Top 10 Surprising Companies Shaping the Gaming Industry
In the very early days of the video game industry, there was a rather humorous rush of companies to get involved in what was then a very new market. One day, I’ll likely write a list of the Top 10 Surprising Companies to try to capitalize on the video game industry in its infancy. That day, however, is not today.
After a few years of stabilization, however, there emerged a handful of significant stakeholders in the industry: Nintendo, Sega, Sony, and their affiliated game developers. For several years, the gaming industry existed in pseudo-isolation with these companies essentially running the entire show. That dynamic could not last forever, however. As the industry expanded its profits and influence, it became natural for other companies to want to capitalize on its success just as they had tried to do in the industry’s infancy. Perhaps more importantly, as technology became more and more ubiquitous and found its way into more and more facets of our lives, it was natural for the video game industry to merge in some ways with other telecommunications industries.
All that brings us to today, where no longer is gaming an isolated industry away from other enterprises. Instead, today video gaming is deeply embedded in a broader technological culture. As such, it is experiencing constant influences from companies that traditionally have not been involved in the video game industry. In many ways, these companies are now some of the most significant stakeholders in shaping the future of video games. What is surprising about these companies is that, at least for the ten I am going to discuss in this list, not a single one of them has ever produced a video game or a dedicated video game console. Instead, these companies have positioned themselves to have influence over an industry that traditionally has not been within their sphere of clout.
The formal criteria for inclusion in this list is that the companies mentioned must never have directly developed either a major-release video game or a dedicated video game console; yet, despite this seeming absence from the industry, all ten companies still exert significant influence over the industry’s current developments.
#10: The Military
Although not technically a company, the military — especially the United States military — fits many of the criteria one would use to identify a company exerting surprising influence over the video game industry. It is inarguably independent from the game industry as a whole, and although it has at times commissioned or sponsored video games (with America’s Army coming to mind immediately as the most prominent example), it is certainly not what you might consider to be a member organization of the broader gaming industry.
However, with the seeming fascination of the gaming industry with modern warfare (an obsession that is so deeply ingrained that in all likelihood, when you read the phrase “modern warfare”, you think first of the game by the same name), it is not at all surprising that the military exerts a significant influence over the gaming industry. In some ways, it is what one might expect: as games push to be more and more realistic, they include more and more from actual military protocol and technology to deliver an authentic experience. It is perhaps not far-fetched that one day, military personnel might look at war-based video games with the same respect that college and professional football players give to EA’s hyper-realistic football franchises.
Perhaps most notably, in this particular instance the relationship goes both ways. While the military influences the video game industry, advancements and developments in the video game industry in turn influence the military. Control mechanisms for remote turrets on Humvees and other military vehicles are intentionally designed to mimic the Xbox 360 controller. Part of this is to retain a natural mapping to the games that new recruits may be accustomed to in order to dampen the learning curve; more importantly, however, this design reflects a respect for the human factors engineering that goes into the design of these controllers. The basic idea is that if these controllers are good enough for the multi-billion-dollar video game industry, they likely are good enough for the world’s most powerful military as well.
Now, of course Steam is not actually its own company: developed by Valve, it is merely a subsidiary platform. Still, though, the structure of the platform is such that Steam exhibits significant influence over the industry without making any games in and of itself. Steam is strictly a digital distribution platform; it is the Internet equivalent of your local GameStop or EB Games.
Steam is particularly interesting, at least in my opinion, because it manages to stay in thriving business despite competition from much larger and more established companies. Amazon, for example, has a robust and thorough digital distribution delivering many of the same games as Steam. Steam stays in business through a deep and nuanced understanding of its audience, stretching from the purchase experience to the organizing interface to the management of DRM on certain games. One of the persistently amazing things about Steam is the way the company receives almost unanimous positive reviews from its customers; never have I seen any company so consistently praised as Steam.
Its positive reviews, however, are not the main takeaway to remember about Steam. Instead, the company represents an ongoing revolution that we will revisit several times throughout this list: the overall revolution towards digital distribution. Steam may have pioneered it, but digital distribution is taking over nearly every element of the gaming industry, with digital stores penetrating every major current console. Steam is the forerunner of this trend, and it is not far-fetched to believe that without Steam setting an example for how effective, reliable, affordable, and popular digital distribution can be, mainstream game companies may have been more hesitant to move in that direction. Even more importantly, one might even speculate that console manufacturers and game developers oppose the move to digital distribution, but the popularity of Steam forced their hand into bringing it into the fold lest they lose their entire audience to the more popular format.
