Video game publisher

Last updated November 10, 2023

A video game publisher is a company that publishes video games that have been developed either internally by the publisher or externally by a video game developer.

They often finance the development, sometimes by paying a video game developer (the publisher calls this external development) and sometimes by paying an internal staff of developers called a studio.^[1] The large video game publishers also distribute the games they publish, while some smaller publishers instead hire distribution companies (or larger video game publishers) to distribute the games they publish. Other functions usually performed by the publisher include deciding on and paying for any licenses used by the game; paying for localization; layout, printing, and possibly the writing of the user manual; and the creation of graphic design elements such as the box design. Some large publishers with vertical structure also own publishing subsidiaries (labels).

Large publishers may also attempt to boost efficiency across all internal and external development teams by providing services such as sound design and code packages for commonly needed functionality.

Because the publisher often finances development, it usually tries to manage development risk with a staff of producers or project managers to monitor the progress of the developer, critique ongoing development, and assist as necessary. Most video games created by an external video game developer are paid for with periodic advances on royalties. These advances are paid when the developer reaches certain stages of development, called milestones.

Business risks

Video game publishing is associated with high risk:

The Christmas selling season accounts for a highly significant portion of industry sales, leading to a concentrated influx of high-quality competition every year in every game category, all in the fourth quarter of the year.^[2]
Product slippage is common due to the uncertain schedules of software development. Most publishers have suffered a "false launch", in which the development staff assures the company that game development will be completed by a certain date, and a marketing launch is planned around that date, including advertising commitments, and then after all the advertising is paid for, the development staff announces that the game will "slip", and will actually be ready several months later than originally intended. When the game finally appears, the effects among consumers of the marketing launch—the excitement and "buzz" over the release of the game, fueling consumers' intent to purchase—have dissipated, and lackluster interest leads to weak sales. An example of this is the PSP version of Spider-Man 3.^[3] These problems are compounded if the game is supposed to ship for the Christmas selling season, but actually slips into the subsequent year. Some developers (notably id and Epic) have alleviated this problem by simply saying that a given game will be released "when it's done", only announcing a definite date once the game is released to manufacturing. However, this sometimes can be problematic as well, as seen with Duke Nukem Forever .
The industry has become more "hit driven" over the past decade.^[4]^[5]^[6] Consumers buy the game that's best marketed but not necessarily of the highest quality, therefore buying fewer other games in that genre. This has led to much larger game development budgets, as every game publisher tries to ensure that its game is number 1 in its category. It also caused publishers to on occasion force developers to focus on sequels of successful franchises instead of exploring original IP; some publishers such as Activision Blizzard and Electronic Arts have both attracted criticism for acquiring studios with original games and assigning them to support roles in more mainstream franchises.^[7]^[8]
Current generation consoles have more advanced graphic capabilities than previous consoles. Taking advantage of those capabilities requires a larger team-size than games on earlier, simpler consoles. In order to compete with the best games on these consoles, there are more characters to animate; all characters must be modeled with a higher level of detail; more textures must be created; the entire art pipeline must be made more complex to allow the creation of normal maps and more complex programming code is required to simulate physics in the game world, and to render everything as precisely and quickly as possible. On this generation of consoles, games commonly require budgets of US$15 million to $20 million. Activision's Spider-Man 3 , for example, cost US$35 million to develop, not counting the cost of marketing and sales.^[9] Every game financed is, then, a large gamble, and pressure to succeed is high.

Contrasting with the big budget titles increased expense of "front-line" console games is the casual game market, in which smaller, simpler games are published for PCs and as downloadable console games. Also, Nintendo's Wii console, though debuting in the same generation as the PlayStation 3^[10] and the Xbox 360,^[11] requires a smaller development budget, as innovation on the Wii is centered around the use of the Wii Remote and not around the graphics pipeline.

