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Home / Washington Business - July/August 2005 / Industry Profile: Gaming Washington |
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Industry Profile: Gaming Washington |
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Written On: July/August 2005 |
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Written By: by Daniel Brunell |
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On November 9, 2004, hundreds of thousands of people waited until a minute after midnight to flood stores across America. They waited for one of the most highly anticipated video games of all time, Halo 2. The game sold 2.4 million units in the United States and Canada on the first day, driving cash register receipts to $125 million. Not only did the game exceede industry sales records, but entertainment records as well. Halo 2 generated more money in one day than any of the biggest movies in box office history. Halo 2 also surpassed that weekend’s box office favorite, The Incredibles, which grossed $70.5 million in three days.
Video games are on par with more traditional forms of entertainment such as music, films, and network and cable television not only in revenue but in audience. Last year, the video game industry grossed more than $10 billion in sales nationwide. It was one of the bright spots in the economic downturn that eliminated so many other tech companies. The industry is still growing at a remarkable rate.
Washington is one of the epicenters of this growing industry. King County is second only to Silicon Valley in the number of companies and employment in the sector. Our state is home to some of the leading video game console makers like Microsoft’s Xbox division and Nintendo’s North America division.
Washington also hosts to some of the largest video game development companies, like Bungie Studios in Redmond, which produced Halo 2, and Sierra Entertainment of Bellevue, which produce the popular game Half-Life 2.
Microsoft’s Xbox division is one of the newest to the console market but is already an industry strong horse. Launched in November 2001, in North America, Xbox is now available in 26 countries.
"Microsoft made the decision to enter the video gaming market because we recognized that interactive entertainment was a critical scenario in the home," said Molly O’Donnell, Xbox senior manager, public relations. "On current course and speed, by 2009, game sales will surpass music sales at $32 billion worldwide. Microsoft is making an incredible, strategic investment in Xbox because games provide experiences like no other form of entertainment."
This rapid growth is not only found in the new console game market, but the industry has also spread its reach to other mediums. Traditionally, games were made for a specific consoles, computers or for arcade use. However, many smaller developers can no longer afford the $20-30 million of development costs to make a traditional console game. This has created a new niche. These new markets are found in interactive internet and cellular phone games.
One company that is looking for new ways to present games is Sandlot Games of Bothell. Started in 2002, the company has eight full-time employees and is a leader in the burgeoning online and downloadable games. Sandlot produces such popular online titles as Super Granny, Tradewinds and Slyder. Its games are available for download off of a number of different web sites, including Yahoo, Shockwave.com, Real Networks and Microsoft. Sandlot’s games are focused more towards a causal audience then most games.
"I believe it has the potential in the next five years of becoming larger than the current market of hardcore games that consumers buy off of a store shelf," said Daniel Bernstein, president and CEO of Sandlot Games. "Since our games are downloadable, we do not face the traditional publishing barriers of handling hard goods. Our customers pay for bits traveling over the Internet."
This new segment of the economy hit Washington by surprise. "We do not even have a grasp of the economic impact of this industry on our economy," said Kristina Erickson, program manager of Film and Interactive Media with the Washington Department of Community, Trade and Economic Development. "We have been developing an open dialogue with the industry to see what their needs are and how the state can focus resources to help this new area grow." The department is currently working on a local economic impact statement, which will be completed at the end of summer 2005, to see the real impact this new industry has on the state’s economy.
But, even though this industry segment might be new, it faces some challenges.
Growing pains are right up in the list of challenges. For example, with the growth of the new economy, many video game developers are having a hard time finding quality workers. The growth of the whole technology sector has taken away a lot of talent that video game designers need to make games. In response, several university, community and technical colleges have started or updated their program offerings to fit this need.
One of the more pressing things the industry faces is a need for leadership from prospective workers. "The ability of a knowledgeable worker such as an artist or a programmer depends on their ability to communicate," Bernstein said. "Poor communicators are not likely to be made into managers and group leaders. I think a strong emphasis on project management and humanities is missing from a lot of university engineering curricula." And workforce training issues are not the only growing pains the industry has faced.
Besides workforce problems, "The central issue we face is government regulating the content of our software," said Lewis McMurran, senior director of Government and External Affairs for the Washington Software Alliance, one of the main proponents of the industry. Like Hollywood and the music industry before it, the video game industry self-imposed a rating system in 1994. "The industry goal has been to try to educate parents about the rating system and make sure that games marked for adults do not get sold to youth."
This issue is especially touchy in Washington. In 2003, Washington became the first state in the nation to place a government censorship on the video game industry, prohibiting video game vendors from selling or renting "cop-killer" video games to minors. The law was appealed by industry groups to U.S. District Court in Seattle where the law was struck down on First Amendment grounds.
Despite these few hiccups, the industry continues to grow at an astonishing rate. "In the next 20 years, video games will become an essential component of global pop culture, and this industry will reach an audience many times larger than we've ever dreamed of. We'll take games places they've never been before," O’Donnell said.
I may have to call in sick tomorrow. I think I’m coming down with a fever called "Atari 2600."
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