@2003 Troy Dunniway – All Rights Reserved.

Overview of the Game Industry

By Troy Dunniway

troy_dunniway@hotmail.com

So what is the game industry really like? Even if you're in the industry, do you really
know what it's like? Have you worked in the industry at a small company the entire time?
Have you worked freelance or for yourself, for the most part? Do you sit in your office,
doing your job, forgetting to look around once in a while and seeing what is going on
around you? Depending on where you work or where you want to work the industry is a
very different place. To help you understand this a bit more, this first article gives a brief
overview of the game industry, what goes on in it, how it works, and what to watch out
for.

The Industry
The game industry is an incredible place to work. Overall, it is making several billion
dollars each year in revenue worldwide, which is more than movies make in the box
office here in the United States each year. It's growing at an incredible pace and changing
every day, it seems. The year 2001 brought with it steady growth of PC sales but an
explosion in console sales. The end of 2001 saw the successful launch of new consoles by
Nintendo and Microsoft, as well as very successful sales by Sony. The market is
expanding and showing us that even three successful console platforms might now be
possible.

Games are also now being recognized by many more people as a serious form of
entertainment and even as an art form. Mainstream media now looks at games as a
successful business, no longer as a bunch of weirdos working in their garages. The
quality of next-generation games has improved so much that many more people are
turning to gaming for enjoyment. This provides you a great chance to not only make great
games, but also have fun while doing it. In addition to making games that give millions of
people across the world pleasure, game designers also get to cross into other media, such
as movies, toys, articles, and comics. In the end however, we simply get to make fun
games and play them for a living.

The game industry is also a highly competitive and relatively unstable place to work. The
pecking order is dominated by large publishers at the top of the food chain who have the
single-handed ability to fund, market, manufacture, package, and distribute games.
Underneath the publishers are a large number of development studios that are responsible
for actually creating the games. Some development studios are actually owned outright
by the publishers and are called "internal" developers. The rest are known as
"independent"; these are basically groups that work on a project-by-project basis with the
publishers.

Recently, many of the top small independent developers have been purchased or invested
in by large developers, who, in turn, have been purchased or locked up by one of the

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large publishers. The large publishers themselves have been acquired or merged into still
larger entertainment entities.

So how does all of this dog-eat-dog consolidation affect you? It means that the industry is
being controlled by outside companies whose main (perhaps sole) motivation is profit.
This is both a good and a bad thing. First, there has been a lot of crap being made, so a
little cutting of the fat could actually be a good thing. The bad side is that more publishers
are now taking less risks, which means that more "me, too" products are being made and
fewer original titles seem to be in development. The most original and creative products
seem to be coming out of Japan as this article goes to press.

The industry is also going through rough times financially. Even though, as a group,
designers are making more money than ever, a lot of problems are cropping up because
developers are not able to develop quality products on time and within budget. Because
of industry consolidation, a lot of publishers are cutting unprofitable or risky games. So,
even though the industry is growing, there are a lot of layoffs. Small developers who
develop only one title at a time are not the only ones to feel the pinch. Larger developers
and publishers are also going through rough times and are laying off a lot of staff, so
nothing is a safe bet anymore.

Another problem plaguing the industry is the migration of talent. Some people are forced
to jump companies because the company they work for lays them off or goes under.
Others do it because the work conditions at their companies have become intolerable.
Because it is still hard to find highly qualified developers, many companies are willing to
pay a premium for talent. In this environment, a lot of people jump companies to make
more money. This situation actually hurts the industry because, whenever someone
leaves a project in the middle of it, the project is jeopardized. If the company is even able
to find a replacement, it probably will be forced to pay the replacement more money,
throwing off their budget and timeframe even further.

The game industry might not be such a notoriously bad place to work as the film industry
is, but some companies do have a slave-driving reputation. Many of the rumors could be
exaggerated, while others are absolutely true. Some websites out there specialize in
promoting rumors. Keep in mind that there are two sides to every story, and, like other
news agencies, it's sometimes better news to promote controversial stories than true ones.
Be careful what you believe.

