Exploring the evolution of the games market

Technology journalist and TV presenter Kate Russell details the history and changing state of the computer games market. The past 40 years the home video gaming market has gone from zero to lots of zeros (11 to be more precise), as global revenue for the industry now approaches $100 billion.

It was 40 years ago that Atari first released a home version of the game, Pong. It became an instant Christmas hit and a new mass-cultural phenomenon was born. 

That’s not to say Pong was the first home video game. The world’s first commercial home gaming console, Magnavox's Odyssey, went on sale in late 1972, enjoying moderate success with a catalogue of simple, arcade-style games. But Atari’s Pong console was the first to gain mass market appeal through a clever marketing strategy, locking in a deal with America’s largest retail chain at that time, Sears, which was ideal for catching the festive trade. In the end though Atari had to settle a copyright infringement claim against them by Magnavox in 1982, because Pong was so similar to the tennis game the Odyssey had been released with.

Over the next decade, Atari introduced its first cartridge-based system so people could add games to their collections. This was quickly followed up by similar offerings from Mattel, with its Intellivision console and the Commodore 64, and the games market found itself on solid footing.

Games themselves started to evolve again noticeably in 1980 when two titles were released that started to open our minds to the concept of ‘virtual worlds’. First was Battlezone, a 3D environment game where players could for the first time roam freely around a battlefield in search of action (it was later enhanced by the US government for training exercises). Next came Defender, which with the simple addition of a radar scope implied a world far beyond the scope of our vision on screen. These sound like such small things today, but back then they were truly mind-expanding concepts. I remember playing Elite on the BBC Micro in 1984, flying around this alternate galaxy inside a box on the table. It felt a bit like looking through the door of the TARDIS.

Arguably the next major milestone in our tour of the past, Elite, was the first game in a genre now known as ‘sandbox’, where you can play in the virtual world however you like rather than having to follow a linear storyline like ‘hit tennis balls’ or ‘kill soldiers before they kill you’. Created by Ian Bell and David Braben, Elite took the concept of virtual worlds to an entirely new level as you toured the galaxy in your trusty spaceship, buying and selling goods and resources, or choosing a life of piracy and stealing them if you preferred. The pair could have had no idea they were defining a genre that would go on to spawn billion-dollar game franchises like Grand Theft Auto. David Braben, now heading up Frontier Developments, told me:

“Ian and I were both a bit bored of the home computer games, which were mostly trying to mimic games from the arcades with varying degrees of success. I think the main thing we achieved was to get a game made and sold that was very different to the competition. Publishers at the time had it in mind that all games had to be no more than 10 minute experiences, whereas we shipped a game that took weeks to play, had a storybook and manual, and was much more expensive. I think the biggest effect was that we made the way for other innovative, different titles to be made as we showed a game did not have to be a clone of an arcade game to be successful.”

By 1989, the games world had started to think on its feet, with Nintendo releasing the Game Boy handheld console so that gamers could play whenever and wherever they wanted. Cute characters and colorful animations abound as the technology used to deliver our entertainment became ever more sophisticated, and by 1990 Nintendo’s latest 8-bit gaming system had conquered one in three American homes. This was to be the decade of the ever-increasing bit-size, as processor chips leaped from 8-bit to 64-bit in just the first few years. Increasing power meant more beautiful and complex games, but this also meant mounting costs and some analysts started to get twitchy that the bubble wouldn’t last.

But the public’s hunger for home gaming seemed insatiable and it quickly became apparent they would pay thousands of dollars to feed it. Even in 2001, when global economies were in mild recession and financial markets in a spin following 9/11, sales of video game hardware, software and accessories grew by record levels to $9.4 billion. I was working as a games journalist throughout that period and it was like being part of a gold rush, with big money players hoping to cash in on this explosive new cultural trend. The likes of Final Fantasy VII, Shenmue and Halo 3 enjoyed eight-figure game development budgets, huge glitzy launch parties and ridiculous marketing spends, while hundreds of media outlets all clamored to tell us about the latest thrilling game or console. By 2008, mega-franchises like Grand Theft Auto and Call of Duty were commanding the arena, with Grand Theft Auto 4 shifting more than six million copies in its first week of release. Gaming could no longer be considered a back-bedroom activity for sweaty teenagers. For several years already console makers had been vying for more and more prominence in our homes with the addition of music and movie players. With the addition of internet access this relationship was cemented.

Predictably, from the outset the internet has played a huge part in the evolution of gaming. Multiplayer gaming actually dates back as far as 1974, when researchers at MIT linked players across the ARPAnet (the forerunner of the modern internet) in the first ever networked game, Mazewar. But with the dawn of the World Wide Web in 1991 came a new era of online gaming that was open to all (as long as you could afford the hardware and had cable running to your house). Today, online gaming alone contributes the lion’s share of the industry’s $93 billon revenue. This is why developers of multiplayer online role-playing games like Destiny, currently boasting more than 9.5 million registered users playing an average three hours a day, can afford eye-watering sequel budgets reported to be around half a billion dollars.

