Vertical Integration, Exclusivity and Game Sales Performance in the US Video Game Industry

36 Pages Posted: 20 Oct 2010

See all articles by Ricard Gil

Ricard Gil

Queen's University (Canada) - Smith School of Business; Johns Hopkins University - Carey Business School

Frederic Warzynski

Aarhus University - Department of Economics

Date Written: September 30, 2010

Abstract

This paper empirically investigates the relation between vertical integration and video game performance in the US video game industry. For this purpose, we use a widely used data set from NPD on video game monthly 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 and sell more units 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 and marketing strategies that soften competition and not from ex-ante differences in video game quality. We also find that exclusivity is associated with lower demand. Our estimates suggest that consumers value vertical integration features in their games between 4 and 34 dollars per game.

Suggested Citation

Gil, Ricard and Warzynski, Frederic, Vertical Integration, Exclusivity and Game Sales Performance in the US Video Game Industry (September 30, 2010). NET Institute Working Paper No. 10-06. Available at SSRN: https://ssrn.com/abstract=1694311 or http://dx.doi.org/10.2139/ssrn.1694311

Ricard Gil (Contact Author)

Queen's University (Canada) - Smith School of Business ( email )

Smith School of Business - Queen's University
143 Union Street
Kingston, Ontario K7L 3N6
Canada

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

HOME PAGE: http://carey.jhu.edu

Frederic Warzynski

Aarhus University - Department of Economics ( email )

hermodsvej 22
DK-8230 Åbyhøj
Denmark
+45 89 48 61 95 (Phone)

HOME PAGE: http://www.hha.dk/~fwa/frederic.htm

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