When projects are behind schedule, many game companies get into "crunch mode."
During crunch mode, developers typically work as many hours a day as possible and
often through the weekend. In many development environments, crunch mode becomes
the standard method of operation when schedules slip, and this can last for many months.
I've seen many projects where the team thinks they are going to crunch for just a month
and then ends up crunching for close to a year. The whole team falls apart, and the
project just gets worse instead of better. Crunch mode as a way of life in this industry
helps to ensure the continued migration of talent and also helps to explain why most
games ship late.

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The Consumer Base Expands

The traditional video-game industry consumer has been a "hard-core" player willing to
pay for the latest in technology (Jacobson, 1999). But the traditional player is giving way
to a wider variety of players. This has had a profound impact on the industry, moving the
video-game industry from the margins of culture to the mainstream.

In another change to the consumer base, PC-based games will account for more of the
market as console-based games slow in growth (Jacobson, 1999). An in-depth discussion
of the PC game sub-industry and the console game sub-industry follows.

Mass Market Status

The overall game industry has achieved mass-market status: "A huge portion of this
category's sales is now controlled by Wal-Mart, Toys 'R' Us, Kmart, and Target, which
are willing to stock only a handful of the top-selling titles" (Jacobson, 1999).

This shift in market status has triggered new business tactics and strategies. These tactics
include focusing on research and development, marketing, brand building (by focusing
on sequels and add-ons for existing games), distribution, and product diversification (by
types of games, hardware platforms, and price points) (Jacobson, 1999).

Additionally, some software publishers have been acquiring smaller game developers to
round out their skills and ensure a steady flow of production and distribution. Smaller
developers have also begun seeking out larger companies to fund better marketing
campaigns and expansion initiatives to meet demands for their product.

The winning strategies for this new environment are outlined here (Jackobson, 1999):

 Development of solid internal publishing capabilities (ownership of intellectual

property rights, which offers higher margins for the industry)

 Strong, free cash flow position (which enables companies to pursue acquisitions
and product development while absorbing higher marketing costs)

 Mass-market distribution leverage (which is needed to win the shelf-space wars in

this industry)

Consolidation of the Industry

As the industry becomes more competitive, buyouts and consolidations will take place as
the industry normalizes.

Many of the acquisitions have been aimed at forming a vertically integrated, diversified
publishing and distribution business. A lot of the acquisitions have focused on smaller
companies with special expertise, to complement the acquirer's business. Consolidation
in the industry will continue as the battle for leverage with retailers for shelf space
intensifies (Jacobson, 1999).

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The Products
The industry primarily develops games for four different platforms: PC/Windows,
Microsoft Xbox, Sony PlayStation 2, and Nintendo GameCube and GameBoy. Some
developers and publishers develop games for multiple platforms, while others develop or
publish exclusively on a single platform. Of course, other platforms exist for game
development (Macintosh, Palm, Pocket PC, and so on). Many of the techniques in this
article are not applicable to the development of handheld games, web games, and other
relatively simple games. However, this doesn't mean that some of these types of games
don't need to follow many of the same processes that I talk about here; they just need to
do so to a lesser degree.

The reasons for how and why a game gets made are always different. Many games just
start as one person's idea, which grows and grows until that person can begin actually
working on it. Other games come about because the owner of the license or intellectual
property on which they are based wants a game made from it. Many games are just
sequels, expansions, or improvements on a previously successful game. Some games are
made because a publisher needs to fill a genre gap in its portfolio (don't worry, I'll be
talking about game genres a little later).

Unlike Hollywood, the chances of a person coming up with a new idea, writing a script or
a game design, and selling it to a game publisher for a lot of money is one in a million.
Game publishers almost always deal with game creators with a proven track record. This
isn't to say that a single person or a small group of people can't create a game, but the
odds of them making a AAA or best-selling game are not good. (The best-selling game
Roller Coaster Tycoon was developed by a very small team, so there is hope. However,
you also have to make the size and scale of the project fit the size of the team.)