When publishing for game consoles, game publishers take on the burden of a great deal of inventory risk. All significant console manufacturers since Nintendo with its NES (1985) have monopolized the manufacture of every game made for their console and have required all publishers to pay a royalty for every game so manufactured. This royalty must be paid at the time of manufacturing, as opposed to royalty payments in almost all other industries, where royalties are paid upon actual sales of the product—and, importantly, are payable for games that did not sell to a consumer. So, if a game publisher orders one million copies of its game, but half of them do not sell, the publisher has already paid the full console manufacturer royalty on one million copies of the game and has to absorb that cost.^{[ citation needed ]}

Investor interest

Numerous video game publishers are traded publicly on stock markets. As a group, they have had mixed performance. At present, Electronic Arts is the only third-party publisher present in the S&P 500 diversified list of large U.S. corporations; in April 2010, it entered the Fortune 500 for the first time.^[12]

Hype over video game publisher stocks has been breathless at two points:

In the early 1990s, the introduction of CD-ROM computer drives caused hype about a multimedia revolution that would bring interactive entertainment to the masses. Several Hollywood movie studios formed "interactive" divisions to profit in this allegedly booming new media.^[13] Most of these divisions later folded after expensively producing several games that were heavy in "full-motion video" content, but light in the quality of gameplay.
In the United States, revenue from the sales of video and computer games exceeded revenue from film box-office receipts for the first time in the dot-com days of the late 1990s, when technology companies in general were surrounded by hype. The video game publishers did not, however, experience the same level of rise in stock prices that many dot-com companies saw. This was probably because video game publishing was seen as a more mature industry whose prospects were fairly well understood, as opposed to the typical exciting dot-com business model with unknown but possibly sky-high prospects. While many technology stocks were eventually destroyed in the dot-com crash in the early 2000s, the stock prices of the video game publishers recovered as a group; several of the larger publishers such as EA and Take-Two Interactive achieved historical highs in the mid-2000s.

Publishers by revenue

Rank	Name	Country	Revenue in $bn
1	Sony Interactive Entertainment	Japan	26.9^[14]
2	Microsoft Gaming	United States	24.2^[15]
3	Tencent Games	China	16.224
4	Apple	United States	15.2
5	Nintendo	Japan	13.9^[16]
6	Electronic Arts	United States	7.42^[17]
7	NetEase	China	6.668
8	Embracer Group	Sweden	3.4^[18]
9	Take-Two Interactive	United States	3.089
10	Bandai Namco Entertainment	Japan	3.018
11	Square Enix	Japan	2.386
12	Nexon	South Korea	2.286
13	Ubisoft	France	1.9^[19]
14	Netmarble	South Korea	1.883
15	Konami	Japan	1.303
16	Sega	Japan	1.153
17	Capcom	Japan	0.73^[20]

In 2021, the largest public companies by game revenue were Tencent, with US$32.2 billion, followed by Sony, with US$18.2 billion, and Apple, with US$15.3 billion, according to Newzoo.^[21]

Related Research Articles

A video game developer is a software developer specializing in video game development – the process and related disciplines of creating video games. A game developer can range from one person who undertakes all tasks to a large business with employee responsibilities split between individual disciplines, such as programmers, designers, artists, etc. Most game development companies have video game publisher financial and usually marketing support. Self-funded developers are known as independent or indie developers and usually make indie games.

<span class="mw-page-title-main">History of video games</span>

The history of video games began in the 1950s and 1960s as computer scientists began designing simple games and simulations on minicomputers and mainframes. Spacewar! was developed by Massachusetts Institute of Technology (MIT) student hobbyists in 1962 as one of the first such games on a video display. The first consumer video game hardware was released in the early 1970s. The first home video game console was the Magnavox Odyssey, and the first arcade video games were Computer Space and Pong. After its home console conversions, numerous companies sprang up to capture Pong's success in both the arcade and the home by cloning the game, causing a series of boom and bust cycles due to oversaturation and lack of innovation.

A video game console is an electronic device that outputs a video signal or image to display a video game that can be played with a game controller. These may be home consoles, which are generally placed in a permanent location connected to a television or other display devices and controlled with a separate game controller, or handheld consoles, which include their own display unit and controller functions built into the unit and which can be played anywhere. Hybrid consoles combine elements of both home and handheld consoles.