If you are unfamiliar with the company, Nvidia is the most prominent video card manufacturer in the business today (although the Xbox 360 and some other consoles and devices still use ATI-brand cards). They do not manufacture game consoles, but they manufacture the video cards that appear in the PlayStation 3 and nearly every gaming-quality PC in use today. In the future, Nvidia cards will power both Microsoft’s next console and Nintendo’s next console after a significant power shift among the executives in charge of the projects.
What makes Nvidia influential is that the company is consistently improving upon its own graphics framework in a way that has and will revolutionize the gaming industry in numerous ways. The extraordinary strides made in the realism produced by modern consoles are largely owed to Nvidia and its advancements. Its modern influence over the industry, however, comes from an even more astounding achievement on the horizon. Nvidia has promised its developers and contractors that within a few short years, they will be able to replicate Xbox 360-quality graphics with their mobile GPUs. Mobile GPUs are the ones that power the graphics you see on your iPhone, iPad, and Android-powered smartphones. Imagine these devices able to produce the type of graphics you would see in a large standalone console; combined with the enormous strides made in the realm of storage space available on these devices, it is not hard to see smart phones replacing home consoles by just streaming the screen wirelessly to a larger television set in very much the reverse setup as the upcoming Wii U. But of all the involved stakeholders, Nvidia is the one who would be most responsible for that profound shift; in order for mobile games to ever compete on an equal playing ground with console games, they must first transcend any hardware limitations that would limit their ability compared to their larger big brothers.
Just as Nvidia is responsible for the vast majority of GPUs at use in the gaming industry today (and soon to be even more), IBM is responsible for the vast majority of the CPUs. IBM technology powers both the Xbox 360 and the PlayStation 3, and shows no sign of diminishing its hold on the console industry any time soon.
Generally, one might think that IBM does not actually exert much influence over the industry because one might think that it just supplies its best technology equally to all of those interested in using it. After all, partnering with IBM does not represent a major gain for laptop or desktop manufacturers over one another because all have access to the same set of processors; partnering keeps them competitive, but it does not give them an advantage given that they all leverage the same hardware. That is not the case in the video game industry, however. Intel partners very closely with both Sony and Microsoft (as well as other companies, but those are less notable) to develop hardware that most directly addresses the concerns and needs of those console manufacturers. With the PlayStation 3 and the Xbox 360, this resulted in profoundly different hardware configurations. The Xbox 360 uses a traditional structure for integrating its processors and video cards, whereas the PlayStation 3 uses a more innovative and unique structure. This means that the PlayStation 3 is in some ways more difficult to develop for, but also retains more potential. The PlayStation 3 is the system of choice for many of the research endeavors that are pursued with this increased computing power for exactly this reason: the unique architecture of the system gives it more upside and more potential at the expense of greater difficulty in development. By directly partnering with the two console manufacturers, however, IBM is shaping this discussion as a whole; without this partnership, this corner of the console war might otherwise be less of an arms race and more of a battle of design and marketing.
As mentioned before, Amazon attempts to compete with Steam for video game digital distribution; most games available for download via Steam are also available via Amazon, and even though Steam still retains the vast majority of the market share for digital distribution to personal computers, Amazon’s presence in the market is itself a significant driving factor that continues to influence the industry. To illustrate this idea, think of it in terms of an arms race. When Steam was the only digital distribution for video games, there was little direct incentive to develop further; so long as they presented something more attractive than the traditional purchase process, Steam would be an industry leader. However, the entry of Amazon into the marketplace forces Steam to stay one step ahead and anticipate gamers’ next requests. This is competition in its purest form: because a firm as strong, agile, and massive as Amazon competes with Steam, Steam must develop as quickly as possible to stay in the market, thus improving on the capabilities of the market as a whole.
However, Amazon also holds interesting influence over the video game industry via its somewhat new tablet computer, the Kindle Fire. We’ll talk more about the Android operating system later in this list, but in the context of that operating system, the Kindle Fire represents an interesting influence on the industry — particularly the mobile games portion — through its hybrid open/closed paradigm. By limiting the app access of the Kindle Fire to applications accepted by Amazon (and, surely, that Amazon receives a stake from), Amazon attempts to obtain the best of both worlds: the flexibility, innovation, and availability of an open paradigm along with the security, quality, and profit of a closed paradigm. If the device holds its market share or increases it, we might see a profound change to the way the Android marketplace operates, which would cause a ripple effect throughout the entire mobile games industry.
