Enigma

Turing is widely considered to be the father of theoretical computer science and artificial intelligence.
CADGI (C) 2019-2023 39
Games are highly creative products. We
need creative thinking such as Fantasy, imagination - art
imagination, thinking of things that do
not exist yet using our skills, knowledge
and experience.

Technology gives us opportunities to

develop new ways of playing games but
fundamentally games are products of
creative minds.

Creativity is not just the privilege of

artists which is a typical first thought but
there is lot of creativity involved in other
areas such as programming and business
development.

This is why the games industry has

become such an amazing field of
innovation during its 60+ years of
industrial history.

Middle-Earth
CADGI (C) 2019-2023 Connections to Kalevala (Finnish mythodology)
40
 Oftentimes it takes decades to
an idea to become commercially
viable.
Technological change
1995 was the year when
Nintendo decided to publish first
1960’s 1995 2016
Virtual Reality platform/game
console, or ‘Stereorescopic 3D”
experience.

Unfortunately, this was a

commercial failure. The
technology was not ready for
consumers.

In 2016, Sony published

Playstation VR set. Almost 5
million units have been sold to
date and it has been a great
success story.

It took almost 60 years (!) to

make an idea of a new type of
user experience commercially
successful. TV Nintendo Virtual Boy Playstation VR
CADGI (C) 2019-2023 41
Source: https://en.wikipedia.org/wiki/Virtual_Boy https://en.wikipedia.org/wiki/PlayStation_VR
 Demographics change – sticking to what we know
We grow with the games we play.

User behaviours are often connected

to usual habits such as playing the
same genre repeatedly.

The simple reason for this is that we

learn to play certain games and
genres. When feeling comfortable,
we do not want to learn new things
such as about new types of games. A
new game has a learning curve like
any technology product which is an
obstacle rather than a motivator.

If you like a certain type of chocolate,

you probably will buy it again rather
than taking a risk of trying new type
of chocolate. Tastes change slowly.

Another example, each teenager play

games if they have access to them
but the older generations 50+ do not
start playing games because they CADGI (C) 2019-2023 42
never had the habit before.
 Innovation diffusion process
The most famous illustration of innovation diffusion
process was developed scientists to understand the
sociological model how new innovations are adopted by
the users.

Generally speaking (and there are tens of thousands

articles about it), people can be roughly categorized into
certaing behavioural groups.

It is important to mention that individuals adopt

differently different products at product level (e.g. smart
phone, FPS, cryptos).

You might be innovator in first person shooter but then

in another product, e.g. owning a PS5 you might be
laggard. Theory has not changed but products have. It is
often connected to the product life cycle (game’s life
cycle). If after 20 years of existence I start playing World
of Warcraft, am I a ‘laggard’?

Think of yourself? Where are you in that curve?

https://en.wikipedia.org/wiki/Technology_adoption_life_cycle CADGI (C) 2019-2023 43

https://www.taylorfrancis.com/chapters/edit/10.4324/9780203887011-36/diffusion-innovations-everett-rogers-arvind-singhal-margaret-quinlan
The average revenue per
user (ARPU) in the Mobile
Games segment is projected
to amount to US$87.32 in
2022.

While there are more players

playing mobile games their
average spent is increasing
too.

It means, different cultures

and countries are adopting
in-app purchases. In some
cases they price points are
going up too.

https://www.statista.com/outlook/dmo/digital-media/video-
games/mobile-games/worldwide#revenue CADGI (C) 2019-2023 44
Different cultures and countries tend to
spend differently money on mobile games. If you
compare this slide with the previous slide there is big
increase in spending.

For instance, Europeans tend to spend less money

Than Asian cultures. This can also be debated but
It is because Europeans have grown up with a ‘pay to
play’ model where you buy the game once and all
content is at least mostly free.

Most Asian countries and cultures are adopting faster the

Free-to-play model, where installing the game and
starting to play is free But to advance faster or to get
access more game content, you have to pay.

Also, a ‘pay to win’ is a common strategy in the games

industry. By paying real money you receive for extra
gold, diamonds/ characters/content/weapons etc. you
can advance faster and get extra power to beat the
competitors. ‘Pay to win’ is very controversial debated
because most players still think you should ‘earn your
experience’ by playing Further reading and references: adopted from https://en.wikipedia.org/wiki/Free-to-play
CADGI (C) 2019-2023 45
https://www.cnbc.com/2018/05/30/pay-to-win-video-games-differences-between-us-and-chinese-gamers.html
The game.
 Game
technology
ecosystem

CADGI (C) 2019-2023 46

https://www.businessofapps.com/insights/mobile-gaming-industry-statistics-and-trends-for-2021/
THE GAMES INDUSTRY AS A DEVELOPER

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Value Creation in Games

Management perspective:
Long-lasting intangible value (e.g. IP) that results to
cash flow and higher share price

Developers’ perspective:
Long-lasting intangible value that results
better games in the future

CADGI (C) 2019-2023 48

A great game?