Still, a large movement is afoot in the game industry to expand the capability for
individuals and small companies to make independent games and get them sold.
Individuals or small companies have a variety of different places to look for exposure.
Similar to the Sundance Film Festival, people can enter their games in an independent
developer's contest at the yearly Game Developers Conference (www.gdconf.com),
which includes an Experimental Games Workshop at the GDC (www.experimental-
games.com). Or, would-be designers can go to the Independent Games Festival
(www.igf.com). Groups such as the IGDA also have programs to support starting groups.
Microsoft even has an Incubation program that seeds a number of small developers with
development kits, to allow them to develop games for the Microsoft Xbox more easily
and to find a publisher.

The biggest problem that a small team has in making a AAA title is that most types and
genres of games require a tremendous amount of content and code to be created, and a
small team can't produce this in a reasonable amount of time. Whether you are one of
these newcomers to games or an old veteran, this article will show you what is needed to
create a well-thought-out, well-organized, and successful game design to help you create
a great product.

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It is important to understand a little about the game industry and what it takes to sell a
game. Currently, there are two main methods for buying software: retail and online.
Some companies are now trying to create games and sell them online only, using the
Internet to distribute their games. This means that you never receive a package, but you
simply download the entire game before you play or as you go. None of the major game
publishers is using this model, for two reasons: First, there are a lot of potential problems
relating to security. Second, most games are still too big to download. I'll be focusing on
the creation of retail games that are developed, packaged, and sold through major stores
or by online retailers that ship you a game after you buy it.

Retailers receive their products from a distributor. The distributor is the one responsible
for making sure that the games get onto the shelves and are properly represented after
they get there. A publisher gives the distributor the product, but often this company is one
and the same.

A publisher is usually the one who pays for the development of the game, markets it,
creates the packaging, and makes sure it is tested. Publishers can pick up new titles in one
of three ways. Some larger publishers actually develop some titles in-house, using
internal teams from start to finish. Publishers also might own a certain title or license and
might want to make a game out of it, so they might shop it around to various developers
who they know or have worked with in the past. Publishers also receive a lot of game
design submissions that they often weed through, looking for titles that interest them.
These titles are usually called first-party titles. Larger publishers in the console world
(Microsoft, Nintendo, Sony, Sega) also have what are called third-party titles, which are
games that other publishers are developing for their hardware. Third-party publishers
include Electronic Arts, Activision, and Lucas Arts. Most of these publishers support a
wide variety of different platforms and often publish the same game on multiple
platforms at the same time.

When a title is ready to go into production, it is created by a developer who is either

internal or external to the publisher. Sometimes a developer also might work with another
third party to help create code, artwork, sound, music, scripts, and so on. Most often,
however, all of this work is done in-house by the developer.

The Issues
The game industry is still made up of a relatively few number of companies that all seem
to know each other. At the high levels are many old-timers who have been in the industry
a long time and all know each other. On the other side are young people who are not long
out of college and who are usually video or computer game fans. For this reason, it is
important to avoid getting a bad name in the industry because people will usually find
out, and it can be tough to regain their trust and your credibility.

You should be aware of a variety of "inside" issues in the game industry. Many of these
issues exist in some way in every industry, but it helps to know how they manifest
themselves here. A variety of industry-specific issues also are important, including the
lack of alternate funding; censorship, regulation, and concern over violence in games; too
much derivative content; lack of cultural diversity and women in the workforce;

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exploitive software patents; lack of recognition for and awareness of the creators; short-
term focus and lack of long-term R&D; and academic and curriculum issues in teaching
game development.

Funding
Getting funding to develop a game can be a tough thing. Getting a publishing deal for a
game these days can take a very long time for even an established company with a
seasoned team. Years ago, we were often able to sign projects in a matter of days or
weeks. I now see teams struggling for more than a year trying to sign the next project. If
you don't currently have a project going, you must then somehow fund your company
during this time.

