VG Industry - Economics

Economics

Early on, development costs were minimal, and video games could be quite profitable. Games developed by a single programmer, or by a small team of programmers and artists, could sell hundreds of thousands of copies each. Many of these games only took a few months to create, so developers could release several titles each year. Thus, publishers could often be generous with benefits, such as royalties on the games sold. Many early game publishers started from this economic climate, such as Origin Systems, Sierra Entertainment, Capcom, Activision and Electronic Arts.

As computing and graphics power increased, so too did the size of development teams, as larger staffs were needed to address the ever increasing graphical and programming complexities. Now budgets can easily reach millions of dollars, even if middleware and pre-built game engines are used. Most professional games require one to three years to develop, further increasing the strain on budgets.

Some developers are turning to alternative production and distribution methods, such as online distribution, to reduce costs.

Today, the video game industry has a major impact on the economy through the sales of major systems and games such as Call of Duty: Black Ops, which took in over USD$650 million of sales in the game's first five days and which set a five-day global record for a movie, book or videogame. The game's income was more than the opening weekend of Spider-Man 3 and the previous title holder for a video game Halo 3. Many individuals have also benefited from the economic success of video games including the former chairman of Nintendo and Japan's third richest man: Hiroshi Yamauchi.

The industrywide adoption of high-definition graphics during the seventh generation of consoles greatly increased development teams' sizes and reduced the number of "AAA" (high-budget, high-quality) titles under development. In 2013 Richard Hilleman of Electronic Arts estimated that only 25 developers were working on such titles for the eighth console generation, compared to 125 at the same point in the seventh generation-console cycle seven or eight years earlier.