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This chapter provides an introduction to the games
industry. It offers a brief analysis of the overall
industry structure and examines the role of each of
the sub-sectors (an area explored in more detail in
Chapter 4). The chapter also provides data on the
size and value of the global market and considers
some of the key factors driving growth in demand for
each platform. Finally, the chapter explores some of
the key trends and developments affecting the
industry and their likely development.
2.1 Games industry structure
2.2 Global market size
2.3 Key developments
2.1 Games industry structure
The computer games industry is similar in structure
to other creative and software industries such as film,
music, computer software and books in that it is
based around the creation, publication and
distribution of intellectual property products. The
industry value chain is illustrated below.
Exhibit 2: The games industry value chain
Licence holder
Platform owner / console
manufacturer
Middleware & services company
Developer
Financial institutions
Recruitment
Training education
Lawyers
Technology suppliers
Other services
Agent
Source: Spectrum analysis
Publisher
Peripherals
manufacturers
Distributor
Key:
Retailer Consumer
The core participants in the value chain are briefly
described below:
A
B
C
D
Core value chain - Not interviewed
Core value chain - Interviewed
Core value chain - Focus of study
Peripheral to value chain - Interviewed
1 Source: Spectrum interview with industry analyst
2 Source: Screen Digest - Interactive leisure software, market assessment and forecasts to 2005
GAMES MARKET OVERVIEW
• Developer: Games developers are responsible for
the process of creating a game. This task has
evolved from something which could be
undertaken by one or two programmers part-time
to a highly complex, intensive 1-2 year process
requiring teams of dozens of specialised
designers, programmers, artists, musicians,
scriptwriters, project managers and possibly even
actors.
• Publisher: Publishers are responsible for
selecting games titles, either from independent
developers or from in-house teams, funding their
development, overseeing or terminating
production by assessing progress against project
milestones, management of testing, localisation,
marketing, manufacturing and, to varying extents,
distribution to retailers.
• Distributor: Distributors are intermediaries
between publishers and retailers. Their original
role was more that of a wholesaler when the UK
games retail market was primarily composed of
small independent stores. However, more recently,
increased consolidation in the publishing and retail
areas has led to a shrinking of the distributor's role
to more of a simple fulfilment and delivery function
as publishers increasingly deal directly with large
retailers. Some publishers will also form exclusive
relationships with distributors.
• Retailer: Retail stores are by far and away the
most common channel for sales of games. UK
retail is now highly concentrated among the large
retail chains, with one chain in particular, games
specialist retailer Electronics Boutique, now
rebranded as GAME Group, having an estimated
25% market share 1 and less than 10% of the
6000 stores remaining independent 2 . Retail
stores face potential threats from online retail and
delivery of games, but the games industry in
general believes that physical media sold through
stores will remain the dominant retail channel for
the foreseeable future.
• User platform: Games are now played on a wide
variety of devices, including PCs, dedicated
games consoles, mobile phones, on the Internet
and on interactive TV (iTV) platforms. The primary
markets are PC and console games, but the
Internet, mobile and iTV are emerging as new
means by which to reach game-playing
customers.
Competitiveness analysis of the UK games software sector Main report 9