With these kinds of numbers regularly bandied about in the press, it’s no longer any surprise that the games industry is king of the entertainment superhighway. Hollywood can do nothing but watch the dust trails thrown up by its screeching tires (probably off-road rally ones with a V8 engine) as Hollywood actors are snapped up to voice game characters, and blockbuster games such as Call of Duty, The Sims and Mario Kart regularly top box office offerings for revenue. However, making direct comparisons between the movie and the game industry can be misleading when we start talking about costs, as movie budgets are typically stated as the cost of making the film, whereas game budgets tend to include marketing and promotion too.

Considering the inexorable spread of mobile across the world, analysts are predicting even bigger things for gaming too. Due to the rise of social and ‘freemium’ model games like Candy Crush Saga and Temple Run, which are free to play but with premium upgrades available, almost a third of UK citizens are now mobile gamers, with 6.2 million playing every day. This is not an uncommon picture across the digitized continents and it’s estimated that mobile gaming will have pushed the global games industry up to be worth over $100 billion by 2017.With this mass appeal status comes a natural shift in the demographic gaming appeals to. In America, women now make up 47 per cent of the gaming population and one-third of US gamers are over 50.

In the UK, female gamers are in the majority and more people over 45 are playing games than kids and teens. Yes, you read that correctly. Today’s western gamers are mostly women and the over forties, so cultural stereotypes are definitely being smashed right now.

Interestingly in Asia, where deep-seated traditions are often still in play, data collected by the Chinese gaming site 17173 suggests that females make up 66 per cent of Japan’s gamers, compared to 37 per cent in Korea and just 27 per cent in China. As these countries open up politically and culturally though, the landscape is likely to shift faster than anyone can imagine. You see, pretty much the whole of Asia (under a certain age) has been in the thrall of a new obsession for some years now: e-Sports.

Since the turn of the new century, professional gaming has been embedding itself into gaming culture, especially in Asia. There are now global tournaments and sponsors with increasingly deep pockets footing the bills in return for lucrative advertising spots. In Seoul last year, 40,000 fans packed out the city’s sporting stadium to watch players compete for a million-dollar prize fund in the League of Legends World Championship, and a further 32 million tuned in online.

In 2013, almost 65 per cent of China’s $13 billion games industry was down to online games like World of Warcraft and League of Legends, and the top gamers in many Asian countries are household names. The business of online gaming is booming right across the continent, with China experiencing year-on year-growth of around 40 per cent in the sector. These numbers are not to be underestimated in today’s financial climate.

The fanaticism shown in some parts of Asia is catching on in the West too. Prize pools in Europe and North America are beginning to grow and with the help of public access media outlets like Twitch TV, the concept of watching games as a sport is begging to take root across the internet. After only three years in existence, Twitch TV – a platform where players can broadcast live gameplay from their desktop – was already clocking up 50 million viewers each month and has now been snapped up by Amazon for almost $1 billion. The interesting thing about Twitch TV is that it operates a profit share scheme for channels broadcasting frequently enough to a lot of viewers. All ad revenue and subscriber fees are then split with these partner channels, and several people have already quit work to play games for a living on the platform.

One big blemish on the industry’s reputation right now though is the issue of gender. Games like Grand Theft Auto have been accused of portraying women as victims, or grossly over sexualized like the early Lara Croft, with her impossibly tiny waist and gravity-defying breasts. The industry itself is guilty of massive gender disparities as only 11 percent of game designers are female, and that number plummets to three per cent when looking at programmers. This doesn’t make any sense when you consider the gender split in the game playing population. Many women are still being driven away from mainstream online gaming too, where reports of sexism and gender discrimination are rife in the press. It seems while we were all distracted by the ever more realistic graphics and intricate gameplay, online gaming was allowed to evolve a loudly misogynistic community, where horrific reports of rape and murder threats against women in gaming communities (including publishing female victims’ personal details online in an act known in trolling circles as ‘doxxing’) seem to be the accepted norm.

It’s a battle that I think will rage for some time yet but will balance out in the end. There is a lot of grassroots work going on right now to interest more girls in studying STEM subjects and go on to work in the games industry. Professional gamer Stephanie Harvey, who also works as a game designer for Ubisoft, believes getting this gender balance right is key to the continued growth of the games industry:

“Gaming is still a new medium but as we see the battle for better graphics slow down, we also see the opportunity for new experiences to emerge. Having gender balance in the gaming industry will help stimulate creativity and will push gaming experiences forward.  The market clearly has grown in the last few years and EVERYONE is getting into gaming, but the industry wasn't prepared for its demand. We want and desperately need new experiences, and diversity in safe and respectful work environments will inevitably and hopefully bring it.”

