Communication Technology Update
8th Edition
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Communication Technology Update
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Video games are a form of interactive electronic entertainment with a 30-year history as a major economic and cultural force in U.S. and international markets. In 2001, video games generated $9.4 billion in sales in the United States alone (Tran, 2002), with estimates of worldwide sales exceeding $20 billion (Van Grinsven, 2002). Some forecasters predict that, by 2005, as many as 70% of U.S. homes will contain video game consoles, making them almost as prevalent as VCRs (Damuth, 2001). Increasing scholarly, journalistic, and congressional interest in video games demonstrates a burgeoning field of inquiry involving the analysis of the ways in which games shape and recirculate cultural values. This chapter describes the background, recent developments, and current status of video games, including those played on console systems and handheld devices.
The history of the video game industry is characterized by distinctive trends.
(1) Hardware and software development are interdependent, specifically related to the coordinated timing of product release. Hardware systems fail to thrive if compatible and compelling software is not immediately available for the consumer market.
(2) The industry's rapid technological progression has been driven by the symbiotic relationship between hardware/software innovation and gamers' demand for "realism," meaning increased speed, interactivity, and film-quality imagery and audio.
(3) The major console manufacturers (Sony, Nintendo, Microsoft, and, until February 2001, Sega) have engaged in intense competition for profits, jockeying for market share and third-party developer relationships.
(4) Software piracy costs the industry billions in revenue each year.
(5) The immersive qualities of game technology and narratives have led some politicians and citizens to worry about the social effects of video games, resulting in rounds of congressional hearings, ratings systems, and the removal of certain games from the market.
The work of video game production is a collaborative process requiring groups of people to design, prototype, produce, market, and distribute games. Developers determine the platform, desired user experience, design, and budget. If the title is developed for the console platform, developers target the title for playback on a platform such as Nintendo GameCube, Sony PlayStation 2, or Microsoft Xbox. If the title is developed for playback on a personal computer, developers decide whether to target the Mac platform and/or Windows platform, and the minimum system specifications for RAM and CPU speed. Handheld game developers must consider platforms including Game Boy and Game Boy Advance, personal digital assistants (PDAs) such as Palm and Handspring, and wireless phones.
The video game industry began in the late 1950s as technologists, scattered around the United States, independently began tinkering with existing technology, without much thought about patents or profitability, to create something fun for themselves (Poole, 2000). The first inroad toward successful commercialization began in 1967 when Ralph Baer developed an electronic tennis game for the home. In 1972, as Intel was inventing the tiny microprocessor necessary for small, less expensive computers, Magnavox licensed Baer's game system as Odyssey. Simultaneously, after an initial failure with an arcade-based version of Spacewars, University of Utah student Nolan Bushnell founded Atari and tried again with Pong, a tennis video game. Pong proved profitable enough to allow Bushnell to sell out to Warner in 1976 for $28 million (Poole, 2000). By 1977, home-based Pong clones saturated the market, causing the first crash in the industry and resulting in the demise of console manufacturers such as Fairchild and RCA (Herz, 1997).
In 1976, Fairchild's Channel F released the first cartridge-based game console that allowed several games to be played on the same hardware. In 1977, Atari released its 2600 programmable video computer system. Sales of the system and games were moderately successful, building through 1979 with the release of the game Asteroids and peaking in 1980 with the release of the home console version of Space Invaders. Video game sales slowed until 1986, when Nintendo released its 16-bit NES cartridge-based system and Super Mario Brothers for home consoles. Sega and Atari attempted to compete with NES by releasing their own systems, but NES outstripped its competitors in U.S. sales by a 10:1 ratio. In 1989, NEC released the first system to use CDs for game storage: the TurboGraphx-16 (Herman, et al., 2002).