One of the most interesting developments in the gaming industry over the past five years has been the resurgence of gaming — or at least some form of gaming — as a mainstream enterprise. When gaming first reached prominence with Nintendo’s NES, it was normal for nearly everyone to play video games; but at some point between the Nintendo 64 and today, dedicated home consoles and PC gaming became interests reserved for adolescent and young adult males with few other audiences partaking as they used to.
There are many different trends responsible for this resurgence of mainstream appeal, not least of them the Nintendo Wii’s focus on casual games and the ubiquity of smartphones as new game consoles. However, another contributing factor is the resurgence of gaming as a social enterprise. During those days when gaming started to be regarded as a young male interest, the social element largely deteriorated. Except among known fellow gamers, discussion of video games diminished as a mainstream a conversation piece largely because there was no facility to directly connect friends in gaming. For this reason, Facebook is having a significant profound impact on the industry as a whole. Because so much of our social lives are run through Facebook nowadays, there is a natural infrastructure available for linking with friends and sharing video game experiences. The games themselves may be largely casual, and traditional gamers may scoff at the notion of Farmville and Words with Friends truly being a part of the video game industry; however, they themselves represent the evolution of the industry that Facebook is causing. Social gaming is not restricted only to casual Facebook games, but witnessing the appeal of a social element in game design has caused many of those same features to work their way into other consoles and games as well. The entire friend system on Xbox Live draws from the same appeal: sharing one’s progress and achievements with others is an inherent motivating activity that can draw people into playing a game more than they would have otherwise.
Google could be included on this list for a variety of different reasons – in fact, I am including it twice because it is currently in the process of pursuing two different developments that, while profoundly and fundamentally unrelated, both have a significant fundamental impact on the gaming industry. The first of these is the company’s new ultra-fast Internet connection that it is deploying and testing in the Kansas City area.
If you are unfamiliar with the Google Fiber plan, it offers one gigabit per second (roughly 125MB per second) download speeds at a price that is competitive with the ridiculously slower plans offered by Comcast, AT&T, Charter, and other Internet service providers. To put that download speed in perspective, it would be possible to download an entire high-definition movie in under a minute.
Ultra-fast Internet connections at an affordable price would revolutionize almost the entire world, but would have a specifically relevant impact on gaming. The shortsighted way of viewing that impact would be to think that online multiplayer and the digital distribution would simply be made almost instantaneous and error-free with no more latency issues or download times. While true, Google Fiber offers a much more profound shift than that. I have argued many times in the past that the OnLive paradigm is the future: one day, rather than having a dedicated computer or game console in our homes, we will simply stream the screen contents onto your home televisions and monitors. Internet speeds are not quite fast enough to offer a full competitive experience through this streaming paradigm at present, but Google Fiber offers more than enough bandwidth to identically re-create the experience of playing a PlayStation 3 game on a home console through a service like OnLive. With Google Fiber, the need for equipment inside the home will vanish, and cloud computing will cease to be an alternative and become the new standard, revolutionizing not only gaming but technology as a whole.
If you aren’t familiar with Kickstarter, I invite you to come out of that cave you have been living in for the past six months. Started in 2008 but reaching prominence in 2011, Kickstarter is a site that allows prospective startups and individuals to raise funds for a project prior to actually completing the project. The way it works is simple, but brilliant. With any project, there is a minimum number of customers that would be required to make that project a profitable success. In traditional business, this is where risk came in: investors would risk the company being unable to attain customers. As a result, entrepreneurs were reliant on a small number of venture capitalists to fund their projects even though the true judgment of their project’s success and quality would come from an entirely different audience.
With Kickstarter, however, the entrepreneurs can interact directly with the prospective customers. Entrepreneurs pitch their ideas to the consumer, and if the consumer likes the idea, they pledge a certain amount of money to the cause. The pledge is not a donation, however, but rather a pledge to purchase some element of the finished product. If the project gains enough funds to be profitable, it goes forward, and all of those who pledged money receive one of the product; if insufficient support is gathered, none of the consumers who pledged money have to pay anything. In effect, projects only go forward if there are already enough consumers pledged to purchase the product to make the project profitable.