<span class="mw-page-title-main">Activision</span> American video game publisher

Activision Publishing, Inc. is an American video game publisher based in Santa Monica, California. It serves as the publishing business for its parent company, Activision Blizzard, and consists of several subsidiary studios. Activision is one of the largest third-party video game publishers in the world and was the top United States publisher in 2016.

The video game crash of 1983 was a large-scale recession in the video game industry that occurred from 1983 to 1985, primarily in the United States. The crash was attributed to several factors, including market saturation in the number of video game consoles and available games, many of which were of poor quality. This along with waning interest in console games in favor of personal computers. Home video game revenue peaked at around $3.2 billion in 1983, then fell to around $100 million by 1985. The crash abruptly ended what is retrospectively considered the second generation of console video gaming in North America. To a lesser extent, the arcade video game market also weakened as the golden age of arcade video games came to an end.

The video game industry is the tertiary and quaternary sectors of the entertainment industry that specialize in the development, marketing, distribution, monetization and consumer feedback of video games. The industry encompasses dozens of job disciplines and thousands of jobs worldwide.

A console game is a type of video game consisting of images and often sounds generated by a video game console, which are displayed on a television or similar audio-video system, and that can be manipulated by a player. This manipulation usually takes place using a handheld device connected to the console, called a controller. The controller generally contains several buttons and directional controls such as analogue joysticks, each of which has been assigned a purpose for interacting with and controlling the images on the screen. The display, speakers, console, and controls of a console can also be incorporated into one small object known as a handheld game.

Video game development is the process of developing a video game. The effort is undertaken by a developer, ranging from a single person to an international team dispersed across the globe. Development of commercial video games is normally funded by a publisher and can take several years to reach completion. Independent development has been on the rise, facilitated by the growth of accessible game development software such as Unity and Unreal Engine and new online distribution systems such as Steam and Uplay, as well as the mobile game market for Android and iOS devices.

A mobile game, or smartphone game, is a video game that is typically played on a mobile phone. The term also refers to all games that are played on any portable device, including from mobile phone, tablet, PDA to handheld game console, portable media player or graphing calculator, with and without network availability. The earliest known game on a mobile phone was a Tetris variant on the Hagenuk MT-2000 device from 1994.

Germany has the second-largest video games player base in Europe, with 44.3 million gamers in 2018, after Russia. Consumers in Germany spent €5.87 billion on video games over the course of 2021, a 3 percent year-on-year increase from 2020. The video game market in Germany grew by 6 percent to €6.2 billion in 2019.

The video game industry in Mainland China currently is one of the major markets for the global video game industry, where more than half a billion people play video games. Revenues from China make up around 25% of nearly US$100 billion video game industry as of 2018, and since 2015 has exceeded the contribution to the global market from the United States. Because of its market size, China has been described as the "Games Industry Capital of the World" and is home to some of the largest video game companies. China has also been a major factor in the growth of esports, both in player talent and in revenue.

Platform exclusivity refers to the status of a video game being developed for and released only on certain platforms. Most commonly, it refers to only being released on a specific video game console or through a specific vendor's platforms—either permanently, or for a definite period of time.

Video gaming in the United States is one of the fastest-growing entertainment industries in the country. The American video game industry is the largest video game industry in the world. According to a 2020 study released by the Entertainment Software Association, the yearly economic output of the American video game industry in 2019 was $90.3 billion, supporting over 429,000 American jobs. With an average yearly salary of about $121,000, the latter figure includes over 143,000 individuals who are directly employed by the video game business. Additionally, activities connected to the video game business generate $12.6 billion in federal, state, and local taxes each year. World Economic Forum estimates that by 2025 the American gaming industry will reach $42.3 billion while worldwide gaming industry will possibly reach US$270 billion. The United States is one of the nations with the largest influence in the video game industry, with video games representing a significant part of its economy.

In the video game industry, AAA (Triple-A) is an informal classification used to classify video games produced and distributed by a mid-sized or major publisher, which typically have higher development and marketing budgets than other tiers of games. In the mid-2010s, the term "AAA+" was used to describe AAA type games that generated additional revenue over time, in a similar fashion to massively multiplayer online games, by using games-as-a-service methods such as season passes and expansion packs. The similar construction "III" (Triple-I) has also been used to describe high-production-value games in the indie game industry.

