Five Companies to Watch
The games industry supports several successful business models.
Even though not all of these publicly traded (or soon to be publicly traded) companies make games, all are exploiting their popularity. Two of them, Zynga and Apple, are relatively new players in the games industry, but both have benefited immensely from the surging demand for casual games, which can be played in spare moments on a smart phone or a social-networking website. The other companies have track records in the mature, though still lucrative, market for complex, “hard-core” games typically played on consoles and personal computers. But now they are adjusting their strategies to take mobile and social gaming into account.
Even though Apple cofounders Steve Jobs and Steve Wozniak worked for Atari on one of the earliest successful arcade games, Breakout, Apple’s hardware was never a popular platform for games until the arrival of the iPhone App Store in 2008. Games quickly dominated the best-selling-app charts, and Apple’s mobile devices became the rapidly expanding market of choice for game developers. Apple responded by adding game-friendly features to its mobile operating system, iOS. In addition to helping boost mobile sales, Apple cashes in on the popularity of games on its devices by taking a cut of both game sales and in-game purchases of optional content. It also operates an advertising network that allows Apple and developers to share revenue from marketers wishing to place ads within games.
See the rest of our Business Impact report on The Business of Games.
Activision Blizzard has had a string of hits, most recently Call of Duty: Modern Warfare 3, a so-called first-person shooter game that allows a gamer to play from the viewpoint of a Special Forces soldier. Within five days of the game’s release this month, it reached $775 million in global sales. Activision Blizzard also operates World of Warcraft, one of the most popular massively multiplayer online role-playing games, or MMORPGs. World of Warcraft has over 10 million players who pay monthly subscription fees to enter an online fantasy world via their personal computers. Activision Blizzard has also begun increasing its presence on mobile devices, offering features such as apps that let players respond to in-game messages from other players while away from their console or computer.
Another giant in personal-computer and console gaming, Electronic Arts develops its own games as well as publishing and distributing titles created by outside studios. It owns several console and personal-computer game franchises that reliably sell millions of copies upon each yearly update, including the soccer simulation game FIFA and the American-football simulation game Madden NFL. In recent years, Electronic Arts has moved aggressively into the market for casual and social games. It purchased PopCap, a casual-games pioneer and maker of the popular Bejeweled series, in a $1.3 billion deal in August.
Nvidia created the first commercial graphics processing unit, or GPU, for personal computers in 1999. GPUs allow CPUs to offload much of the work required to convert the internal mathematical description of a game environment into the 2-D images displayed on screen, with the GPU handling details such as lighting a scene or applying textures to objects. Nvidia has shipped over one billion of these chips, which allowed games to become much more complex and realistic. With the ability to play games a critical selling point for the latest wave of smart phones and tablets, the company has found a new market in mobile devices, even offering a general-purpose CPU bundled on a chip with a GPU as an all-in-one solution for device manufacturers.
One of the year’s most anticipated IPOs is due soon from Zynga, which is expected to garner a valuation of at least $14 billion. Skillfully exploiting the ability of Facebook to host third-party applications, the company has created so-called social games such as FarmVille and Mafia Wars, which encourage users to play with (and recruit) other Facebook members. Zynga’s most popular games each have tens of millions of players worldwide. They generate revenue mostly from the sale of game items to players.