The battle for better graphics might be slowing down, but that doesn’t mean the war is over in the hardware land grab. With graphics engines running at capacity and the very best creative hands all on deck making the games, innovation in this sector is now dominated by the way we interface with our games. Consumer-ready virtual reality (VR) headsets, which let you look around inside the computer generated world, are becoming a reality thanks to the likes of Facebook’s Oculus VR unit, and consoles have been using motion detection and voice controls as input methods for some years now. The latest version of the seminal space trading game Elite, released at Christmas after raising £1.5 million in funds from fans through crowd funding site Kickstarter, delivers an online multiplayer galaxy you can explore with your hands on an authentic flight stick, your head encased in an Oculus Rift VR headset and using voice interactions to talk to the ship’s computer. If anything is going to transport you to the cockpit of a Sidewinder in deep space it’s that.

This kind of immersive futuristic tech is still uncommon but familiar to us all thanks to the movie industry. Science fiction has a way of becoming science fact and given the work done today in cybernetics and neurosurgical implants, is it really so unthinkable that we might one day be taking Total Recall-style trips into cyberspace? Especially when you consider the impossibly long way Elite has come in just 30 years?

Scientists in the UK have already carried out successful tests to surgically link the human nervous system directly to a computer. Imagine the implications for gaming if we can link two brains together over a network? You would just have to ‘think’ the game.

Non-invasive techniques are also coming on in leaps and bounds, with augmented reality, eye tracking, touch and spatially aware sensors all allowing us to interface with technology more and more like we are in Minority Report. Celebrities including Michael Jackson, Frank Sinatra, Elvis and Audrey Hepburn have also been brought convincingly back from the dead to perform as holograms. How long before we see this kind of technology in our living rooms I wonder?

David Braben believes we are on the brink of completely redefining our perception of games:

“We will see the whole mobile/console/PC distinction by platform disappear, and the distinction for games will revolve more around play time and depth of immersion – ‘Snack Games’ played in five minute chunks  vs ‘Match Games’ – 20 minutes or so fixed contest type games vs ‘Session Games’ – spread over many two-hour plus in-the-living-room epic sessions. The parallel today for video is YouTube clip vs TV program vs cinema film.”

Inevitably we will see consoles themselves disappear too, into other broader devices delivering a range of different services. The power of handheld technology today dwarfs that of consoles from just a few years ago, so why restrict gaming to the living room?

As much as the technology we use continues to evolve, the cultural importance of gaming grows ever deeper roots in society too. In contrast to the blockbusters there is a growing artistic community who believe in gaming as another form of creative expression. Luke Whittaker, from State of Play Games is experimenting with mixing different mediums in the digital space; building a live-action set out of paper and filming it with real cameras to provide the backdrops for his new game, Lumino City. Luke explained how he’d infused the surroundings with subtext about the nature of technology, innovation and our energy use; the cultural messages are in there but shouldn’t affect gameplay if you choose not to see them. It took him a year to build the set and it had to be filmed in just a day due to budgetary issues involving big, expensive robotic cameras. It was a labour of love and is a work of art that even a seasoned Luddite would be hard pushed to deny. Luke actually believes that games have been so busy defining themselves there hasn’t been much room for cultural expression, but this is about to change:

“Games can now reference our gaming history, and you certainly see a lot of 8-bit, retro-vibed indie titles, plus endless reworkings of what is effectively Wolfenstein, in the Call of Duty/Battlefield franchises... I see the potential for cultural expression in games just getting bigger. If we’ve shown anything with Lumino City, it’s that you can make a game based on all the other influences in your life – architecture, films, art or your own beliefs – and that you don’t need to use the latest high-end technology to do it, just the idea and the will to carry it through. A whole raft of games designers are growing up now, and if they can see that potential, then we’re in for a very exciting future.”

Some games are even beginning to get a reputation for being ‘good’. It’s just a twinkling in the eye of mainstream acceptance right now, but developers like Game the News have been using the medium of game to express world events and political themes for some time. Games like Endgame: Syria, which launched during the height of the Syrian conflict and used regularly updated current affairs from the war to base the gameplay around, have started to challenge our very perception of the word ‘gamer’.

I regularly see titles coming out in the ‘snack game’ genre highlighted by David earlier, which carry some environmental, social or political message. Use less energy; recycle more waste; eat better food. Worthy but tedious sounding concepts sugar-coated with a game. I’ve even seen a game from Cancer Research UK, which has players exploring an environment built using the genetic data from cancer patients. By flying towards dense clouds of the element they are tasked to collect, players are pointing scientists towards potential hotspots or mutations in the genome, strongly associated with cancer.

But perhaps one day cancer, arthritis, dementia and all those other weaknesses of the flesh will cease to matter at all? We’ll have cybernetic enhancements; 3D-printed organ replacements; virus-hunting nanotechnology coursing through our blood streams. Or maybe we’ll be able to upload our minds to the web and have done with our bodies altogether? Although I hope someone stays behind to clean up the mess.

It’s not as farfetched as you might think when you consider that a lot of the technologies I just mentioned already exist – they’re just not mass market.

Look how quickly that changed for gaming.