In the early 1990s, Sega became a strong force in the video game industry with the 1992 release of the Sega CD system and strong sales of Sonic the Hedgehog. After ending a development agreement with Nintendo, Sony announced plans to develop its own 32-bit CD system. In 1993, Nintendo and Sega announced the development of 64-bit and 32/64-bit systems. By 1995, Sega had discontinued production and support of the Sega CD system, while Sony released its PlayStation and Nintendo released Nintendo64 in Japan. In 1996, Nintendo64 made its American debut, selling over 1.7 million units in just three months. Meanwhile, Sony reported PlayStation sales topping $12 million per day during the 1996 holiday season (Herman, et al., 2002). In 1998, console system sales reached between 6.5 million and 7.5 million units in the holiday shopping period (Video game console, 1999), with PlayStation ranking first in sales of console systems to date.
In 1999, Nintendo announced plans to develop a new console, code-named Dolphin. Microsoft threatened competitors when the company announced its entry into the gaming market with the Xbox console. The electronic game market exceeded $7 billion in 1999, marking a 10% gain over the previous year. Part of this gain was due to Sega's 1999 U.S. introduction of Dreamcast, the first 128-bit Internet-ready system. Retailing for $199, Sega reported earnings of $98 million on the first day of U.S. sales (Herman, et al., 2002).
Internet gaming grew in 1999, with casual gamers playing free games on the Web, while hardcore gamers used subscription-based massive multiplayer online game (MMOG) networks. Always hungry for new markets and increased marketing advantages, console manufacturers viewed Internet connectivity as a way to increase sales and open new revenue streams (Berst, 1999). In September 2000, Sega introduced SegaNet, a subscription Internet service for Dreamcast players willing to pay $9.95 per month. The first console-based role-playing game, Phantasy Star Online, was released in 2000 for Dreamcast, enabling thousands to play together online in real time (Herman, et al., 2002). Other MMOGs gaining popularity included Everquest, Ultima Online, Majestic, and Anarchy Online.
Sony's PlayStation 2 debuted in Japan in March 2000, breaking industry sales records by selling 980,000 units with retail revenues of more than $3 billion in the first two days of sales (PlayStation sales, n.d.). The console shipped with Internet and DVD/CD capability. While PlayStation 1 sales accounted for an impressive 40% of Sony's profits in 1998, PlayStation 2 was expected to prove even more lucrative for the company (Levy, 2000). U.S. sales, launched in October 2000, were initially slowed by poor availability of units (Pham, 2002).
Miniature handheld gaming systems enjoyed steady popularity thanks to their portability and relatively low prices. In 1989, Nintendo released Game Boy, the first black-and-white handheld system, bundled with Tetris, for $109. In 1990, NEC released a handheld version of the TurboGrafx-16 called the TurboExpress, marking the first portable system capable of playing games designed for a home console (Herman, et al., 2002). Bandai's November 1996 Japanese release of a tiny "virtual pet" game device called Tamagotchi resulted in a national craze that traveled to the United States by May 1997. One store sold out of its initial stock of 30,000 Tamagotchi in only three days, marking the beginning of a new platform and phase of miniaturization for computer-based games.
The export of Pokemon to the United States in 1998, combined with the release of Game Boy Color, spurred sales of Game Boys as Pokemon quickly became Nintendo's best-selling game ever. The release of Pocket Pikachu, a miniature game device resembling a Tamagotchi, also raised Nintendo's market share. Meanwhile, several other handheld systems were introduced by companies such as Tiger, Bandai, Hasbro, Cybiko, and SNK whose systems (Pocket Pro, WonderSwan, Pox, Cybiko Xtreme, and NeoGeo Pocket) failed to threaten Game Boy. In 2000, Nintendo continued to expand Game Boy's capabilities with a $49 mobile adapter that allowed players to connect to wireless phones for online game play and e-mail (Herman, et al., 2002).
Location-based gaming takes place in business establishments such as video game arcades in movie theaters, malls, and other locations. However, these arcades became youthful all-male bastions, unwelcoming to families, the elderly, girls, and women (LaPlante & Seidner, 1999; Provenzo, 1999), a fact that prevented the industry from tapping into a huge potential market. A notable trend began in 1977 when Atari introduced its venture into restaurant-based locations designed to capitalize on its video game holdings: Chuck E. Cheese Pizza Time Theatre, a location-based entertainment venue combining animatronic characters, video games, food, and beverages (Herman et al., 2002). In 1997, a new location-based gaming business called Gameworks, a joint venture between Sega and Universal Studios, opened its first sites in Seattle, Los Angeles, and Las Vegas. Dave and Buster's, the recognized leader in location-based gaming, opened in 1982 and averages $13 million in revenue per site per year, with 47% of revenue coming from game play. The company clearly hit upon a formula for appealing to previously untapped arcade players: the clientele is, on average, 33 years old with an annual income of $61,000, and 40% of patrons are female (LaPlante & Seidner, 1999).