Video game monetization is a type of process that a video game publisher can use to generate revenue from a video game product. The methods of monetization may vary between games, especially when they come from different genres or platforms, but they all serve the same purpose to return money to the game developers, copyright owners, and other stakeholders. As the monetization methods continue to diversify, they also affect the game design in a way that sometimes leads to criticism.

Video gaming in Finland consists of video game industry of 260 active video game developer studios, roughly a dozen professional players and countless enthusiastic amateurs.

In the video game industry, games as a service (GaaS) represents providing video games or game content on a continuing revenue model, similar to software as a service. Games as a service are ways to monetize video games either after their initial sale, or to support a free-to-play model. Games released under the GaaS model typically receive a long or indefinite stream of monetized new content over time to encourage players to continue paying to support the game. This often leads to games that work under a GaaS model to be called "living games", "live games", or "live service games" since they continually change with these updates.

<span class="mw-page-title-main">Home video game console generations</span> Video game consoles released during the same period

In the video game industry, the market for home video game consoles has frequently been segmented into generations, grouping consoles that are considered to have shared in a competitive marketspace. Since the first home consoles in 1972, there have been nine defined home console generations.

References

↑ "An Overview of Video Game Publishing for Developers". Aspect Law Group | A media and entertainment law firm. Retrieved February 22, 2023.
↑ Rachel Weber (August 27, 2020). "Why is November still such a big month for games?". gamesradar. Retrieved February 22, 2023.
↑ Yoon, Andrew (September 10, 2007). "Months late, Spider-Man 3 goes to PSP with new content". Engadget . Retrieved July 3, 2019.
↑ Matthews, Matt (April 19, 2012). "Has video game retail become an entirely 'hits driven' industry?". Game Developer. Retrieved August 12, 2013.
↑ Hennings, Nate (August 12, 2013). "'White space' helps us understand the strategic direction of gaming mergers and acquisitions". VentureBeat. Retrieved August 12, 2013.
↑ Messina, Judith (July 31, 2013). "Color Zen throws spotlight on city's games scene". Crain's New York Business. Retrieved August 12, 2013.
↑ nofi (June 28, 2012). "Activision Reduces Prototype Devs To "Support" Role, Significantly Reduces Staff Levels". TheSixthAxis. Retrieved August 17, 2012.
↑ Snider, Mike (June 28, 2012). "Activision cuts staff at 'Prototype' video game studio". USA Today. Retrieved August 17, 2012.
↑ Sinclair, Brendan (September 14, 2006). "Activision exec prices PS3 games". GameSpot . CBS Interactive . Retrieved May 18, 2017.
↑ "PlayStation® Official Site – PlayStation Console, Games, Accessories". Playstation. Archived from the original on November 17, 2014. Retrieved September 17, 2017.
↑ "Why Xbox 360". Archived from the original on December 21, 2013. Retrieved December 20, 2013.
↑ "Electronic Arts Breaks Into Fortune 500", Leigh Alexander, April 26, 2010, gamasutra.com. Fetched from Web on April 26, 2010.
↑ Clark, Willie (August 18, 2016). "Disney's many, many attempts at figuring out the game industry". Polygon. Retrieved February 22, 2023.
↑ "PlayStation delivers record $26.9 billion revenue, operating profit drops 40%". TweakTown. May 1, 2023. Retrieved November 8, 2023.
↑ Ballard, John (October 18, 2023). "Did Microsoft Waste $69 Billion on Activision Blizzard?". The Motley Fool. Retrieved November 8, 2023.
↑ Kharpal, Arjun (May 9, 2023). "Nintendo Switch sales plunge 22% and the gaming giant expects further declines". CNBC. Retrieved November 8, 2023.
↑ https://s22.q4cdn.com/894350492/files/doc_financials/2023/q4/Q4-FY23-Earnings-Release-Final.pdf
↑ https://embracer.com/wp-content/uploads/2023/06/Embracer-Group-publishes-Annual-Report-202223-230621.pdf
↑ https://staticctf.akamaized.net/8aefmxkxpxwl/3HuZnFugstlcg9mb5TUTFn/d272d035c66d9c24c69b9985450943b7/Ubisoft_FY23_Earnings_PR_English_final.pdf
↑ "Business Performance (Japan GAAP) |Financial Data | CAPCOM". www.capcom.co.jp. October 26, 2023. Retrieved November 8, 2023.
↑ "The Top 10 Public Game Companies Generated $126 Billion in 2021 as Subscriptions and M&A Shake up the Market". Newzoo. Retrieved November 25, 2022.

