Video Game Makers Challenged by the Next Wave of Media
SAN FRANCISCO — Booming video game sales are masking a serious concern for game makers: their economic model is in peril. Game companies are taking in more money, but, in many cases, not profits.
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Ben Margot/Associated Press
The Game Developers Conference last week in San Francisco. Sales of video games are rising, but the developers’ profits are not.
The market has expanded greatly, with more women and older gamers playing. People are playing on consoles, computers, cellphones and hand-held gadgets. But a proliferation of free or low-cost games on the Web and for phones limits how much the major game publishers can raise prices. It also diverts attention from the game consoles, like the PlayStation 3 from Sony and the Xbox 360 from Microsoft.
“The model as it exists is dying,” said Mike McGarvey, former chief executive of Eidos and now an executive with OnLive, which delivers games from the Internet. He said consumers were looking at games for consoles and saying, “This is too expensive and there are too many choices.”
Industry sales grew 19 percent in 2008 compared with a year earlier, the kind of sales growth that would thrill many industries during a deep recession. And yet the list of money-losing companies includes top names in gaming: Electronic Arts, Take-Two Interactive and THQ. Dozens of smaller game studios selling games for download and the mom-and-pop companies offering ad-supported “casual games” on the Web are still trying to figure out how to turn their millions of players into profitable customers.
On Monday at the Electronic Arts headquarters in Redwood Shores, Calif., executives and managers will gather to discuss how the company can adapt more quickly and effectively to the emerging media.
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