ReadingC-IO - Structure and Competition in the U.S. Home...

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Introduction The U.S. home video game industry has developed tremendously over the past ten years to become a media force rival- ing motion picture distribution. In 1999, video games equaled motion pic- tures with domestic revenues of $7.4 billion and the game industry contin- ues to grow (PC Data 2000; Graser 2000), with an estimate of $13 billion in 2002 (Gaudiosi 2001). From 1998 to 2001, the industry became the fastest growing segment of the entertainment industry with a growth rate of 15 to 25 per cent, 1 employing over 200,000 people (IDSA 1999, 2001). Worldwide, video games are expected to hit $30 billion by 2002 (Gaither 2001), with popular online games in South Korea enjoying a four million-strong subscription base (Levander 2001). Coupled with its role in the burgeoning online world, the in- dustry has become a significant eco- nomic player in the American media environment as game use has skyrock- eted among users of all ages. Time spent on games has risen steadily and is ex- pected to climb at the expense of more traditional media. Communication scholars have noted that many younger users spend more time on video games Buchman 1996). Nevertheless, at the same time, the business of producing and distributing video games has gone largely unexamined by scholars. A re- view of previous research yields a healthy body of work on effects, mostly focusing on children and violence and gender roles (Dill & Dill 1998; Ander- son & Dill 2000; Griffiths 1999; Dietz 1998; Funk 1993; Schutte et al 1988; Cooper & Mackie; 1986), and growing interest in uses and gratifications (Sherry et al 2001), but almost nothing on the industry. 2 This article is patterned after Chan- Olmstead’s (1991) analysis of the syndi- cated television market: it examines the rise of the industry and lays out its current structure in depth, while also analyzing the resulting competition and the character of the industry as it moves to the mainstream. Drawing on Litman’s (1979) work on the level of di- versity in television programming, variations in content are predicted based on different market structures. The first underlying hypothesis is that a decentralized, competitive market structure will feature less mainstream content and less anticompetitive behav- ior than a maturing concentrated in- dustry; as games have become a larger, more rationalized business, more main- stream content has begun to predomi- nate. However, the network effects present in video game systems create competitive forces that lessen the anticompetitive problems traditionally associated with concentrated indus- tries. The trends reported here support these hypotheses. Video games are seen as a maturing, competitive industry with practices and structure similar to other media. This research paper is grounded in the
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This note was uploaded on 10/12/2011 for the course ECON 101 taught by Professor Mikson during the Spring '08 term at Aarhus Universitet.

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ReadingC-IO - Structure and Competition in the U.S. Home...

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