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Vertical Integration, Exclusivity and Game Sales Performance in the U.S. Video Game Industry

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  • Gil, Ricard
  • Warzynski, Frédéric

Abstract

This paper empirically investigates the relation between vertical integration and video game performance in the U.S. video game industry. For this purpose, we use a widely used data set from NPD on video game montly sales from October 2000 to October 2007. We complement these data with handly collected information on video game developers for all games in the sample and the timing of all mergers and acquisitions during that period. By doing this, we are able to separate vertically integrated games from those that are just exclusive to a platform First, we show that vertically integrated games produce higher revenues, sell more units and sell at higher prices than independent games. Second, we explore the causal effect of vertical integration and find that, for the average integrated game, most of the difference in performance comes from better release period and marketing strategies that soften competition. By default, vertical integration does not seem to have an effect on the quality of video game production. We also find that exclusivity is associated with lower demand.

Suggested Citation

  • Gil, Ricard & Warzynski, Frédéric, 2009. "Vertical Integration, Exclusivity and Game Sales Performance in the U.S. Video Game Industry," MPRA Paper 21049, University Library of Munich, Germany, revised Dec 2009.
    • Handle: RePEc:pra:mprapa:21049
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    Cited by:

    1. Christopher S. Brunt & Amanda S. King & John T. King, 2020. "The influence of user-generated content on video game demand," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 44(1), pages 35-56, March.
    2. Luca Aguzzoni & Elena Argentesi & Paolo Buccirossi & Lorenzo Ciari & Tomaso Duso & Massimo Tognoni & Cristiana Vitale, 2013. "They Played the Merger Game: A Retrospective Analysis in the UK Videogames Market," Discussion Papers of DIW Berlin 1330, DIW Berlin, German Institute for Economic Research.
    3. Benjamin Engelstätter & Michael R. Ward, 2018. "Strategic timing of entry: evidence from video games," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 42(1), pages 1-22, February.
    4. Kim, Jin-Hyuk & Prince, Jeffrey & Qiu, Calvin, 2014. "Indirect network effects and the quality dimension: A look at the gaming industry," International Journal of Industrial Organization, Elsevier, vol. 37(C), pages 99-108.
    5. Parker, Owen N. & Mui, Rachel & Bhawe, Nachiket & Semadeni, Matthew, 2022. "Insight or ignorance: How collaborative history in a workgroup fits with project type to shape performance," Journal of Business Research, Elsevier, vol. 152(C), pages 154-167.
    6. Marissa Beck & Fiona Scott Morton, 2021. "Evaluating the Evidence on Vertical Mergers," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 59(2), pages 273-302, September.
    7. Yuchen Zhang & Jingjing Li & Tony W. Tong, 2022. "Platform governance matters: How platform gatekeeping affects knowledge sharing among complementors," Strategic Management Journal, Wiley Blackwell, vol. 43(3), pages 599-626, March.
    8. Peters, Frank, 2018. "The business of video games is a multi-player game : Essays on governance choices and performance in a two-sided market in the cultural industries," Other publications TiSEM 886b3148-4bbb-4ea4-b666-0, Tilburg University, School of Economics and Management.
    9. Yi, Jisu & Lee, Youseok & Kim, Sang-Hoon, 2019. "Determinants of growth and decline in mobile game diffusion," Journal of Business Research, Elsevier, vol. 99(C), pages 363-372.
    10. Venkat Kuppuswamy & Carliss Y. Baldwin, 2012. "Risky Business: The Impact of Property Rights on Investment and Revenue in the Film Industry," Harvard Business School Working Papers 13-007, Harvard Business School, revised Aug 2012.
    11. Haucap, Justus & Stiebale, Joel, 2023. "Non-price effects of mergers and acquisitions," DICE Discussion Papers 402, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    12. Masakazu Ishihara & Eitan Muller, 2020. "Software piracy and outsourcing in two-sided markets," Quantitative Marketing and Economics (QME), Springer, vol. 18(1), pages 61-124, March.
    13. Akifumi Ishihara & Ryoko Oki, 2021. "Exclusive content in two‐sided markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 30(3), pages 638-654, August.

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    More about this item

    Keywords

    vertical integration; exclusivity; performance; video games;
    All these keywords.

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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