Alec Swan
3/16/20
EBM Assignment 2: Trends, PEST Analysis
The Gaming industry
Carol Wonsavage – Entertainment Business Models

Why I Chose This Industry
I decided to choose the gaming industry as I have been playing games basically my
entire life. I was introduced to gaming when I was very young at my dad’s brothers house. I
remember playing games like Sonic, Doctor Mario, and Super Mario World. Eventually when I
was older me and my brother received a Nintendo 64 for Christmas and ever since I have loved
playing video games. The industry has changed immensely over the last decade and has
become one of the largest segments in the entertainment industry.
Background Gaming Industry
The business model of the gaming industry in 1999 was based on video game, console,
and arcade sales. During this time the console market was at a peak of competition with
Nintendo, Sony, Sega, and Atari being major players in this space. In 1993 “the video game
industry generated $19.8 billion in worldwide sales and $20.8 billion in 1994” (Cinema, n.d.). In
the arcade space $7 billion in quarters was generated in just the united states in 1994. In the 90s
the arcade and home console market was “nearly 2 ½ times the size of the $5 billion movie box
office market” (The Game, n.d.).
During the 90s video games were put on multiple different platforms for release. The
Nintendo 64 had their games put on cartridges where the game is then loaded from ROM (Read-
Only Memory) into RAM (Random Access Memory). While the PlayStation had the games on
Compact Discs. These discs were cheaper and easier to make than the cartridges and the compact
discs could hold a lot more information for storage. This was huge step for the gaming industry
at the time and would further propel Sony into one of the most successful gaming icons of all
time (Noble, M.K.).

Two Companies:
1. Nintendo: Nintendo started in 1889 with the production of Japanese playing cards in
Kyoto. Eventually in 1980 “the company created a wholly owned subsidiary, Nintendo of
America Inc. in New York”. Nintendo would “Begin selling the “GAME & WATCH”
product line in Japan, the first portable LCD videogames with a microprocessor”. In 1981
Nintendo created the “Donkey Kong” video game which became the “hottest selling
individual coin-operated machine in the business”. In 1985 Nintendo released the
Nintendo Entertainment System with titles such as Excitebike, Super Mario Bros.,
Metroid, and The Legend of Zelda. Nintendo would release the first ever handheld
system called the Game Boy in 1989 which would become an icon for Nintendo.
Eventually in 1996 Nintendo would launch the Nintendo 64 which sold more than
500,000 systems on the first day. In 2000 the Nintendo Game boy would become “the
most popular selling console ever as sales surpassed 100 million. 2004 saw the
announcement of the next advancement in the handheld market with the Nintendo DS
and was met with immediate success. In 2006 the Wii launched with tremendous success
but would be followed up in 2012 with the underperformance of the Wii U. And in 2017
Nintendo’s most recent console the Nintendo Switch would release brining a whole new
way to play on the go and on your tv screen (Nintendo History, n.d.)
2. Sony: Sony would release their first video game console the PlayStation in 1994. This
new system used “CD format which allowed for bigger games, 3D-capability, and better
sound than what came before”. The PlayStation would eventually become the “first
games console in history to sell over 100 million units worldwide”. In 1995 before
internet became what it is today Sony released the “PlayStation Link would allow two
PlayStation consoles to connect via two TVs for selected multiplayer titles”. In 2000

Sony would release the PlayStation 2. It launched with “High Definition 3D visuals,
online play and an integrated DVD player” which was a huge selling point at the time.
With hit games such as Grand Theft Auto 3, Jak and Daxter, Ratchet & Clank, and God
of War the PlayStation 2 would become the “fastest game console to reach 100 million
units shipped, in just five years and nine months. The PlayStation 2 is still currently the
highest selling video game console of all time (PlayStation, n.d.).
PEST ANALYSIS
Political
Copyright: “Let’s Plays” or gameplay walkthroughs have been a huge thing for the gaming
industry on YouTube. In 2015 Nintendo introduced the “Nintendo Creators Program “. “This
program lets people earn advertising proceeds on any Nintendo related stuff that uses gameplay
footage of Nintendo Games” (Nintendo’s YouTube, Hernandez, P.). This sounds great in theory
as in the past Nintendo would not allow YouTubers to make any money on Nintendo related
content. Soon though creators would find out that this new program would introduce a whole
slew of new issues for content creators. Eventually after three long years of complaints and
backlash from the Nintendo community the Nintendo Creators Program was shut down in
December 2018. Under the new guidelines Nintendo stated we “encourage creators to make
content with active commentary and creative input” (Nintendo just, Marshall, C.).
ESRB: The ESRB is a non-profit rating system for the video game industry. “Established in 1994,
the primary goal is to help consumers especially parents make informed choices about the
games their families play” (About, Harris, B.J.). Currently the ESRB has three different levels of
rating systems. The ratings are as follows: E for Everyone, T for Teen, and M for Mature. In the

