Business Report of Video Games Industry
This is a business report that highlights a business plan for a company in the video games industry. The report covers the basic information of the company which includes the mission, vision, objectives and the legal structure of the company. It also talks about the product/service that is going to be sold to the public and its features as well as the benefits it provides to the owners of the company. The market and industry analysis section analyses the industry using porters five forces and includes information on the marketing trends and size. It further highlights the high competition in the game industry and how the first game is going to be segmented by age and equipment. The marketing section highlights how the 4Ps are going to be used concerning our market segment and what our strategy is to position ourselves in the market. A SWOT analysis has been included in the appendices section. The operations section has been kept short and concise to highlight the scope of our operations and the life cycle of a video game from a start-up business. It further talks about how video games companies still need to leave a team behind to patch up things in case a customer discovers a bug in the game that needs fixing. It briefly talks about the type of supply chain going to be used and why. The organisation & HR section describes what the organisation structure will look like and what the central job roles will be as well as how the recruitment will be done. The CSR section highlights that game companies don’t have a responsibility as they don’t produce any waste but do owe their employees overtime pay during crunch hours. The last section talks about the budget needed as well as financing.
A company is an entity that is involved in commercial business activities. The aim over here is to create a video game production/development company. The mission of the company is to showcase video games as a platform that can show emotions much more appropriately than movies (Ewing, 2011). Furthermore, the vision of the company is to one day be the company that will be regarded as the market leader when it comes showcasing videos games as works of art and emotion. The company’s short-term objective is to finish our first game as per schedule and break-even at the very least. The long-term objective is to become a market leader in the games industry and slowly move towards building AAA games as well as financing game projects that the company thinks will provide it with a lot of profit in return from its success. It would be best for the company to follow a Limited Liability Corporation (LLC) structure as the games industry is very volatile and the first video game is usually not a hit and can result in massive losses thus in order to ensure the least amount of damage to the owners, it would be best to go for an LLC (Akalp, 2016).
II.Product or Service
A video game production company’s only product is the video game itself; some may even go on to create movies which follow the storyline of games such as the Assassins Creed movie based off of the games (Plunkett, 2016). However, this only happens when the company is already hugely successful and has the budget and finance to greenlight it.
Video games possess many features such as various game modes where one is usually a single-player mode featuring a storyline for the player to play through alone while providing them with hours of entertainment (Ferrero, 2016). Other modes include multiplayer modes where players compete with each other in the form of vs. matches where they have to beat each other by completing a specific objective, most games usually focus on eliminating other players or teams to win. In retrospect, some games even offer a multiplayer mode where players can join together and play through the story-mode of the game as there are a lot of people out there who prefer to play with friends rather than compete against them.
Video games are a form of entertainment for the majority of people. Some end up earning millions of pounds depending on the reach of the marketing team as well as the appeal of the game itself (Webster, 2013). Action-adventure video games, in general, have a far more reaching audience when compared to puzzle games and have the potential to earn a lot, the reason being that the visual appeal of these games is significantly higher and it adds up to provide people with a more compelling experience. For a company that is just entering the market, it would best to focus on a simple adventure game focusing on a linear storyline rather than open-world storytelling as that’ll require a tremendous amount of work. The goal is to ensure that the first game is easy and cheap to create but should sell well enough in the market to at least break even. A profit is very unlikely; it’ll help in boosting the brand name though.
III.Market and Industry Analysis
Just as mentioned above, a puzzle game would sell significantly less than an action-adventure game due to action-adventure games appealing to a more substantial number of people. This information would not be apparent without having conducted a market and industry analysis of the on-going trends in the market; it goes to show the importance of market and industry analysis for a company that is just starting up.
Porter’s five forces take into consideration all the things that can affect the industry which the company is trying to enter and can help them analyse the current situation of the gaming industry which can, in turn, help in identifying the weaknesses and strengths (Law, 2009) (Law & Owen, 2010). The five forces in the model are:
- Competition in the industry;
- Potential of new entrants into the industry;
- Power of suppliers;
- Power of consumers;
- Threat of substitute products.
Competition in the video games industry is hard no matter when or how you look at it which is the case in most entertainment industries such as Hollywood. Everyone is trying to create the next big game and earn big bucks in the process. The good thing, however; is that entering the industry is relatively easy as long as you possess the capital and technical skills required to create a video game and there aren’t any barriers other than personal skill limitation. Suppliers don’t play any role in the video game industry unless it is a developer who needs funding for their next big project in which case they can approach a producer to help them. However, customers are another whole story. They possess the most power in the video games industry as the general public is the one that buys the video games and plays them. Thus it is of the utmost importance that the company does as best as it can. Lastly, as mentioned earlier, there is high competition in the video games industry. As a result, the amount of substitute goods/games is high as well. The company could be creating the next big game, but it is imperative to need to keep in mind that the company is following a game model which has been previously tested and so are a thousand other developers. It’s essential that if the company is going to do something, they do it right (Law & Owen, 2010).
The video games industry has been experiencing a continuous growth for the last 30 years and is forecasted to continue growing despite other markets crashing, this is because video games are played by all types of people regardless of age and gender. Furthermore, it is a form of entertainment that is affordable and provides hours of entertainment. The only time the video games industry experienced a crash was during the video game crash of 1983 also called the Atari shock in Japan and the leading cause of this crash was due to market saturation due to flooding in the console market with different products (Kennard, 2015). Segmentation of the product will be based on age by targeting people from the age of 13 and above, the reason for this being because there’ll be violence featured in the game which is not appropriate for people under the specified age. Furthermore, the targeted player-base is that of Xbox and PlayStation 4; this is because consoles have fixed specifications while personal computers have different specs which can significantly increase development times to ensure proper performance. Not targeting people below the age of 13 won’t have much effect on the profits as the reason behind the segmentation is more for ethical reasons than the fact that kids below the age of 13 won’t play our games (Laczniak, et al., 2017).
