Video Game Industry: A Social Menace or Addictive Learning Tool?

A look into potential groups who would benefit the most from the industry in Canada

Shindu Parameswaran, Section Editor

Flickr by tehusagent

When most people imagine a serious “gamer”, it’s hard not to think of overweight teenagers with bags under their eyes from staring at a screen all night. This stereotype seems exaggerated, but how much truth is there to it?

The video gaming generation grew up with their parents complaining about these games being addictive, violent, and damaging to their children. Some even say that gaming creates a disconnection between the virtual world and the real world. While it is true that there have been cases of obesity, illnesses, and even deaths due to excessive gaming, exactly how damaging is this industry? Would society be better without it?

The Birth of a Generation

Can you imagine a world without your beloved FarmVille or Halo? In 2009, the video game business was estimated to be worth more than $60 billion. But when did this multi-billion industry originate?

It dates back to 1966 where Ralph Baer, a New Hampshire engineer who was employed by a military electronics contractor, sprang up with the idea in his living room.

As he was watching TV, he started thinking about what you could do with a television besides watching shows such as Bonanza and “My Three Sons?” He began to write a few-page reports on the matter – ultimately resulting in the beginning of the industry.

On the other hand, many people may argue that the true foundation of the industry was in California by a couple of young entrepreneurs – Nolan Bushnell, the founder of the company, and Al Alcorn, an engineer – launching Atari Incorporated. The two bought a black-and-white TV from a local drug store, created the first video game machine – naming it Pong – and installed the machine in a local bar. Within the first week, the game caught on with customers and the two entrepreneurs realized they had a winner on their hands.

Yet, debatably, the blockbuster, that may have made the video game industry prominent globally, happened halfway across the world – in Japan. Although, previous video games were developed from deep and immense thinking, the Pac -Man idea came about over a routine lunch. The team working on the Pac-Man project went out for pizza, and the team leader noticed that one slice of the pizza was missing. “He looked down and there was Pac-Man staring at him.” Arguably, Japan had started the fascination for video games.

[pullquote]Violent video games help in the improvement of visual-spatial skills.[/pullquote]

By the late 1980s and early 1990s, Nintendo, another Japanese video game corporation, controlled 90 percent of the video game market. Their control over the industry increased once they introduced the Gameboy, a handheld video game. Nintendo derived its innovative idea for its Gameboy after the fall of the Soviet Union. The fall of the USSR allowed Nintendo to get their first glimpse at the popular game, Tetris – initiating the establishment of Nintendo’s Gameboy device.

By the mid-1990s though, Sony, a Japanese global electronic conglomerate, decided to infiltrate the video game industry by introducing the PlayStation. A few years after Sony had entered the trade and were about to introduce its second console, Microsoft also decided to enter the fray with its Xbox console. The two global corporations observed the profits of Nintendo and the potential of the industry for many years, finally eroding Nintendo’s grip of the industry.

The video game industry is persistently progressing in various ways: innovative methods to improve gameplay (i.e. through motion tracking or controls) and enhanced graphics. This enhancement in graphics have been witnessed through characters in video games resembling their real-life individuals (i.e. basketball stars, like Kobe Bryant and Lebron James, are duplicated in games, such as NBA 2K11).

The improvement in gameplay has been seen through the Nintendo’s fifth console, the Wii, which has motion detectable controllers. Seeing the success that Nintendo has gained through the Wii, Microsoft and Sony have tried to replicate the success of Nintendo by recently releasing their own motion-sensing game controllers through the Kinect and Move.

Counting the Loot

Flickr via joey.parsons

The video game industry may be progressing in the right direct in terms of the technical aspects, but what about the growth of the industry in financial terms? According to a study done by PriceWaterhouseCoopers (PwC), global video game revenues have increased gradually from $21.88 billion in 2002 to $41.90 billion in 2007. Forecasts done by PwC predict that the industry will continue to grow with revenues hitting $68.4 billion in 2012.

This is in alignment with previous forecasts, which expect that the gaming industry will outshine other entertainment areas, like music and movies, in terms of growth. It is expected that console games will make up the majority of the sales for the gaming sector, with sales expected to increase from $24.9 billion in 2007 to $34.7 billion in 2012 – growth of 6.9 percent. The Internet is also expected to play a role in the following years with online games anticipated to generate revenues of $14.4 billion in 2012, in contrast to the $6.6 billion produced in 2007.

Even though the gaming sector is thriving for the most part, there are some gaming markets that are predicted to decline in the future. One such division is the PC gaming market. Although, some industry experts deny the forecasted decline for the market, according to the study, the PC gaming market is projected to decline to $3.6 billion in 2012 from the $3.8 billion revenues generated in 2007. This is due to the decreasing amount of quality games being released, which interest PC gamers.

Meanwhile, the increased number of in-game advertising, which generated $1 billion in profits in 2007, will be expected to swell in the coming years. With Microsoft acquiring the video game advertising company, Massive, and Sony teaming up with a similar company in IGA Worldwide, it is expected that other companies will also look to reap profits from advertising within games. It is expected that in-game advertising will reap profits of $2.3 billion in 2012.

Much of what has been discussed thus far has revolved around video games for consoles and PCs; but what about the app market for video games? In recent years, this market has created blockbusters, such as Angry Birds and Cut the Rope. Is this a sign for the future of the video game application market or a short-period spurt?

[pullquote]You’ve probably heard of “that guy” who played StarCraft until his death.[/pullquote]

The study expects that this “oft-ignored” market to enjoy the best growth in the gaming industry. It is expected that the mobile gaming market expanded by 19 percent in 2012 with sales increasing from $5.6 billion to $13.5 billion from 2007 to 2012. Moreover, the study suggests that Canada will benefit greatly from this outburst, as the Canadian mobile gaming market is anticipated to collect $346 million in 2012.

The Parties that Profit

In an interview with the Arbitrage, Jennifer Jenson –- an Associate Professor of Pedagogy and Technology in the Faculty of Education at York University and President of the Canadian Game Studies Association – reiterates the fact that the video game industry is evolving: “I think the game industry is growing, in part, because they are attracting a larger audience (not just men and boys) and also, perhaps in part, because there has been a move to different kinds of games (movement based games on the Wii, music games like Guitar Hero and Rock Band) and even games on other devices, especially in North America like the iPhone and Android phones.”

Based on the above-mentioned, the gaming industry as a whole seems to be thriving and will continue to flourish in the future. But who is benefiting from this industry’s growth? One group that is clearly prospering from the booming industry is video game companies – console makers, such as Sony, Microsoft, and Nintendo, and video game developers, such as THQ and Activision.

Even companies that act as middlemen benefit greatly. These “middleware companies” are “a major player when it comes to supplying the tools that do all the little things – those finer details that make games come alive.” Canada appears to benefit greatly from the flourishing gaming industry, as there are many innovative organizations that are part of the video game developing process, including the fact that there is a great deal of demand for video games – specifically apps on the iPhone and Android phones. With increasingly more Canadian companies playing a role in the gaming sector, the government has taken actions to encourage more activity among Canadian companies.