Despite the dearth of evidence causally linking video games to criminal acts (Gunter, 1998), concerns over video games' effects on individuals and society have resulted thus far in four main types of restrictive measures: ratings systems, content-based selection by retailers, developer self-restrictions, and lawsuits blaming games for leading to criminal acts. In 1993, the content of the games Night Trap and Mortal Kombat prompted U.S. Senators Leiberman and Kohl to launch an investigation of video game violence. As a result, the industry agreed to regulate itself via a voluntary rating system established, implemented, and maintained largely by two organizations: the Entertainment Software Rating Board (ESRB) and the Internet Content Rating Association (ICRA) (Herman, et al., 2002). The ESRB rates games according to content related to violence, sex, crude language, tobacco, alcohol, illegal drugs, and gambling. Rating symbols, such as "M" for mature, are included on the packaging of game boxes and online gaming Web sites. As of February 2002, ESRB reported rating over 7,000 products (ESRBi, n.d.). ICRA staff reported that, as of February 2002, over 195,000 websites were rated using the ICRA self-rating system (personal communication, February 8, 2002).
In 2000, the U.S. Federal Trade Commission reported findings that video game companies targeted kids in ads for M-rated titles. Meanwhile, Indianapolis became the first U.S. city to ban underage children from playing arcade games with violent or sexual content. By March 2001, the ordinance was ruled unconstitutional (Herman et al., 2002). In 2001, the families of some Columbine High School victims filed a $5 billion lawsuit against select game developers, alleging the killers' game-playing habits helped cause the shooting massacre (Associated Press, 2001).
In an effort to respond to consumer pressure, some retailers declined to carry certain video games. In 1998, Wal-Mart refused to carry some 50 arcade games that were deemed "inappropriate" by the company. In 2000, Sears and Montgomery Ward ceased selling M-rated games after a sting operation in Illinois in which underage children were able to purchase forbidden games, and Wal-Mart and Kmart began requiring identification for all M-rated game purchases (Herman, et al., 2002).
Several important developments occurred in 2001. Disappointing sales prompted Sega to discontinue the Dreamcast system in February 2001 (Kent, 2001). Officials announced that the company would instead focus on other business strategies: content development for Dreamcast and other platforms, networked gaming via SegaNet, licensing Dreamcast chip-set technology, and developing game titles for handheld devices (Sega focuses, 2001).
Two console systems and a handheld system were released, renewing cutthroat competition between the big hardware companies. In June 2001, Nintendo released the $99.95 Game Boy Advance and 17 games. The Advance is designed to connect with wireless phones for Internet access and features a 2.9-inch screen, 32-bit ARM CPU, and 240 x 160 screen resolution (Game Boy Advance, n.d.). Advance sold 500,000 units in its first week, topping one million within six weeks of its release. Four Advance games ranked in the top 10 best-selling games that June (Herman, et al., 2002).
Microsoft's entry into the video console market marked the company's venture into large-scale hardware development and entertainment. The Xbox was unveiled in the United States on November 15, 2001 and, by December 31, had sold 1.5 million units in North America (Tran, 2002). The February 2002 Japanese launch, viewed as crucial for Xbox's worldwide success, proved lackluster, with only 124,000 units sold in the first week (Fox, 2002). The Xbox uses a Pentium III processor, a custom-designed 300 MHz Nvidia X-Chip, and 64MB of RAM (Extended Play Staff, 2001).
Nintendo released its $199.95 Gamecube system in America on November 18, 2001 and amassed over $98 million in console, game and accessories sales in one day. The Japanese release moved 133,000 GameCubes in the first week, outstripping Xbox (Fox, 2002). The Gamecube system is compatible with Nintendo's Game Boy Advance and features a 485 MHz custom-made IBM Gekko processor (GameCube detailed, n.d.).