Unique
characteristics

WOW! → WOM → £

Platform
Type of game Demographics and
(technology,
(genre) segmentation
mechanics)

CADGI (C) 2019-2023 49

 Flow theory In the game development, it is important to
understand how the game play flows and how
to difficulty level of the game on a zone which
keeps the game player engaged.

CADGI (C) 2019-2023 50

https://www.pursuit-of-happiness.org/history-of-happiness/mihaly-csikszentmihalyi/
 An simplified example of Games industry value chain(s) in2020s
Since the birth of the games industry,
changes in technology and consumer
behaviours have facilitated business
models have been invented.

On the right there is a simplified

image of how the value chain has
changed during the past decades.

Probably the most important change

in the value chain happened when
internet start to support ‘self-
publishing’. Self-publishing means
that the game developer takes all
responsibility where to publish the
game and how do marketing. It also
meant that game developer took all
responsibility about the games
success. Also, it meant that a bigger
share of the revenues come directly
to the developer.
Adapted from reference: CADGI
https://hackernoon.com/the-gaming-ecosystem-explained-nk1d32ts
(C) 2019-2023 51
Stand out from the mass

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Paradox is that we are like-minded
similar but we want to stand out from
the mass and still belong to a group.

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 One statistical
analysis
development
company
categorize steam
developers by
their published
games.

You can notice

how the ‘success’
is split between
different types of
developers.

https://vginsights.com/insights/article/what-are-the-highest-earning-developers-doing-on-steam-that-you-arent
CADGI (C) 2019-2023 54
Self-publishing has increased
significantly since past 20 years.

However, as you see, partnering with

a publisher or organisations that can
promote your game in the
marketplace can be an important
source of success.

Partnering is a lot to do being part of

the industry ecosystem, knowing
people, knowing other developers,
sharing ideas and even resources.

https://vginsights.com/insights/article/what-are-the-highest-earning-developers-doing-on-steam-that-you-arent
CADGI (C) 2019-2023 55
https://vginsights.com/insights/article/what-are-the-highest-earning-developers-doing-on-steam-that-you-arent
CADGI (C) 2019-2023 56
Here you see some statistics from IVGC
students.

I have asked you to choose 5 most Game mechanics

important features of a video game. Narrative (story)

Realistic physics
Of course, the list of features is a ‘mix’ Visual style
of different types of things. Also, we Fun gameplay
cannot generalize this to all population
Level design
except people similar to these 3000+
Flow experience
respondents.
Something different from other similar games

Have a look. What do you think are the Feedback

most important features of a video Cutting edge technology

game? Multiplayer

Bug free
During your game design process, you Great reviews
must make difficult choices about Cool bosses to beat
where you put your available resources
Popular platform
and what are the best way to use your
and your teams’ skills. Engaging
Earn real money by trading

Question is would this mix of priorities Long lifecyle

make a great game? Distinctive graphic style

CADGI (C) 2019-2023 57

 Product recommendation bias by a user
From Module 14: The Game I play now
module where you write an essay about the
game you are playing at the moment; I ask
you a question of you would recommend
your game to your friends.

Here you see a very clear choice bias. We

tend to recommend the products we have
chosen because it would be strange to admit
a bad decision. Also, we would not tend to
play long time a bad game that doesn’t fit to
our liking.

We tend to choose a game we are familiar

with as well as what fits to our choice
behaviours. Therefore, our recommendation
is more likely to happen for the products we
consume. As discussed, games are
experience information goods, they are
difficult to assess without trying!

Product recommendation question is #1, the

most important question you should ask
from your user as they are willing to put
their own choice in stake.
CADGI (C) 2019-2023 58
 Similarities among successful developers
“There’s no magic formula to being a successful developer, but the trends are
pretty clear.”

1. Successful developers make a lot of games

2. Successful developers find publishers, so they can focus on what they’re good at
3. Successful developers specialise
4. Successful developers focus on genres that do well
5. Successful developers adapt to changing player preferences

https://vginsights.com/insights/article/what-are-the-highest-earning-developers-doing-on-steam-that-you-arent
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MONETIZATION AND DATA ANALYTICS

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 Monetisation and data

Now you know the statistics of the industry and some of gamer behaviours.
Next, you need to think of your own game and how you will position it in the
marketplace.

