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Video Game Industry Production-Distribution Chain Explained.

Video Game Industry Production-Distribution Chain Explained.

This entry first appeared at www.prninjaapp.com


The video game industry as an entertainment medium has undergone rather dramatic changes over the past decade. Nowadays it is easy to get hopelessly lost among the many steps along the chain, and the only way to understand the potential advantages and disadvantages of the different approaches is to take a good look at them all. Let’s do it.
Production-distribution chain 

Traditional Production-Distribution Chain

The gamer is the final link in a traditional production-distribution chain that extends from the developer to the publisher and retailer. When a gamer downloads a game in the App Store, for example, the chain would be:

  1. Developer produces a game using their own funding or funding provided by the publisher.
  2. Publisher picks it up, provides marketing and public relations assistance, provides quality assurance, polishes it and submits it to the App Store.
  3. App Store provides a platform for game distribution.
  4. Gamer browses the App Store and buys the game.

Advantages:

  • Developer might receive funding from the publisher.
  • Developer is not responsible for public relations, marketing and market research, advertising, manufacturing, nor distribution.
  • Developer is not responsible for Q&A and therefore saves money.

Disadvantages:

  • Having a publisher on board can inflate the production cost.
  • The game’s success depends on the publisher’s marketing, PR, and distribution efforts.
  • Since the developer is not responsible for Q&A and the publisher takes on this task, increasing the chances of bugs slipping through. (See Obsidian and Bethesda’s conflict in regard to the game “Fallout: New Vegas”)

Direct-to-Retailer Production-Distribution Chain

This kind of production-distribution chain represents the short version of the traditional chain. Again, the gamer is the final link in a chain that consists of a developer and a retailer:

  1. Developer produces a game using their own funding or funding provided by venture capitalists.
  2. App Store provides a platform for game distribution.
  3. Gamer browses App Store and buys game.

Advantages:

  • Developer is in total control of marketing, PR, and manufacturing.
  • If the game is successful the developer keeps more profit.

Disadvantages:

  • Developer takes full responsibility for the game’s release, sales, and success. 

Direct-to-Gamer Production-Distribution Chain

A direct production-distribution chain is associated with high-potential profits and risks, and the main difference here is the absence of intermediaries. In this variation, the developer distributes their games directly to its user.  It looks like this:

  1. Developer develops a video game and distributes it through their own website.
  2. Gamer downloads the game or plays it online.

Advantages:

  • Developer is in total control of marketing, PR, manufacturing, and distribution.
  • If the game is successful the developer keeps more profit.

Disadvantages:

  • Developer takes full responsibility for the game’s marketing, PR, and sales.
  • High risks associated with potential losses.

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