It is very hard to find alternate sources of funding. Banks and other institutions are still
often hesitant to loan to game developers. In addition, not a lot of seed money or other
forms of money are coming from venture capitalists to allow game developers to get
through the rough times. Very little of this money is available to allow companies to
independently fund the development of an entire project before they have to go to a
publisher to sign a deal.

Like many other businesses, a lot of problems arise in finding adequate funding for
games. This will continue to be a problem as long as the industry faces stability
problems.

Violence
The game industry has taken a lot of flak in past years for making games that are too
violent and for not regulating itself enough. Some parents blame children's violence at
school or at home on violent video games; other critics claim that people actually gain the
skills that they need to kill people by playing games. Psychologists have done research
that backs up both sides of the story. There is no concrete evidence either way, though,
and the controversy is far from over.

Content
There are some who heavily criticize the industry for its lack of creativity. There are
many games that can be considered derivatives of each other and are relatively
unoriginal. There is constant controversy among developers regarding whether they
should innovate or imitate, and whether they should evolutionize or revolutionize the
game that they're working on compared to other games of the same genre or type. This
controversy will never end until everyone can agree on whether it is better to play it safe
or take a risk.

The Workplace
The game industry has a notoriously bad reputation as a bad place to work. It is known
for its long work days, excessive work hours, high stress, and management problems. The
game industry can also be a tough place for women to work and for new people to break
into. There are potentially many problems in the game industry to look out for, but
finding a good workplace can be the most important.

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Patents
There are a variety of problems having to do with patents in game design. Some are real
problems, whereas others are threatening to be problems. In some cases, people hold
patents on some aspects of game design, programming code, or technologies that, if
enforced, could severely impact the industry. Hopefully, none of the major patent issues
will ever come to actually pass. If they do, however, someone might establish a corner on
the market, or we might have to start paying steep additional royalties we can't afford to
pay.

In general, patents are a mixed bag of tricks. Most games are derivatives of one another.
To say that you own the rights to all role-playing games or some other form of game
would be ludicrous. However, people continue to try to patent aspects of game design and
technology, which could be counterproductive for the industry in the long term. Keep in
mind that things change very quickly, and trying to patent your design or ideas is a very
tough process.

Recognition
Some companies still don't give a lot credit to those who create the games. Higher-ups in
certain companies can still take credit for things they didn't really do. Ideas are also hard
to credit, and sometimes that is what you contribute as a designer. Make sure that you are
given as much credit as you deserve.

R&D
This industry tends to be overly consumed with just making games maybe because
everything moves so quickly or because this already is considered to be the most cutting
edge of the industries. Regardless of the reason, the gaming industry still does very little
research and development on new technologies until a project begins. It would benefit
developers to think more about how to create new technologies that they don't normally
have time to create for a normal game-development cycle, and to think about ways to
leverage technologies for longer time periods. More R&D would benefit many companies
greatly, and it wouldn't hurt game designers, either, to think more about the process of
development and how to make games better.

Teaching
Many schools are teaching classes on game development, and far fewer are teaching
game design. However, many game-development companies are still horribly unhappy
with the quality of the students coming out of specialized schools. For various reasons,
companies feel that students are coming out of school with inadequate skills and are not
able to be productive in a reasonable period of time after they are hired. Some of the
issues revolve around what the students are being taught, how they are being taught, who
is teaching them, the material that teachers have to teach from, the disjunction between
academia and production techniques, a lack of hands-on training and applicable studies,
as well as a variety of other issues.

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So, whether you are a student going to school or someone who might be looking to hire a
student, be sure to evaluate the situation, the school, and the person. Don't take a school's
program or reputation for granted.