Video game monetisation is the process that a video game

publisher/developer can use to generate revenue from a video
game product/service. Beyond hobbyists, no revenue means no games made in
longer term.

Monetisation strategy is the most important task to plan when considering

how to make money out of a game. There are plenty of types of monetization
available, it is often a mix of several types. Some of them are very ‘creative’
such as selling loot boxes or NFTs.

Monetisation of a game is largely based on understanding user behaviours and

data analytics (statistics). Most of the successful games do not only publish
great games (user experience) but know what the game players like and how
they behave while playing a game.

Applied from: https://en.wikipedia.org/wiki/Video_game_monetization CADGI (C) 2019-2023 61

 General level monetisation methods
• Retail
• Digital distribution
• Subscription
• Microtransactions
• Downloadable content
• Season Passes
• Player trading
• Advertising

CADGI (C) 2019-2023 62

https://en.wikipedia.org/wiki/Video_game_monetization
 Different game play monetisation strategies
• Pay to win (pay for get an advantage compared to other players)
• Play to win (advance by completing tasks)
• Free to play, no upfront cost to play but usually in-app purchases
• Buy-to-play, pay once, play forever
• GaaS (Games as a service), e.g. monthly payment
• Play-to-Earn, reward players for their time spent
• Play-to-Earn Crypto, also NFTs
• Loot boxes, Call of Duty (skin, that people could not recognize)
https://en.wikipedia.org/wiki/Video_game_monetization
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https://www.business2community.com/cryptocurrency/best-crypto-games
The point of this graph is to show
That each game has a different ‘pay to win’
Paying to Win
profile.

In some genre and games people are willing

to play a lot of real money to win in the game.

Marketing play a important influence on people’s

choice behaviors.
$550 AVG/Player
“Game of War: Fire Age is a freemium mobile
massively multiplayer online strategy video game
developed and published in 2013 by Machine Zone
(now known as MZ). The game had a high-profile
advertising campaign and was one of the top-
grossing apps in 2014 and 2015.”

References:
https://en.wikipedia.org/wiki/Game_of_War:_Fire_A
ge

CADGI (C) 2019-2023 64

 Examples of reasons for Willingness to Pay

• Innovation&fun – Reviews and respect

• Consumer purchasing power – Pricing, Value
• Changing behaviors – Give a reason to pay
• Game genre – Target group
• The life cycle of the game – Long, 5+ years
• Monetisation logic – Smart, existing
• Relevant game mechanics – Engaging
• Timing – By type
• Big Data – Analysis, implementation

Extension to other platforms CADGI

and(C)other
2019-2023types of software products 65
Data Analytics, definition
In simple terms, games data analytics, is about analysing the numerical data gathered from the game for the
use of
1) Improving game play experience (retention)
2) Improving monetisation possibilities (revenue)
3) Understanding game play behaviours (e.g. difficulties)

Data is #1 source to understand game player behaviours.

It is a complex science, and you need to have skills in statistics to analyse and understand data properly.
Data analytics is closely connected to Key Performance Indicators (calculations about user behaviours) and
Monetisation strategies (making money from the game product and selling virtual goods)
Further reading
https://medium.com/activewizards-machine-learning-company/top-8-data-science-use-cases-in-gaming-
de1f429ae651

CADGI (C) 2019-2023 66

A game’s success is often measured with a selected set of KPIs
(Key Performance Indicators)
It helps a game studio to understand the success and also the problems the game might have. There are MANY indicators
to look at.

It is commonly accepted (can be debated, but depends on the context) that the most important KPIs for games are

ARPU – Average Revenue Per User. This describes how much money the player is spending in the game. Check stats from
previous slides.
LTV – Lifetime Value. This describes how much money in total each player spends in the game. Can be during several years
of time!
CAC – Customer Acquisition Cost. This is the money that you need to spend to acquire a new paying user/download or any
other conversion target. Very important measure for the marketing department.

Retention Rate – The number of users that come back to play the game, in calendar time. This is about your customer
loyalty. A bad retention rate means the game has serious issues; a good retention rate means it is engaging.

There are many more statistics game studios/publishers follow of course, including the most important one which is the
actual sales and at large, profit.

Further reading and formulas can be found e.g. from thisCADGI

source
(C) 2019-2023 67
Adopted from https://gameanalytics.com/blog/50-kpi-measure-mobile-game-app.html
70b$ in Virtual Goods worldwide
Virtual goods are non-physical objects and money purchased for use in online communities or online
games. It is the most common way nowadays to monetise a game.

