How The Video Game Industry Is Changing

Video games have yet to hit a real peak as far as how good the design and technology can be. In this article, we’ll look at how the video game industry is continuing to change and evolve.

Video game creation has become increasingly complex, and the cost of creating a game to run on one of the major consoles has risen with this greater complexity. It was once unthinkable to sink millions into development costs, but games today can cost tens and even hundreds of millions. This has pushed game development into Hollywood movie territory in terms of production and marketing costs.

The higher price and the higher stakes started a trend of mergers and acquisitions that has continued over the last decade. Now companies like Facebook (FB), Microsoft (MSFT) and Softbank are getting into purchasing game studios along with large game companies, including Take-Two Interactive (TTWO), Nintendo and Activision Blizzard (ATVI), and conglomerates, such as, Sony and Konami that have large gaming interests. (For more, read Power Up Your Portfolio With Video Game Stocks.)

Virtual reality is coming. Oculus VR, a subsidiary of Facebook, is working hard on the technology and seems to have the capital and expertise to make it happen. Video games have already surpassed many other forms of entertainment as far as immersion goes, and virtual reality will add yet another layer. There will also be further experimentation with controls, such as adding voice, touch screens and gestures to game mechanics when the consoles add peripherals to take in those inputs. Video games get better looking every year, but we will likely see them enter an awkward, experimental phase as they work through new control and viewing options. Nintendo’s Wii U touchscreen gamepad is an early step in this direction.

Like Hollywood, the video game industry needs to spin more revenue off of its intellectual property because the product costs a lot to make. Merchandising is already around, with t-shirts, figures, hats, mugs and more. The Halo series on Microsoft’s Xbox has spread to other forms of content through novels and comic books in addition to an upcoming television series and a long rumored movie. This may become the approach for all successful video game series to follow.

The growth in mobile gaming continues to be strong, with Konami and other companies publicly stating that they will focus on mobile. Here again, smaller studios are getting eaten up by larger ones, but the production values are more manageable due to the limitations of the platform. As a relatively new part of the industry, the breakeven points and profit model for mobile gaming has not yet been set. Right now, there are ad-driven games, freemium games that require upgrades and games that use a virtual currency that depletes as you play. There is money to be made in mobile gaming, but most developers are still working out how to get it.

The final and most important trend in the video game industry is the expansion of the market as far as demographics go. People are playing games both earlier and later in life, and the gender mix is nearing par. The top-level gamers competing in the eSports leagues have gained enough recognition that they can apply for the professional athletes visa when entering the U.S. Gaming has a wide appeal, and it is still growing.

The video game industry has always been about innovation, so new technology, new controls and new experiences are to be expected. The consolidation, acquisitions and search for additional revenue streams are reactions to the fiscal realities of game development. Video games cost a lot of money to make, so companies need to have deep pockets and different ways of making a profit to stay in business.

The most interesting change in the video game industry is the expanding demographics of gamers. With more people playing games and creating demand for more immersive entertainment, the future of the video game industry looks bright.