Sony maintained an undisputed sales lead in 2001 thanks to a one-year head start, reporting U.S. sales figures of 6.6 million PlayStation2 units, with Microsoft and Nintendo competing for second place with North American sales figures of 1.5 million Xboxes and 1.2 million GameCubes (see Figure 11.1). Sony also addressed the low end of the market with a repackaged version of the original PlayStation priced below $100.
After the September 11 terrorist attacks in the United States, several video games featuring terrorist-oriented violence or airplane scenes were altered, delayed, or pulled by developers out of concern that the public would criticize the games for insensitive or inappropriate content. Meanwhile, Sega launched pay-as-you-play games for Japan's i-mode wireless phones based on Sonic the Hedgehog, Samba de Amigo, Out Run, and Fantasy Zone (Herman, et al., 2002). In Europe, a wireless gaming company called It's Alive touted its two wildly popular pay-as-you-play games called Botfighters and Supafly, in which players interact with nearby unknown players in real time using wireless phones (Botfighters, 2002; Supafly, 2002).
Figure 11.1
Console Unit Sales through December 2001,
Worldwide
Source: Tran (2002)
Recent data about video game players reported by the Interactive Digital Software Association refute the notion that game players are adolescent males playing alone in their bedrooms. In 2000, video games were played by 60% of U.S. residents over the age of six. Of frequent players, 59% play with friends and 33% play with siblings. Consoles were found throughout the home (Figure 11.2). The average age of players is 28 years; 43% of players are female, and females influence 25% of console purchase decisions (Console facts, 2002). Strikingly, video games were named "the most fun entertainment activity" by 35% of those surveyed for the third year in a row, with television trailing at 18% and the Internet at 15% (Ten facts, 2002).
The launch of three new systems in 2001 pushed U.S. sales of video games and hardware to a record $9.4 billion, surpassing 2000's figure of $6.6 billion and 1999's record of $6.9 billion. Even Hollywood's 2001 domestic box office receipts were eclipsed at a mere $8.4 billion (Tran, 2002). However, profits would have been higher if not for the estimated $1.9 billion lost to videogame piracy in 2001 (U.S. computer, 2002). Price wars continued as Sega cut the Dreamcast price to $49.95 in late 2001 (Becker, 2001) and Nintendo cut the Game Boy Advance price by 20% in early 2002 (Tran, 2002). Computer and videogame software sales were forecast to reach $16.9 billion by 2003, not including an estimated $1.1 billion from online game revenue (Quick facts, 2002).
Because most PDA and wireless phone games are preinstalled or downloaded as shareware, quantifying sales is difficult (Shim & Fried, 2002). Verizon's 2002 launch of the first 3G wireless phone network in the United States provided a necessary step for the development of networked wireless gaming (Verizon launches, 2002). Steady hardware growth appears certain as 2001 PDA unit sales increased 36% over 2000 figures (Kane, 2002). Color PDA prices are forecast to drop in price by about $200 in 2002, and development of "smart phones" will mix PDA and wireless phone functions (Kort & Dulaney, 2001). While Palm expects application sales to drive hardware sales (Paul, 2001), the "killer app" that could make PDA sales skyrocket has not yet emerged (Shim & Fried, 2002).
Figure 11.2
Distribution of Video Game Consoles in the
Home
Source: Quick facts (2002)
As the new kid on the block, Microsoft's market position will depend on the availability of titles, the success of the March 2002 European launch, and implementation of the plan to turn the Xbox into a multi-function home entertainment appliance tentatively named HomeStation, designed to handle e-mail, Web access, video recording, and other tasks (Becker, 2002). Industry diversification could be affected by the fate of Botfighters-type pervasive wireless gaming and the continued growth of MMOGs in the United States. As the industry continues to pursue untapped markets, game developers will face pressure to create titles for diverse audiences.
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* Assistant Professor, Department of Communication, University of Utah (Salt Lake City, Utah).