past some of the main concerns about determining a rating came from the levels of sexual
content, violence, and language found throughout the game. Within the last 5 years though top
games like Call of Duty, Overwatch, and Fifa have introduced new mechanics called loot boxes.
These loot boxes are essentially gambling as you are spending real world currency for a chance
at in game items. Many of these loot boxes are targets at games played by kids who might not
know how much money they are spending or even realize that they are spending real money at
all. After backlash from parents and legislators the ESRB will now be “stating online interactions
not rated by the ESRB” on the front of game boxes that allows players to spend real world
currency in the game ( ESRB, n.d.).
Economic
Subscriptions: When the PlayStation 4 launched in 2013 it introduced “PlayStation Plus” a new
online service that allowed you to play multiplayer games online and download select free
games each month. Many PlayStation fans were not happy about this as the PlayStation 3 has
free online play. This new model from Sony proved to be a game changer for them as it was
reported in 2019 that they made $3.20 billion through the subscription like PlayStation Plus
(PSN, Barker, S.). Eventually Nintendo would release its own online subscription in 2018 with
current subscribers sitting at 9.8 million (Switch, Strickland, D.).
Free to play: The free to play game model has been around for quite some time now and is
mostly considered on the mobile market. Within the last few years though major studios have
developed games like Fortnite, Apex Legends, and PubG. These games focus on a Free to play

model (F2P) that lets you play the core game absolutely free with in game purchases optional.
In 2018 these F2P games “generated a staggering $88 billion in 2018 leaving traditional games
in the dust”. This new model of F2P provides a long tail approach for these games that allow
the studios continual income for years to come ( Free, Coldewey, D.).
Social
Online play: Back in the 90s and 2000s couch co-op was hugely popular among console gamers.
Games like Mario Kart, Super Smash Bros, FIFA, and Call of Duty were games that you, your
friends and family would all crowd around the tv and play for hours. Now with the
advancement of internet quality you are able to play with basically anyone across the globe via
the internet. With this advancement in Internet and technology gaming has now become a way
to stay in contact with friends or family who have moved away. In the past 12 months Sony has
around 94 million active users with “90% having connected to the internet at some point” (PSN,
Croft, L.).
Twitch: Twitch is an online live streaming platform where you can stream video games and In
Real Life (IRL) content. Twitch was launched in 2011 and has quickly become the largest
streaming website for video games. Twitch has evolved into more than just a live streaming
platform over the years and is now a place where many kids, teens, and adults hang out and
what their favorite streamers while talking in the real time chat. Over the years Twitch has
developed a reality TV type persona that some of the content creators try to pursue. Many of
the creators go by stage names and have high quality productions and personas that keep

people invested and wanting to return for more. Twitch has been huge for the gaming industry
by keeping gaming relevant. In 2019 “Twitch users watched 9.36 billion hours of content on the
site”. The average viewership of twitch content “has often met or surpassed that of ESPN and
other cable news networks” (The future, Khalid, A.).
Technological
Game Patches: Unlike the old days where you would purchase a game and you could pop it in
and play it in seconds, we are now downloading day one updates via the internet that in some
cases can take hours to download depending on your internet speed. Now game patches are
not all bad news. They allow for new content to be added to the game, bug fixes, and
performance issues that just were not possible before we had the current internet
infrastructure. But with many developers having tight deadlines we are seeing more and more
day one updates and less polish of a game when it launches because the developers know that
they can fix and update the game down the road via a patch. These patches can also be very
inconvenient to the consumer depending on how your internet speed is and the unknowing of
when a new patch will be deployed as you cannot in most cases play the game until the new
patch is installed (The Problem, Frederiksen, E.).
Mobile Devices: Now more than ever is it easier to escape life and play your favorite game on
the go. Currently the mobile gaming market is estimated to be worth $63.2 billion with is 47%
of the global gaming market. The Nintendo DS is the second most sold console of all time with 4
of the top 10 being mobile game consoles. With the launch of the Nintendo switch in 2017 we

have seen full size console games being able to be taken on the go. The combination of being
able to play at home on your TV and on the go, gaming has made the Nintendo Switch already
one of the best-selling consoles of the past decade (20 Mobile, n.d.).
Conclusion
The gaming industry has changed and evolved drastically over the last two decades.
With the rise of technology came one of the biggest things for the game industry which was the
online infrastructure. Being able to play games online with your friends anywhere in the world
was a huge deal and still is till this day. We are now able to skip the disc altogether and
download games straight to our devices. Publishers and game studios can add content and
update the games if things go wrong after the game is all finished. With online play Sony and
Nintendo are able to implement online subscription fees that have made over $3.2 billion in
revenue for them (Switch, Strickland, D.).
Gaming is now more accessible than ever with mobile devices and consoles that are
able to fit in our pockets. With 47% of the global gaming market we have shown that mobile
gaming is what we want (20 Mobile, n.d.). F2P is also a huge thing among the mobile market
which highly encourages microtransactions and loot boxes. This has created much controversy
over the past decade because of shady practices in games that are mainly marketed towards
kids. The gaming industry is evolving at a rapid pace and the consumers are continuing to show
that gaming is their favorite form of entertainment.

References
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