Internet Impact

Impact of the internet – how does it affect cost and revenue?

Cost - The impact of the internet has decreased the costs for online operations. Production companies no longer need to physically produce a game. Instead, they can digitize the game for download. Through online networks, game developers are able to work together in different cities, states while producing a video game. The internet has allowed of networked individuals to come together. Increasing the efficiency for producing a game, decreasing the costs for employees over an extended amount of time. Games can now be produced on a faster basis.

Revenue - The online gaming industry is growing every single year. The internet has added to the revenue for production companies. As they produce hit, quality video games, they have the opportunity to either sell the product high, or gain more traffic by offering the game very cheap. Or potentially free! Through paid advertisement, or sales, the company will see higher revenue through the internet.

What has the internet changed?

The impact of the internet continues to grow yearly.

The (Internet Advertising Bureau) (Dated, 2/25/08) has indicated that traditional advertising is starting to shift to online companies. Internet advertising has passed $21 Billion in 2007. The video game industry has a major online presence. As the internet continues to grow in demand, the video game industry online will continue to grow. As the number of people visiting gaming websites increases, then the opportunity for advertising online will increase. Advertisers look to advertise where the consumers are visiting. If free websites who offer video games continues to draw in people, then they will have great opportunity to profit from the internet.

Online auction sites - These are sites like ebay, Amazon, Yahoo auctions (Japan), which are used in a way where you can buy games and consoles from stores and make them available for auction at a higher price, if the stores run out after you buy them, thus making profit. Also, you can find games that are too expensive or unavailable in stores in places like ebay, and often for a cheaper price. This can be deemed bad for business as the companies are losing out on those sales.

Xbox live subscriptions - millions of people are subscribed to xbox live. Considering that this adds 50 dollars a year per customer, we are looking at tens of millions worth of revenue here. Also you can purchase things like mini-games, or ad-ons to existing games on Xbox live which even further increases revenue.

MMORPG Success Massively Multi-player Online Role Playing Games, is a slew of games where millions subscribe to play in different virtual worlds and pay a monthly fee. World of Warcraft is a big success story. Millions of users log onto this virtual world, and pay a fee each month to play as a character in this world. This opened up an advanced way of gaming, and has become very profitable. Even games like Final Fantasy, which used to only be single player, now has a virtual world of its own where many people play, and pay each month, as opposed to just once for the game itself. It is a way to keep the profits rolling in on a game that was created years ago, and continues to expand.

cannibalization Part of the problem of the internet is that when stores sell games in-store and well as online, you tend to take profits away from the store. Although, if customers buy many games online, the revenues of the company itself will go up, so this can also be a good thing for stores.

free game downloads on the net Companies have found new ways to make money off video games. One of which is to offer games for free on the internet. What this does is it promotes advertisement sales by including ads at the site which the games are on, or in the game itself.

Copying and downloading games, and privacy issues Part of the problem with the industry that we see with other industries as well is the problem of piracy. Video games are produced with security codes built in so they can not be copies or reproduced. Hackers have found a way through that security and have created a way for the information in the games to be extracted and downloaded to the internet. They also have created software programs that can play the "burned" games. It is obvious that this has an negative impact on the revenue of the profits of the producers of the games and the suppliers.


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Activision

The impact of the internet on Activision has allowed the company to minimize production costs for video games produced. Game developers are able to work on an internet based network that allows the company to fully utilize different experts in various locations to construct video games. A team of experts have increased the production time that is required to produce a video game. As the production costs are minimized from the internet shaving off the production time. Video games are becoming more complex, which require increased technology, graphic media, and of course more time to complete a video game. Therefore, even though the existence of the internet has helped the company, the creation of good titles is very complex.

The effect of the internet on the video game industry has been huge. Internet based networks have expanded the addiction of the industry. In the beginning development of video game systems, the only multi-player user ability was with friends. The internet has allowed users to compete against people from around the world. The addiction of video games continues to increase, as you can constantly change your competition, beating various people of different skill levels. Activision has seen increased profits through internet based platforms, as they have produced many video games that have internet capabilities. As a production company, they produce video games for Personal Computers, PlayStation, Nintendo platforms, and X-box. Of course the games have the insanely popular X-box live, allowing players to compete against each other within an online network.

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Electronic Arts

As the world of online gaming develops, so to has the marketing strategy of Electronic Arts. With the emergence of free online gaming, Electronic Arts has expanded to new horizons. North America used to be the bigest market for gaming, but now with free online games, E.A. has extended itself to Asia and eastern Europe by providing games online for free, with the purchase of items in game to produce revenue for the company. Such as the success if FIFA in Korea and China.

http://www.nytimes.com/2008/01/21/technology/21game.html?_r=2&ref=technology&oref=slogin&oref=slogin

Microsoft:

Here Microsoft is way ahead with its Xbox Live service. Sony's online gaming was launched fairly recently and is considered to be much less accomplished than Microsoft's. Nintendo's efforts, scoffs Mr Barton, are "frankly stone age compared to the others". But this is about more than using Xbox Live to play the shooter game Halo against friends at the other end of the world. Games publishers can reach out to new consumers, for example with sites like EA's pogo.com, which is "purely advertising driven," and designed not for hardcore gamers but people who want to have a bit of fun in their lunch break.

http://news.bbc.co.uk/2/hi/business/6523565.stm

Microsoft

The Internet has definitely had an impact on Microsoft's Xbox. Xbox owners can download selected games via their Xbox live account, which in turn cuts production and manufacturing costs off the video games. Microsoft also uses its Xbox live service to market some of their gaming products which also cuts some of their marketing cost. With the Internet Microsoft has been able to reach a wide array of demographic segments. They have used the Internet for cross marketing which has shown in their numbers. Their online gaming service Xbox Live has connected people all across the world. They have created a network effect. With MSN, Office Live, and Xbox Live it seems that there is no escaping them. They are the standard in Console online gaming. If you want to play some one in a different country at your favorite game you know to get an Xbox and setup your Xbox live account.

People have found their soulmate via Xbox Live.

(http://www.xbox.com/En-US/community/personality/trixie/communityspotlights/20071108-halo3proposal.htm - Retrieved, 4/20/08)

Here is another article about a couple who met playing Xbox and had a baby together.
(http://www.xbox.com/en-US/community/news/2008/0313-xboxlivebaby.htm - Retrieved, 4/20/08)

To understand the internet's impact, we need to compare to the normal video game industry, and see what impact it caused.

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