Innovations in the video game industry
Stanford University
October 11, 2007
Ichiro Otobe
Square Enix
1
Agenda
• Who we are
• The market
• Innovations
2
2
Square Enix
Over 75 million units
Over 41 million units
3
3
Agenda
• Who we are
• The market
• Innovations
4
4
Games became comparable with other
entertainment media in size
(USD Billions, 2004, Major countries)
40
30
20
10
0
Game
DVD/Video
Movie Box Office
Music CD
Sources: Digital Content Association of Japan, Enterbrain
5
5
The global game market continues to grow
Sales of packaged games
USD Billion
30
20
10
Europe
North
America
Japan
0
1994 1996 1998 2000 2002 2004 2006 2008E 2010E
($1=120Yen)
Source：Square Enix
6
6
Attracting new type of users
Nintendo DS players
Nintendo Wii players
New with DS
Return with DS
New
New with Wii
Old
Old
Return with Wii
Return
Source： Famitsu Game Hakusho 2007
7
7
... with new types of revenue streams
USD Billions
15
Digital Distribution
10
Advertisement
5
Subscription
0
2001
2003
2005
2007
2009
Sources: DFC Intelligence: Online games: Genres and The Online Gamer March 2006
2011
8
8
But, increasingly different by region
Unit sales of packaged games
(%, 2006)
GC Wii
PS2
PS3 Xbox 360
PC
GBA PSP DS
North America
Europe
Japan
Source：IDG
9
9
New era of game
Network is the Game
Everything plays Games
10
10
Network is the game
Software
+
Community
11
11
What is game?
Traditional games
Video games
Network games
CPU
•Play with other
people
•Symmetric game
play
•Communication
as part of fun
•Play alone
•Asymmetric
game play
•Play with other
people
•Symmetric game
play
•Communication
as part of fun
12
12
Everything plays game
Devices
Content
Access from anywhere
Access to everything
13
13
Fundamental transformation of the industry
structure
Past
Future
Content
Network
Terminal
User
14
14
What game companies need to do?
Console
Attract new users
Mobile phone
Movie
Be everywhere
…
Lifestyle
Comic
Arcade
・・
・
gamer
non-gamer
Tastes for design/story
15
15
New content model
Traditional Model
Polymorphic Content
Novel
Novel
Movie
DVD
Others
Game
Movie
DVD
Original
Concept
Others
Game
16
16
Agenda
• Who we are
• The market
• Innovations
17
17
Atari Pong - 1975
18
18
Atari VCS 2600 - 1977
19
19
Nintendo NES - 1985
20
20
Super NES - 1991
21
21
Sony PlayStation - 1995
22
22
PlayStation 2 - 2000
23
23
Innovations on the business models
have defined the generations
•Atari Model
•Nintendo Model
•Sony Model
24
24
Innovations by game developers result in
new genre
• RPG
• First Person Shooter
• Real-time strategy
• Adventure
• MMORPG
• ...
25
25
Game development is mostly artwork
• Use mature
technologies
• Large number of art
staff, each very
specialized
• Environment for
iteration
Resource allocation
Game Design
Engineering
Artwork
26
26
Game development process
Japan
U.S.
• Creative driven
• Business driven
• ad-hoc process
• Standardized process
• craftsman shop?
• Software developer
27
27
Tools to foster innovations
Software
Engine
Hardware
28
28
Mod-friendly games
• Provide
development tools
• Provide source code
of the game
• Use standard file
format
29
29
Ecosystem of Mod
Engine
Developer
Sales of engine license
Recruiting
Feedback to the game
Sales of original game
Providing tools
Developer/user
community
Game
developer
User support
for engine users
User
Sales of games using engine
30
30
Machinima
31
Who leads innovations?
Service
Console
Provider
Software
Console
Provider
Hardware
Console
Provider
game developer
game developer
Portal
User
User
Technology firm
Mobile phone
STB
...
32
Where innovation happens?
Service
Business model
Meta-data
Data
Software
System
Middleware/tools
Media standard
Hardware
Processor
User Interface
33
33
New players focusing on new slices
34