Personal Computer Game Industry Analysis

Personal Computer Game Industry Analysis

Porter’s Five Forces is a useful tool for understanding the structure of a business’ strength in success against other rivaling competitors within the same industry. Rivalry amongst the competitors within the gaming industry becomes more intense when there are many and/or equal competitors, when growth within the industry is slow, when costs are highly fixed, when there are little to no switching costs, and when the exit barriers are high. Rivalry weakens within the gaming platform industry when the market is fast-growing and the number of existing competitors diminishes.

One successful strategy used by many competitors within the game industry, is to make games that have a large and loyal fan base continue to be available on the same platform every time a game in a series is released, in order to keep the customer’s loyal to their product.

The threat level of other substitutes or services is determined by whether the substitutes are readily available, the attractiveness of the product’s price, whether customers will view the substitutes as being comparable or have better quality, the performance, whether the comparisons of switching costs are high or low, and other relevant attributes. Substitutes that threaten the PC industry are other video game platforms, other daily activities, other sources of entertainment, or other things that might be perceived as more important. Although other forms of entertainment such as movies, television, music, etc, do not hold much of a threat to video games in terms of the level of interactivity.

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As of September 2014, 84% of households within the United States own a personal computer. (Raine) Therefore PCs have their strength in numbers. PCs threaten other competitors within the industry due to their multi-functionality compared to other substitutes. PCs other functions besides gaming includes uses pertaining to education, entertainment, work, etc. The PC is capable of running games made for previous and newer generations of itself, unlike most video game consoles. PC graphics are superior compared to other platforms within market. Games released on other platforms are almost always offered also on the PC platform.

In 2014 29% of video game players within the United States were under the age of 18. (Statista) When it comes to the game market for children, parents more often would buy a handheld console and games for their child (especially younger children) due to their portability, accessibility, and more affordable price than that of a PC capable for video games and the price of PC games.

Within the PC gaming segment the level of capital requirement are high and the levels of entry barriers are high. Incumbents discourage entry by establishing barriers such as economy of scale, time spent in development, cost spent on development, the access