Video Games: Vertical Integration

Introduction to Vertical Integration

Vertical integration refers to the organisational strategy where a company takes control over two or more stages in the production and distribution of a product within an industry.
The video game industry increasingly relies on vertical integration to maintain control over the entire product development cycle, which spans from conception to distribution.
The advantages of such strategy include cost efficiency, a unified marketing and branding strategy, and control over intellectual property.

Key Components of Vertical Integration in Video Games

The stages involved in video game vertical integration include development, publishing, production, marketing, and retail distribution.
Development involves the creation of the game itself by software programmers, artists, and game designers.
Publishing includes the orchestration and financing of the game’s production and distribution.
Production involves the manufacturing of game copies and gaming hardware, if applicable.
Marketing involves the promotion of the game to reach its target audience.
Retail distribution includes both physical and digital options, and can be managed in-house or through third parties.

Implications of Vertical Integration

Companies that are vertically integrated can better control the quality, cost, and timing of game production.
Companies also have a greater capability to protect their intellectual property rights and prevent others from using their assets without permission, allowing greater profit retention.
Yet, heavy reliance on vertical integration may lead to complacency, and the lack of external competition may stifle innovation within the firm.
Legally, vertical integration may lead to anti-trust issues, as these organisations can become overwhelmingly powerful and potentially monopolistic.

Case Study: Nintendo

Nintendo is a prime example of a vertically integrated video games company.
Their strategy encompasses development, production, marketing, and distribution – they create the software for their games, produce the hardware to play them on, and control their distribution.
Nintendo’s integrated approach helps maintain a consistent brand image and quality control across all stages of production and distribution.
Federal assents have also allowed Nintendo a virtual monopoly on some properties, such as Pokemon and Mario, providing them a strong competitive advantage in the global gaming industry.

Insight into vertical integration in the video game industry will allow you to comprehend why certain companies dominate the market, and observe the challenges and benefits this strategy presents. It highlights the complexities of the gaming industry and further deepens your understanding of global media practices.