Socio cultural & Environmental factors

The key social trends and educational factors which are affecting the video game industry are the norms established by the educationists in particular on the impact of games on children. Addiction of children to video gaming is another key issue. Though industry associations have resisted the pressures of imposing restrictions, there is likelihood that this lobby may once again attempt to place constraints on development.

However social mobility and factors of income distribution will contribute to growth of the video game industry. Another aspect favoring the business is the overall approving approach of people to electronic entertainment and video games which will contribute to growth. Technological The new developments in the industry are essentially related to online console gaming and development of MMORPG. This will see a substantial accretion of gamers world wide and thus has tremendous potential.

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The industry per se may not have to spend on technology on these issues as computer hardware companies as Intel as also broadband network proliferators as Arroyo are investing in the same. The spending on research by producers and developers is assisted by the symbiosis of relationship with the consumers or the gamers who will provide excellent inputs for progression of games. Five Forces Framework A five forces framework analysis of the video games industry is carried out as per succeeding paragraphs and is represented by Figure 7 below.

Threat of New Entrants The video game industry particularly console gaming is a closed loop business with only three companies, Sony, Microsoft and Nintendo which have monopoly of console production and distribution. Thus new entrants in this segment are unlikely to venture at this stage even though there is adequate growth potential. The high cost of entry, establishing economies of scale, overcoming the brand identity of established players, and attaining cost advantage mitigate against entry.

However the field of development has adequate scope for new entrants and there is a high level of fluidity which has provided opportunity for a number of new developers to enter, which will increase with online console gaming taking roots shortly. Rivalry Determinants There is intense rivalry in console gaming. The three principal players are continuously wrangling for domination with technology, cost and creativity advantages. Sony has established a lead with Microsoft closely following with the PS 3 and Xbox 360 models respectively.

On the other hand developers too have a wider range in competition with high level of product differences, the diversity of competitors and complexity of game development. The consumer will have a major role to play in this who can supply the necessary inputs to the developer to provide him an edge over the competitors. Thus the relationship between the console, developer and consumer will provide advantage to different players in the industry and though this is not determining rivalry at present will continue to be a dominant factor.