Egos
The game industry is notorious for having a lot of people with big egos. A lot of factors
contribute to all the egos in the industry. Some people develop egos because they do a hit
game. This doesn't always mean that they know what they are doing, but it does mean
that they think they do. Some egos come from the industry having lots of young and
relatively immature people working in it people who got into making games as a way to
skirt the typical corporate environment that they couldn't fit into and didn't believe in. As
you move up the ladder at your current company, move to another one, or are just trying
like hell to get into the industry, it is important to understand that many people have very
"delicate" personalities and egos that need to be worked around or stroked. This might
seem ridiculous, but if you hope to get anywhere, you need to watch out for and step
lightly around sensitive people. The fact is, sometimes highly creative and talented
people are hard to work with and even harder to work for and this is an industry chock
full of talented people!

Politics
Just like all the big egos in the industry, every company has its politics. Apart from
normal day-to-day human interaction, some companies are so political that getting things
done requires a steel helmet and a full-time bullshit detector. These more toxic
environments occur for several reasons. Perhaps the company became too large too
quickly and its policies didn't allow for certain necessary changes in conditions. Perhaps
the human resources department was asleep at the switch and hired incompetent or
destructive personalities: One rotten apple can easily spoil the morale of a team and
mortally wound a project. Perhaps there are more middle managers than needed; this is a
sure-fire way to cause unnecessary confusion and competition for resources.

But there's no escaping some level of politics in an organization. After all, everyone has
an agenda. The question is, will they compromise on their agendas so that another agenda
can also be met? For instance, my agenda is often making great game designs. No matter
what project I am on, I want the design to be great. It's not that I don't care how the art
looks, what the technology is, or how many copies it sells, but I really want to say that
the part I worked on was as good as it possibly could have been. Producers need to make
sure that the game is on time and on budget, programmers need to make sure the game
works, artists need to make sure the game is beautiful, and so on. Politics occur as a
necessary part in getting the game done because everyone needs to make compromises to
get the game out the door.

The question to ask yourself is, do you play politics just to play them, or do you play
politics because you have to? I find myself constantly fighting this dilemma. The higher
up the food chain you are in the company, the more political maneuvering you have to
deal with. I constantly see things being done purely because they've always been done
that way, even when a better way exists. The dilemma is what to do about it. The best

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advice that I can give is to compromise when you can and pick your battles, so that you
can concentrate on the things that are most important to you and your design.

Risers
Risers are people who are working at a company only to get ahead. They're not really
there to make a great product, but they only want to climb the social, political, and
economic ladder. Every company has people that do this. The most important thing I can
say is this: Do not become one. Earn your respect, earn your promotions, and work harder
than everyone around you. Everything will work out much better in the end.

Final Thoughts
Whether you are thinking of getting into game development or are in it already, I highly
suggest joining and becoming active in an organization such as the IGDA. The
association has 30 articles worldwide and can be a good source of information and
support. These articles meet monthly to discuss game-development issues, make
connections, schmooze, and learn from each other. You can go to www.igda.org/ for
more information:

If you're interested in learning more about the industry in general, I recommend reading
Game Design: Secret of the Sages, by Marc Saltzman, if you can find it (it is now out of
print), or Game Design: The Art and Business of Creating Games, by Bob Bates. Both
articles cover a lot more general information about game design and the industry that is
worth reading if you are new to this field or thinking about getting into it.

The game industry is a great place to work. It's fast-paced and always changing. The
industry is full of lots of interesting people who can be a riot to hang out with. There are a
lot of opportunities for people who are interested in almost anything and for people who
have a wide variety of skills. Like almost every industry, there are both good things and
bad things. Understanding the problems that you might face in the industry will go a long
way toward making your career in a much more enjoyable experience.

References

Bates, Bob. Game Design: The Art and Business of Creating Games. Prima Tech, 2001.

Jacobson, M., et al. Activision. Bear, Stearns, and Co., Inc. March 18, 1999.

Saltzman, Marc. Game Design: Secret of the Sages, 3rd Edition. Brady Games, 2001.

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