Habbo Hotel (https://www.habbo.com/ / https://en.wikipedia.org/wiki/Habbo) was probably the first

ever game like social networking service that invented virtual goods which are now used as the main
source of revenue for games.

Their strategy was very simple but extraordinary at the time of creation in year
2000. They gave a free access to anyone to get a ‘hotel room’ for room. However, the hotel
room was empty without any furniture. The magnificent idea was that users
must pay real money for credits to spent on virtual furniture to decorate their hotel room.

They also had other types of virtual currencies like Diamonds and seasonal currencies.

For instance, Habbo Hotel made revenue over $74 million in 2009 by selling virtual furniture.

The service is still open, even it went through some serious trouble about
Moderation of the discussions. Changes were made and it is a ‘safe environment’ for
teenagers to play.

https://techcrunch.com/2009/03/30/habbo-pulled-in-74-million-in-real-
revenues-last-year-from-virtual-goods-and-advertising/ CADGI (C) 2019-2023 68
Paying for what? Examples of where game players
spend real money

• New levels, content

• Resources
• Permanent game-affecting items
• VIP access
• Expanded options
• Progress and performance boosts
• Wait-time reduction
• Permanent cosmetic items
• NFT (non-fungible tokens)
• …new items coming all the time

CADGI (C) 2019-2023 69

The reason for choosing the image on the
right is to show that different game genres
tend to have different consumer spending
profiles.

As you can see, role playing often make in

average higher revenue per user than for
instance trivia games.

The point is, that you need to carefully look at

different game genres (type of games), their
potential and then position YOUR game into
the market place.

The reasons for differences between genres

vary of course. Most often it is the game
player profile behind the scenes that matters
the most. E.g. on 30 year old man spends
more in games than a 57 year old woman.

CADGI (C) 2019-2023 70

Why games studios that successfully sell virtual goods are so profitable?
There is NO a simple answer as the games industry is brutally competitive. From economics
point of view it is all about MARGINAL COST and MONOPOLISTIC competition in the game.

Loose definition is that Marginal Cost is the cost added by producing one additional unit of a
product or service which in software business like games approaches to zero cost (no cost at all
to add a unit in the market place).

Monopolistic competition characterizes an industry in which many firms offer products or

services that are similar, but not perfect substitutes. Barriers to entry and exit in a monopolistic
competitive industry are low, and the decisions of any one firm do not directly affect those of
its competitors. (https://www.investopedia.com/terms/m/monopolisticmarket.as)p

So producing or publishing a new game is almost zero cost to the game publisher. However, this
is not completely true because high expenditure spent on marketing nowadays.

When the game player is in the game, and if the experience is good, the game owns the user
and there is NO competition in the game for the demand and supply of in game virtual goods.

Therefore game publisher can manage the internal economy alone and price the goods according
whatever the users are willing to pay.

Supercell (https://www.ft.com/content/a0ac39d6-2ec0-11e9-8744-e7016697f225) is probably

the most successful mobile gaming studios taking advantage of this idea. For instance in 2018 an
amazing 1.37 billion euro with only 283 employees.
Further reading about Marginal Cost of Production
https://www.investopedia.com/terms/m/marginalcostofproduction.asp
Adopted from
https://ckluis.com/the-marginal-cost-of-software-approaches-zero-7fda166f219f CADGI (C) 2019-2023 71
https://praxtime.com/2013/12/16/average-is-over-could-use-more-zero-marginal-cost-economics/
 “10% players pay for
People are getting used to spend money
on in-app purchases but there is a lot
90% revenues”
room for growth.

Most of the game players do NOT spend

money to in-app purchases.

The point is, you need to know those

players who spend the most and try to
attract such players to your game and
make those who do not pay get them • 0.19% / half of revenues, AVG/Player is $24.33
items that are so attractive that they
change their behaviours (not easy to • Total amount of mobile game players is increasing
do!). • Share of the total paying customers is increasing
• The shape of the curve is changing but slowly
Whales who spend a lot and can get
even like VIP access, and special. People are still learning how to spend
There is space for new games with smart monetization logic

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THE ECONOMICS OF VIDEO GAMES (A BYTE OF IT)

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Simple Finance: Risk vs. Reward
Typically, the more risk you take the more reward you should get for your
investment. The games industry is a good example of an industry where the cost of
producing a game is mostly upfront without knowing if the game will make the
investment back. There is a high risk taken which might end up losing the investment
(time, money). Movies and music are similar industries.

High risk but potentially high reward!

