Thursday, December 8, 2011

Updated Gaming Bipartite Network

Updated Network Insights

As we look at the network model for the gaming industry over the next few years, a few trends emerge. Even over the past five years, more firms who were traditionally platform providers or content creators have moved into distribution, leveraged by content digitization and with the strategic goal of cutting the middle man. We have seen companies such as Microsoft, Apple, and Nintendo develop direct consumer relationships -- areas once controlled by GameStop, Target, and other brick and mortar retail stores. We have seen this play out in the music industry and more recently with ebooks.

Also as a result of the digitization of video games, it is becoming easier for new content creators ("indie studios") to reach an audience. The gaming platforms that are being developed also require a less formal knowledge structure to begin development. For example, the mobile gaming SDKs have a lower learning curve than the more robust XBOX or PlayStation SDKs. These dynamics have led to a proliferation of smaller independent video game development firms, who can create and deliver a video game with as little as one person -- a feat that was impossible as recently as five years ago.

All this trends are visible in our network of relation of the industry. When analyzing the network big picture it is interesting to observe that the bigger players in the Industry - Microsoft, Sony, Nintendo - are positioned in a central node that allow them to oversee the industry and influence in the different layers. Also is remarkable how heterogeneous the game development layer is. With game studios, movie makers and brands interacting for the content development creation.

In our view in the near future this network will continue its expansion towards the online and social gaming layers, those companies able to effectively incorporate this new trends in their value chain will prevail in the market. At the same time content creation will become even more competed since technology has increase the availability of tools for creative small player and also has lowered development cost.

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