Kickstarter has already been used to fund several gaming-related projects, not least among them Ouya, an Android-based gaming console intended to compete with the PlayStation 3, Xbox 360, and Wii U. The effect of Kickstarter is that it opens up the industry to new entrepreneurs and new companies; it no longer takes an enormous reservoir of prior profits to penetrate the industry because anyone with a good idea can raise the funds to make a difference.
#2: Google — Again
I already mentioned Google once on this list, but the second contribution of Google is so profoundly and fundamentally different that I think it warrants individual inclusion. In short, the second contribution through which Google is influencing the gaming industry is their Android operating system.
There is certainly a strong argument that Google’s Android system should actually bump them up to the #1 slot on this list; in fact, the first and second slots on this list are so closely related that it is almost impossible to discuss one without discussing the other. They are one another’s yin and yang, each a complement to the other in the same way that Microsoft and Apple battled in the 1990s. The Android operating system represents the best thing to happen to mobile gaming since the advent of the smartphone. The existence of an open platform in which to develop games, unrestricted by marketplace standards, exponentially increases the potential appeal and breadth of mobile gaming.
But as stated before, many traditional gamers will scoff at the notion of including mobile games alongside big-budget releases; even within that mindset, however, the Android operating system represents a significant influencing force in the industry through its backing of systems like the upcoming Ouya. The Android OS is flexible enough to be used in a wide variety of different contexts and domains; one could say it is almost the Linux of mobile operating systems, offering an open and free infrastructure in which to develop. The availability of such a robust underlying operating system introduces enormous potential for a wide-ranging variety of potential gaming applications. Combined with things like Kickstarter, the Android operating system opens up development of full gaming libraries and professional games to basically anyone. It is no longer necessary to be indebted to an expensive development kit or to have an enormous funding source to create professional games; Google Android has opened the market to anyone.
At the surface level, it is easy to see why Apple might be the most influential non-gaming company on the gaming industry. By creating the most successful and ubiquitous smartphone on the market today, they have simultaneously created a new gaming platform that almost always resides in a huge population’s pocket or purse. Whereas there used to be a significant barrier to entry into the video game world — that is, a several-hundred dollar game console purchase — now access to the video game industry comes included on a device that millions of people would purchase anyway. I would argue, more than Nintendo’s new focus on casual gamers or Facebook’s ability to reintroduce the social aspect of gaming, that the ubiquity of the iPhone is the single most-relevant development in the reemergence of gaming as a mainstream industry. Millions of people who otherwise would never play video games are currently carrying in their pocket or purse a device several times more powerful than even last generation’s consoles; a surge in the mobile games industry was natural.
However, Apple’s position at the top of this list is not solely due to the iPhone. Apple is far and away the most profitable company in its industry, even when expanding its industry to include nearly any kind of technology. It trumps Sony, Nintendo, Microsoft, Google, Facebook, and any other company that would lay claim to the industry. There is no doubt in my mind that all of these companies operate with an eye towards Apple. The ability of Apple to create user-friendly, socially popular devices gives it enormous potential if it were to ever choose to enter the video game industry in full force; such a decision would have more impact on the industry than any other development since the decision by Microsoft to enter a decade ago. Please do not misunderstand me: I am not an Apple fanboy, and in fact I have a very strong disdain for the company, its operating procedures, and its corporate paradigms. There is no doubting, however, that the specter of Apple as a player in the video game industry has a significant and persistent effect on the decision-making of every other current stakeholder in video gaming.
With technology becoming more and more ubiquitous, it was only a matter of time before the line between video games and other technology blurred. We already started to see it at the beginning of this generation, as both the PlayStation 3 and the Xbox 360 made a push to be not only gaming consoles, but full home entertainment systems. That trend will only continue, and the emerging ubiquity of mobile devices will push mobile gaming or more into the main realm of the gaming industry. With the technological advancements pioneered by companies like Nvidia and IBM, accompanied by the social faculties presented by Apple and Facebook, the openness of development pioneered by Google and Kickstarter, and the persistently-available delivery supported by Amazon and Steam, the video game industry of tomorrow will be much different from that of today. It is not far-fetched to think that in the very near future, gaming will be indistinguishable from the rest of the entertainment industry as technology converges to provide the most parsimonious and consistent experience possible.