Structure and competition in the U.S. home video game industry

Abstract The video game industry has continued to grow dramatically over the past decade, cutting into mainstream media in participation and revenues as it becomes part of mainstream media culture. Following the industrial organization model, this paper conceptualizes and systematically analyzes five vertical stages and the key market segments of consoles, handheld and PC‐based games. Genre‐based measures of content show that the different game platforms have varying levels of product diversity, driven by differing levels of risk and rewards. Comparisons in production and distribution are made with other major media. The main conclusion is that the industry is reaching a mature phase with concentration and integration beginning to be found in its stages. A mainstreaming of content is partially countered by a vibrant community of developers, mostly for PC games. As a standard‐based industry, non‐interoperability and network effects continue to play a key role in preserving competition in a field with a shrinking number of firms.