Download The next force in porters` five forces that is seen in the video game

Porters Five Forces
Porters Five Forces is a framework that aids in the analysis of the level of competition
that is present in an industry. Porters Five Forces includes: Threat of substitute, Threat of new
entrants, buyer power and supplier power. The video game industry is vulnerable to the level of
competition. Video games are constantly being adapted and changed with the increase of
technology available which in turn creates a high level of competition within the video game
industry. The technologies that we are looking at that create a high level of competition among
competitors are, artificial intelligence (AI) open source software/ open gaming, mobile gaming
and digital distribution.
The force that has the most effect on the video game industry when it comes to
technological impact is the threat to new entrants. Technology is getting more and more
advanced constantly and with technology advancing it creates competitive advantage between
competing video game companies. When it comes to the technological impacts on the threat of
new entrants it is present most prominently in three of the technologies that we selected, those
three are the open source software/ open gaming, digital gaming and mobile gaming. Interactive
gaming companies are turning to open source software and it is becoming strategically crucial
for software development. With other companies coming in and start using the open source
software it will increase their agility and cut costs and will be able to provide their product to the
market and a cheaper price or ultimately for free. Open source software has the biggest effect
on the threat of new entrants in the mobile gaming. Open source software has had a big impact
on the mobile gaming aspect of the video game industry. Open source software has allowed
mobile application developer to develop mobile gaming apps for a cheap price and be able to
provide those games to the market for little to no price. This creates the threat of new entrants
to the existing mobile gaming giants as these companies are coming in to the market using
open source software and being able to develop their mobile games for little cost and provide it
to the end users for new cost to them. Digital distribution is going to have a huge technological
effect on the video game industry. Digital distribution is acting as the new entrant in this
scenario and what is being effected is the third party video game supplier. With the threat of
digital distribution increasing, third party video game suppliers are becoming obsolete, that
being said the third part suppliers that are selling physical copies of video games. More first
party video game developers and publishers are going to be looking at going digital to sell their
video games. Digital distribution isn’t brand new into the market of video games but it is
something that has become an increasingly popular choice to purchase video games. In 2009
digital distribution accounted of 6% of sales of video games by 2011 it tripled to 24% (Okalow,
1). Digital distribution is going to continue to increase and has created a huge threat to the
bricks a mortar video game stores as digital distribution creates an easier way for developers to
develop the games and provide downloadable updates when needed and creates an easier way
for the end users to buy the games of their choice.
The next force in porters’ five forces that is seen in the video game industry is the threat
of substitute. The threat of substitution is something that is always going to exist within the video
game industry. The technologies that we selected all have an impact of the threat of
substitution. Each video game console developers, video game developer and mobile game
developers all have direct competitors that they are trying to gain and sustain a competitive
advantage. Open source software can be a threat of substitute as it provides developers a
cheaper way to develop mobile games and allows them to publish the games to the market at
free of charge to the end-users and use in game purchases the source to make money these
mobile games will be a substitute to the existing mobile games that people are spending money
on just to play them. Digital distribution provides a huge threat of substitution to the brick and
mortar video game stores, it provides convenience to the developers and end users. Digital
distribution provides a competitive advantage of being able to play the game almost instantly
upon the launch of the game. By not having to produce millions of physical copies of the video
game product it will cut the costs of the developer and in turn it will decrease the cost per game
through the video game consoles marketplace. Artificial intelligence doesn’t directly provide a
threat of substitution, however it can be a characteristic that helps. As game consoles and video
games get more and more advanced due to the large accessibility of technology, video game
developers are trying to find a way to create a competitive advantage to separate them from
their competitors. Artificial intelligence could aid a video game developer in becoming a threat of
substitution to similar video games within the same genre. By having a more advanced artificial
intelligence it makes the game more realistic and better to play.
The buyer power aspect of the porter five forces provides a great opportunity for digital
distribution. Buyer power provides an opportunity for digital distribution because if the end users
prefer digital distribution over the traditional brick and mortar distribution then the traditional way
of purchasing video games could become obsolete. The buyer has high buyer power as they
are the ones who chose what technology is most important to them within the video game
industry. The buyer could prefer the open source software games that are free, or could prefer
games that have high artificial intelligence, they could prefer the digital copy over a physical
copy of a game.
The opportunities that come with the supplier power of the video game industry are hard
to attain. Digital distribution is a great opportunity for suppliers to gain power. By having digital
distribution it eliminates the middle man and goes right from developer/publisher right to the end
user, which can in turn allow the developer/publisher to set competitive prices for their product.