Innovation and marketing in the video game industry

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Innovation and Marketing in the Video Game Industry
avoiding the Performance Trap

DaVID Wesley anD GlorIa Barczak
Northeastern University, Boston, USA

The public has no sense of how fast things are moving … It’s like going from bows-and-arrows to the space age. Ralph Baer, inventor of the first video game console

Formost of the video game industry’s short history, console makers and developers have been searching for a holy grail of high performance and realism. However, the recent surge in popularity of underpowered consoles and simple games over cutting edge technology and big budget titles suggests that a new paradigm may be at hand. Examples include the success of the Wii over the PlayStation 3 and Xbox360, the DS over the PSP, casual PC games over first-person shooters, and music games over big budget action adventure titles. Everywhere one looks, simplicity and ease-of-use are triumphing over depth and complexity. Netbooks, portable music players, and point-andshoot digital cameras are a few of the product categories that have emerged to serve the needs of the mass market of consumers whorequire simple and easy-to-use products and services. In his best-selling book Crossing the Chasm, Geoffrey Moore (2002) argues that success in high-tech markets depends on “making the transition from an early market dominated by a few visionary customers to a mainstream market dominated by a large block of customers who are predominantly pragmatists in orientation.” This transition is called the chasmand the key to crossing the chasm is to make the mainstream market materialize. However, achieving this leap requires a different strategy than what one might use to lure early adopters of technology. The reason is that the mainstream market has different values and requirements than the early market. Although all industries are affected by this reality, the case of the video game industry isparticularly compelling.


InnoVaTIon anD MarkeTInG In The VIDeo GaMe InDusTry

The Social and Economic Impact of Games
This book is the first attempt to understand the business of video games from a marketing and innovation perspective. Why academia has not given more consideration to an industry that has a revenue-generating capacity that rivals film and music remains anyone’s guess. Wesuspect it has something to do with a reluctance to investigate a medium that is often considered juvenile. Yet video games should no longer be viewed as the exclusive domain of antisocial teenage boys, but rather as part of the commercial mainstream. Their impact on society is far reaching. For example, leading edge innovations in processor design, computer graphics, and artificial intelligence areall being driven by the video game industry. Game software is used to train soldiers for battle, to train pilots in flight controls and navigation, and to provide rehabilitation services to hospital patients. Video games have demonstrated resilience amidst the economic crisis that began in 2008, when the world economy suffered its worst downturn since the Great Depression. Countless retailersclosed shop for good, including electronics giant Circuit City, which declared bankruptcy in late 2008. Millions of American homeowners were forced into foreclosure and unemployment reached levels not seen in more than 30 years. Yet throughout the crisis, the video game industry remained resilient, continuing to grow year after year. In 2008, worldwide sales of video game hardware and software passed$50 billion, more than double the annual sales posted in 2004 and 2005, and $5 billion more than in 2007. In less than a decade, more than one billion video game consoles have been sold worldwide. Video games are now one of the leading forms of media consumption, with sales rivaling the most successful Hollywood blockbusters. Marketing executives in a wide range of industries are turning to...