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[1] "An Overview of Video Game Publishing for Developers". Aspect Law Group | A media and entertainment law firm. Retrieved February 22, 2023.

[2] Rachel Weber (August 27, 2020). "Why is November still such a big month for games?". gamesradar. Retrieved February 22, 2023.

[3] Yoon, Andrew (September 10, 2007). "Months late, Spider-Man 3 goes to PSP with new content". Engadget . Retrieved July 3, 2019.

[Matthews-4] Matthews, Matt (April 19, 2012). "Has video game retail become an entirely 'hits driven' industry?". Game Developer. Retrieved August 12, 2013.

[5] Hennings, Nate (August 12, 2013). "'White space' helps us understand the strategic direction of gaming mergers and acquisitions". VentureBeat. Retrieved August 12, 2013.

[6] Messina, Judith (July 31, 2013). "Color Zen throws spotlight on city's games scene". Crain's New York Business. Retrieved August 12, 2013.

[7] (June 28, 2012). "Activision Reduces Prototype Devs To "Support" Role, Significantly Reduces Staff Levels". TheSixthAxis. Retrieved August 17, 2012.

[8] Snider, Mike (June 28, 2012). "Activision cuts staff at 'Prototype' video game studio". USA Today. Retrieved August 17, 2012.

[9] Sinclair, Brendan (September 14, 2006). "Activision exec prices PS3 games". GameSpot . CBS Interactive . Retrieved May 18, 2017.

[10] "PlayStation® Official Site – PlayStation Console, Games, Accessories". Playstation. Archived from the original on November 17, 2014. Retrieved September 17, 2017.

[11] "Why Xbox 360". Archived from the original on December 21, 2013. Retrieved December 20, 2013.

[12] "Electronic Arts Breaks Into Fortune 500", Leigh Alexander, April 26, 2010, gamasutra.com. Fetched from Web on April 26, 2010.

[13] Clark, Willie (August 18, 2016). "Disney's many, many attempts at figuring out the game industry". Polygon. Retrieved February 22, 2023.

[14] "PlayStation delivers record $26.9 billion revenue, operating profit drops 40%". TweakTown. May 1, 2023. Retrieved November 8, 2023.

[15] Ballard, John (October 18, 2023). "Did Microsoft Waste $69 Billion on Activision Blizzard?". The Motley Fool. Retrieved November 8, 2023.

[16] Kharpal, Arjun (May 9, 2023). "Nintendo Switch sales plunge 22% and the gaming giant expects further declines". CNBC. Retrieved November 8, 2023.

[17] ttps://s22.q4cdn.com/894350492/files/doc_financials/2023/q4/Q4-FY23-Earnings-Release-Final.pdf

[18] ttps://embracer.com/wp-content/uploads/2023/06/Embracer-Group-publishes-Annual-Report-202223-230621.pdf

[19] ttps://staticctf.akamaized.net/8aefmxkxpxwl/3HuZnFugstlcg9mb5TUTFn/d272d035c66d9c24c69b9985450943b7/Ubisoft_FY23_Earnings_PR_English_final.pdf

[20] "Business Performance (Japan GAAP) |Financial Data | CAPCOM". www.capcom.co.jp. October 26, 2023. Retrieved November 8, 2023.

[21] "The Top 10 Public Game Companies Generated $126 Billion in 2021 as Subscriptions and M&A Shake up the Market". Newzoo. Retrieved November 25, 2022.

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