Video Game Economics

Introduction

The modern day video game industry is one of the most profitable and fast-growing industries in the world. With over $180 billion dollars of generated revenue in 2021 and 3 billion players, video games are cementing themselves as a staple among recreational activities, and with the help of the recent covid-19 pandemic, the numbers only continue to grow. Despite the seemingly overwhelming amount of positives that have come from this new industry, however, there are ethical issues that come with this success. This article will be focusing on the ethical economic dilemmas that video game companies face when marketing and designing their products.

History

Video games emerged in the 1970s with the introduction of Atari. Games such as Pong and Space Invaders swept the world, generating over $2 billion in revenue in the first 10 years, primarily through arcade consoles in malls, restaurants, and storefronts. From 1978-1981, revenue increased 18 fold, sky rocketing from around $50 million annually to $900 million, quickly surpassing pop music and Hollywood combined.

With the introduction of the Nintendo Entertainment System in the 1980s, video games continued to boom - a trend that continued through the 1990s when playstation was invented. Revenue only increased, and at the end of the century, video games were generating over $30 billion annually. The 1990s also saw huge changes in graphics. 3D polygon graphics became the standard for all games, and the introduction of the internet allowed for multiplayer and competitive modes to exist.

The 2000s served as the era of smart phone gaming with the introduction of smartphones. iOS and Android devices became popular modes of gaming, boosting the industry's revenue even more. Mobile gaming continued into the 2010s, surpassing both console revenue and personal computing gaming. With a market size of several billions of dollars, eSports (competitive gaming) was birthed, only increasing the popularity of video games.

The 2020s have seen the peak of the industry, with an average annual revenue of over $175 billion. The covid-19 pandemic resulted in a 20% market growth from 2019-2020, and even though the pandemic caused several issues such as the global semiconductor chip shortage, the video game industry has experienced net positives from covid.

Ethical Concerns

Although video games provide endless hours of joy and excitement, there is a dark side to the billions of dollars the industry generates. Ever since the industry was created, there have been countless ethical debates surrounding the subtopics below. From addictive engineering to targeted advertising, the video game industry has been under constant accusation of unethical practices.

Audience & Design

The first component of any ethical debate about video game economics is the audience these companies sell and target their products towards. It is no secret that gaming companies design their games to be extremely addictive. Through systems like level-based rewards and loyalty programs, video games are specifically engineered to keep their players returning.