The video games industry is filled with competitors, and hundreds if not thousands of games come out each year. To stand out and get people to notice your product you not only have to make something unique but you also have to let people know that you have created something new as they won’t come to know anything on their own. Marketing provides a company’s products and the company itself with the exposure it desperately needs and in the case of a new company it is more important than ever as it will not be on anyone’s radar if it doesn’t put itself out there for people to notice (Leventhal, 2005).
As a new video game company, it is essential to have a right marketing mix. Let’s make use of the 4 P’s here to help. The action-adventure game will be the product and is going to follow the action-adventure genre as it appeals to a large number of gamers, and thus the chances of it making a profit are higher. However, as a new company, the price of the product needs to be slightly below the usual competitive rate as people will be less inclined to buy from a company that is not well known in the market and to get the benefit of the doubt it would be beneficial to lower prices slightly. The targeted market is mainly console gamers and people below the age of 13. Distribution will be carried out through the in-console digital game stores (place) instead of physical copies as it is faster and allows you to distribute your product globally quickly. It’s hard to provide any form of promotion that gamers will find appealing from a new company. The best thing to do in this scenario is to offer a significant discount for the first few purchases as this will get your product out in the market and thus give it exposure (Cohen, 2014). It is of the utmost importance that the company establish itself as a company that is new but able to provide a quality product in the eyes of their customers to ensure that they’ll be willing to buy from the company the next time they are going to release something (Fernandes, et al., 2017).
A SWOT analysis will help the company better understand and categorise all their strengths, weaknesses, opportunities and threats since it is a strategic planning method which helps a company evaluate all these if it is a start-up business (Helms & Nixon, 2010)
(Please find the SWOT Analysis in the Appendices Section)
For a company in the games industry, day-to-day operations include coding, creating art and merging it all. The long-term goal is to create a video game after all of this code and art has been blended. The life cycle of the product involves the introduction of the game onto the digital game store on the respective consoles after which growth will occur once people start buying it after they notice it. The maturity stage is reached when the game is still relatively new on the market, but now enough people have bought it to give it exposure encouraging more people to buy it, this stage will probably come quickly for a company that is not well-known. A decline will be sharp for a new game as people don’t prefer to buy a new game from new firms unless it is terrific and thus the number of buyers will fall quickly as well. A regular lean supply chain will be used here as the games industry is highly unpredictable and involves a lot of crunch time where people work 20 hours a day at times to get the product on time. After the launch of the product, a team still works on the game patching out issues that people may find in the game such as bugs which can ruin the experience or cause unexpected results (Slack, et al., 2014).
VI.Organisational Structure & HR
Human resources are typically people who are working in an organisation under the Human Resource Department. Human resource is also a term used to describe a person regarding skills and abilities. The human resource department is also the one that creates the organisational chart which tells us who works under who (Heery & Noon, 2008).
The organisational chart of the company is going to be very basic since the company will only be 10-15 employees in the beginning. The project manager will on the top with the art director and lead programmer right under him. The art director is responsible for the artists under him and to ensure that the art of the game remains consistent and up to par with the theme of the game. The lead programmer is responsible for all the coding as well as all the programmers under him, he/she handles all the technical work.
Artists that are interested in joining the company will need to show their previous works while programmers will need to pass a technical test. There will also be an HR employee responsible for all HR activities, but programmers and artists are the central roles in the company.
VII.Corporate Social & Responsibility
Corporate social responsibility is a company’s efforts to take responsibility for the environment and social wellbeing (Wang, et al., 2016). Corporate social responsibility does not apply to a video game company regarding environmental factors as they are not affecting the environment in any way, the only thing they need to ensure is overtime pay for crunch hours. In the games industry, it is normal for programmers and artists to work longer than usual hours. However, the issue is that most of them do not get paid for the extra work they have done but rather the company expects you to do it for free since it is considered a norm in the industry. This is an extremely unethical practice that can give small start-up companies a bad image before it even gets started. It’ll cause skilled programmers and artists to avoid the company to avoid being exploited. A recent example of this can be seen when voice actors went on strike against the gaming industry because of not getting the pay they deserve (Sarkar, 2017).
The average capital needed by an indie studio to get started about £70,000 which accounts for everything from equipment to day-to-day expenses (Boucher-Vidal, 2014). When we talk about day-to-day expenses over here, it refers to the expenses that the game company will have to face until the game can be completed and shipped out to the customers. It accounts for things such as salaries of the employees over the period of development, the cost of the equipment such as computers, the cost of securing the patent for the game and other miscellaneous costs.
A bank loan, crowdfunding and personal financing are all viable options for funding. However, it is important to remember that for crowdfunding to work, the game must be something that is being highly demanded by the public but has not yet been made or something that already exists but is in dire need of a rework. Furthermore, personal financing only works if you have the money saved up already and need to come to term with the fact that you could lose everything (IGC Admin, 2018)
· New Ideas
· Skilled Personnel
· Weak Brand Name
· Lack of Patent Protection
· High capital investment
· Growing market
· Trend change in genre
· High number of substitutes
· High competition
· Market Saturation due to substitutes
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