RESEARCH REPORT: VIDEO GAME PROPOSAL

Zoe Barrie
April 20, 2018
Introduction:
The video game industry is becoming a more prominent industry due to the rise in technology in
recent decades. Capitalizing on finding a game that appeals to a significant market is crucial in
driving revenue and sales. The following document presents a comprehensive overview of
different aspects included in the gaming industry. The pivotal elements highlighted in this report
are industry overview, game type, target markets, competitors, price points, and public interest.

Industry Overview:
The game industry is broken up into four different categories: games for personal computers,
games for mobile devices, games for specific devices (console systems), and new hardware
segments like virtual reality, streaming devices, etc. (“Game Industry Overview”, 2016, p. 3).
Figure 1.1 demonstrates the growth in the video game software market, emphasizing the
Figure 1.1 variation in profitable devices. The
game industry in the US is in fact one
of the fastest growing economic
sectors. The game industry provides
more than 220,000 jobs and produces
billions of dollars in sales and revenue
across the US (“US Video Game
Industry Revenue”, 2018). One of the
more recent developments in the
industry is virtual reality (VR).
Virtual reality uses computer-
simulated real life experiences taking
place in computer-generated
Source: woodsidecap.com environments (“What is Virtual
Reality”, 2017). Because of the
exponential popularity and
advancements of virtual reality, it is estimated to surpass $40 billion USD by year 2020 (“Global
Virtual Reality Market Forecast”, 2017).

Game Type:
In order to capitalize on the current trends in the game industry, the proposed game type would
be a role-playing virtual reality mobile video game targeted at teenagers ages 13-17 years old to
enhance intelligence amongst users. The video game would be offered in the app-store as a free
application, yet would include many in-app purchases to maximize
revenue. Figure 1.2

Target Markets:
Video games amongst teenagers are high in demand
due to the growing popularity. With virtual reality also
becoming an uprising trend in the market, it is vital to
capitalize on the target market.

Source: theesa.com
Demographics:
Reported by the Entertainment Software Association (2017), there is a greater amount of average
gamers in the 18 years or less age category for males. For female individuals, the second most
dominant group of average gamers is in the 18 years or less category, as well. Figure 1.2
illustrates the age groups of average gamers to highlight who the most frequent video game users
are. In addition to being the more frequent users, teenagers ages 12 to 17 have been found
spending nearly three hours in front of a screen, whether it be on a computer, watching
television, or playing video games (“The Video Game Debate”, 2009).

Buying Habits:
When purchasing video games, males tend to be the more dominant consumers in the market. Of
the most frequent video game buyers, 63% are male and 37% are female. In 2016 it was reported
that the more common format of video game purchases was digital format as opposed to a total
physical format. The top two components in purchasing a video game are described by the
Entertainment Software Association to be the quality of the graphics and the price of the video
game (“Essential Facts”, 2017). With all of these buying components in mind, the most common
time of purchase for gamers is during the holiday season (Seitz, 2017).

Competitors:
With the recent spike in sales for virtual reality, many companies have gained a head start in
introducing the specific technology. The VR market has grown rapidly and many companies are
gaining attention from venture capitalists, bringing in investment money to produce the popular
product. Figure 1.3 portrays the demand for virtual reality headsets from the three major
competitors: Sony, Oculus, and HTC. This information indicates the dominance Sony has on the
market, but also demonstrates the room for new companies to enter with momentum from price
cuts.

Sony
Sony’s PSVR, which runs on the PS4, is the primary driver in the virtual reality market; it is
responsible for most of the volume accounted for by consumers. Anshel Sag, author for Forbes,
describes, “there are roughly 2 million PSVRs in the wild and counting. As of [January],
Sony has sold over 70 million PlayStation 4 Figure 1.3
consoles, so there are still a lot more
potential customers of Sony’s PSVR” (Sag,
2018)

Oculus
Oculus was able to keep up with both Sony
and HTC after cutting back on the price
during their 2017 Summer Sale of their VR
device, the Rift. Oculus was able to sell
many VR units and close the gap between
competitors (Sag, 2018).

Source: variety.com
HTC
HTC keeps up with the virtual reality market through their VR system, the Vive. The company
recently dropped the price of their systems to remain on par with their competitors. By cutting
down the price, the VR industry was enabled to ship 1 million units in a single quarter (Sag,
2018).

Price Points:
Due to the significant impact that pricing for virtual reality has on consumer activity, creating a
favorable price is crucial. Because this product is fairly new to the technology world, there have
been difficulties in obtaining an equilibrium for virtual reality; however, finding a way to avoid
the expensive aspects of virtual reality could be beneficial.

Cost of Virtual Reality:

Although virtual reality has quality factors all around, one unfavorable detail remains: its cost.
With the different components included in virtual reality, like the headset and a VR computer,
the best virtual reality experience could cost up to $1,600 total (“Virtual Reality is Too
Expensive”, 2016).

Industry Opportunity:
Despite the disappointing cost of virtual reality, there could be an opportunity to enter the market
with a “really good” VR experience that would cost exponentially less. Instead of using
expensive VR computers, costing up to $1,000, consumers can use their smart phones, offering a
much cheaper alternative for the short-term. All that would be necessary in a smart phone VR
experience is a headset, which can be sold for just $399 (“Virtual Reality is Too Expensive”,
2016).

Freemium Mobile Application:

Paid applications were popular years ago, due to the “one-time” payment; however, these
applications have decreased in popularity due to the increasing prevalence of free and freemium
applications. With the concept of “in-app” purchases, developers of the applications gain revenue
on the charge for additional features. This creates a new element to a video game, since adding
more “in-app” purchases increases the value of one’s individual mobile device video game
(“How to Choose”, 2017).

Public Interest:
Because of the excitement behind the fairly new concept of virtual reality, individuals are
interested in investing their personal money for the experience. Additionally, with the heavy
influence that smartphones have on the public, the growth of VR on a mobile device is
inevitable.
 Figure 1.4
Popularity in Mobile Gaming:
With the rise in smartphones, mobile games have
become more prevalent due to the accessibility.
Additionally, with the low barriers of entry, many
individuals have become developers of their own
mobile application. With the increase in profiting
developers, the mobile game market has enhanced,
driving revenues up and creating a desirable
market for consumers. Figure 1.4 depicts the
growth in revenue in the mobile video game
industry. This emphasizes the increasing
popularity in the concentrated area.

Looking to Buy Virtual Reality: Source: ibisworld.com

With an expansion in public interest in virtual reality, many consistent video gamers have
invested in a VR headset. When asked about satisfaction regarding their VR headset, over 90%
of the owners stated that they were pleased. Additionally, the Entertainment Software
Association noted, 1 in 3 buyers stated that they were interested in purchasing VR in the next
year (“Essential Facts”, 2017).

Conclusion:
The video game industry has a diverse variety of games available for the consumer. With recent
growth in the technology industry, video games are becoming more accessible leading to
increased sales and revenue. In order to truly maximize profit and create something consumers
will enjoy, it is necessary to understand the young targeted market, VR competitors (Sony,
Oculus, and HTC), avoiding high expenses, and the public interest around mobile video games
and VR. By implementing virtual reality, the company is taking into consideration the
consumer’s desires and could potentially anticipate a future flourishing market.
References

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Woodside Capital Partners. (2016, August). Game Industry Overview. Retrieved from:
http://www.woodsidecap.com/wp-content/uploads/2016/12/WCP-Gaming-Industry-
Overview-2016.pdf