When the game is ready to be published it is relatively easy make copies of it, that
means the cost of producing a new copy will come down quickly.

Simplified example:

For instance, if the cost of the game was 1.000.000$, producing one copy means a
cost of $1m/1 copy, 2 copies $0.5m and producing 1m copies would make the cost
$1/game. The more copies you sell the cheaper a copy gets (until to a certain
limit)!

Digital distribution has revolutionized the way games are made available to game
players. That is why there is practically no ‘waste’ product produced or sold (vs.
discs).

Obviously, there are other costs than production, specially; marketing (user
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acquisition) and maintenance.
In-game economy is a ‘monopoly’ - NFTs
One of the most common, if not the most common way of making money with games is to include in-app purchases in them.

It means something sold in the game against real money such as power-ups, time reductions, skins, level-ups and enhanced other features.
Just to mention, there are other “payments” than just real money e.g., playing (spending time with the game to earn in-game currencies and
being loyal to a game).

In-game economy is basically in the hands of its developer. Developer (e.g. game studio) has full rights to design, develop and decide how
the in-game economy works. The reason why it is a in-game monopoly, is the reason that there is no external power, real competition
between developers’ items and services and external party’s supply.

It is an interesting phenomenon for many reason. Firstly, there is no usual market level supply-demand based pricing. The games do
compete for the gamers fiercely but when the gamer is in the game, gamer can only buy and use what is available in the game. E.g. you
cannot carry Pokemon XP/Items to World of Warcraft XP/Items. Each of these in-game elements has a value in money for the developer.
Such market opening and transparency would disturb the in-game economy and spoiling the in-game monopoly of items and sales. To
mention, there are currently discussion how such exchange would happen in a way that it would benefit all. However, game-play perspective
speaking all games are different in many ways and their items as such are not realistically transferred (as now) as they are but there should
be value-based exchange organised between them (conversion).
Pricing strategy is based on behaviors of the players and price points are designed to match gamers purchase power and traction.

Secondly, the scarcity of the products depend on the decision made by the developer. They can make decision such as there is only 100
certain items available which, for game players mean more prestige by owning them. This phenomena called NFT (Non-Fungible Tokens) is
now growing fast. In a market economy it means that rarity of an item makes it more desirable, wanted, valuable and if in demand, more
expensive to get. Good analogy is for instance Pokemon cards and The
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2019-2023 75
THE TRENDS

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 1) Cross platform video games, games that work on e.g. PS/PC/Android
2) NFT Games and blockchain, games that let you trade items and earn them
3) AR and VR Games, VR games are coming now faster thanks to ‘metaverse’
4) AAA games, high budgets, high returns, most expensive game $500m
budget.
5) MMORPG, yes, still
6) Hypercasual games, very easy to start and play, even play automatically
7) Games in movies, plenty of examples
8) Competitive mobile multiplayer games, Apex and others.
9) Unity3D development goes strong, most used development platform.

https://www.ediiie.com/blog/gaming-trends/ CADGI (C) 2019-2023

https://moonmana.com/blog/video-game-development-trends/ 77
CADGI (C) 2019-2023 78
How about eSports?
Growing fast, fan base and ‘commodised’ among hard core gamers.
As an example, the most popular sports
1) Sponsorship money is going to support eSports professionals
2) More and better eSports games are published
to play or follow among young people
3) Competitive games sector will grow (<30) in Finland is eSports.
(instead of single player campaings)
4) eSports is actually a sport, not just playing a game.

StarCraft2 – Joona “Serral” Sotala

1st ever non-South Korean
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Follow the games industry
I have shared many useful links about games industry at IVGC.course Discord
group

Chat with your fellow students at IVGC.Course Discord community

Games Business News / Jobs

https://www.gamesindustry.biz/

Game consumer behaviour data

https://www.limelight.com/resources/white-paper/state-of-online-gaming-
2018/

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About the games industry, conclusion
Video games were always intended to be ‘massively multiplayer’ but the
technology did not support that philosophy well until the internet came around.
Thanks to the internet, billions of people every day share their game play
experiences with friends. It is an amazing industry, but not easy to enter, that keeps
reinventing itself again and again.

The ultimate purpose of video games, in my opinion, is to be social and learn how
be social, share fun experiences. During this course we are trying to inspire YOU,
rather than only play games to DEVELOP your games and learn new skills which will
support your career whatever you will do, even beyond games.

Dr. Jan Storgårds

Course Leader

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 Introduction to Video Games Creation

Module 13: The Games Industry and Data Analytics, 1 ECTS

Dr. Jan Storgårds (c) 2021

Course Leader

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