TeleMedia Strategy
The Bleeding Edge of Disruption

Computer gaming – as an industry - has come a long way. The question we all ask is how and when computer gaming became such an integral piece of the entertainment landscape.  When I look back just a couple of decades, computer games were not at all popular. Most of the people had never heard or played computer games outside of the occasional arcade, but today computer gaming is gaining popularity among all ages of people.  It's really amazing (and somewhat concerning) for me to know that the computer games he likes can keep my 5-year-old son occupied for hours.  Nothing else seems to be able to do that. 

In early stages computer games were very basic from an animation standpoint and not all that interactive.  Nowadays the computer games are very complex, with life-like animation extremely interactive – even immersive – and growing exponentially across a broad landscape of form factors, including stand-alone (arcade-based) computer games, home-based gaming consoles (such as X-Box and Wii), Internet-based online games (think World of Warcraft), hand-held electronic games (PSP), and gaming applications running on multipurpose devices such as the iPhone and Blackberry . 

Today computer games are one of the most popular and fastest growing forms of leisure entertainments for people of all ages.  How popular and how fast growing?  Here are some of the facts:

• Research has shown that 33% of the US population used a computer game console at least once. 
• An estimated 80% of the students between the ages of 12 and 17 are play and own computer games and consoles.
• Two third of all men from the age group 18 to 34 owns computer gaming consoles.
• Researchers estimate that people in the age group 18 and 24 buy an average of 4.5 computer games per year, and in the age group 25 and 34 buy average of 4.2 per year.
• Another study from 2007 estimated that 24% of Americans over the age of 50 played computer games, a 9% increase since 1999.
• In the US, at any given moment a minimum of 1.6 million people are using a computer game console.

All that playing generates a LOT of money.  In 2007, the global computer games industry was worth about $40 billion. Of the total, the US computer game industry represented about $16 billion - almost 34 percent of the industry total.  Even more unbelievably, the industry is growing almost 18.5 percent a year – just in the US.  With new games, opportunities, innovations, and big corporate players coming into the business, I am confident that the industry will continue to see skyrocketing growth for the foreseeable future.  

Just how did we get here?  The history of computer gaming, how it was born, and how the industry managed to capture the hearts and wallets of the world may surprise you.  Unlike many of the other aspects of modern technology, computer games were not created or originated by a single person. They were cultivated by a lot of engineers and scientists working independently and by today’s standards quite slowly.  

In 1947-48 working with devices called Cathode-Ray Tubes (CRTs, or what we know as TVs) Thomas T. Goldsmith and Estle Ray Mann jointly patented a CRT-based amusement device in the USA.  The patent described using eight vacuum tubes to simulate a missile firing at target and contains knobs to adjust the curve speed of the missile.  In early 1951, Christopher Strachey tried to run a draughts program for the NPL Pilot ACE.   

One of the earliest tic-tac-toe computer games was made for the EDSAC (Electronic Delay Storage Automatic Calculator) computer during 1952.  Alexander S Douglas as an illustration wrote this for his Ph. D. Thesis on human-computer interaction for the University of Cambridge.    

In 1958 William Higginbotham an American physicist created one of the first computer games, Tennis for Two.  This game is like a ping-pong or Tennis, which enabled two players to play at the same time.  Later, the commercial version of this application, Pong, was one of the first games to reach a large consumer-based audience. 

In the 1960s, computer games (it was not yet an industry) started seeing a number of rapid innovations. Initially, the computer games ran on university mainframe computers in the United States. In 1961, a group of students at MIT, including Steve Russell, programmed a game named “Spacewar!”  on the DEC PDP-1.  In 1966 Ralph Baer created a simple computer game named “Chase” that displayed on a standard television set.  Ralph Baer and Bill Harrison then created a light gun and several other games during 1967 and 1968.  In 1969 AT&T computer programmer Ken Thompson wrote a game named “Space Travel” for the MULTICS (Multiplexed Information and Computing Service a time sharing OS) operating system.

In the early 1970s, computer gaming actually started making money.  The student union at Stanford University created the first coin operated computer game based on the “Spacewar!” called “Galaxy Game”.  In addition, Nolan Bushnell and Ted Dabney created a coin-operated arcade version of “SpaceWar!”  Three decades later a number of these concepts (including simulated missile firings and tic-tac-toe would be packaged for the Hollywood thriller “War Games” starring Matthew Broderick.

As an aside, computer gaming has for some years been expanding in its usefulness.  Countries like US and Singapore used very advanced computer games for training their militaries.  The use of advanced computer simulation has then tricked down to many civilian applications such as police and airline training.  The US Army even creates computer games to help develop the strategic and decision making skills of its officers.   We will also discuss the growing industry of commercial and military simulation in a future installment.

The year 1972 saw another milestone with the launch of console-based computer games starting with the Magnavox Odyssey system in the USA. Philips bought Magnavox and released a different game in Europe in using the Odyssey brand in 1974 and an evolved game that Magnavox had been developing for the US market. In total, the Odyssey system achieved sales of 2 million units.

In 1980s, computer gaming saw a high growth rate. Piggybacking on the success of the early personal computers, IBM PC and Apple Macintosh-compatible games became very popular during that decade.   On-line gaming also got started during this period as Nintendo's Game & Watch line began in 1980.

Needless to say, the birth of an industry is never totally painless.  There was a significant crash in the computer game industry in 1983 due to the bankruptcy of several North American companies producing home computers and computer game consoles.  Among the reasons for the crash was development and production of a number of poorly conceived games such as E.T the Extra-Terrestrial and Pac-Man for the Atari 2600. However the industry soon learned its lessons and came back full speed in late 1984 and 1985.

In the late1990s, what we now know as the computer gaming industry really came into its own.  Most of Today’s top selling home-based gaming consoles were initially launched during the late 1990s and early 2000s starting with the Nintendo.  Sony’s PlayStation was launched Japan in Dec 1994 and in USA in Sep 1995. Microsoft’s XBOX was released in early 2000.  It was initially launched in USA and launched later in other regions such as Europe and Asia in 2002.  The replacement for the original Nintendo console, GameCube, was released by Nintendo on September 14, 2001 in Japan, November 18, 2001 in North America, May 3, 2002 in Europe and May 17, 2002 in Australia. The GameCube sold 21.74 million units worldwide at that time however GameCube failed to reclaim the market share lost by its predecessor.   

Currently, the latest product from Nintendo (Wii) is competing with Microsoft’s XBOX 360 and Sony’s PlayStation 3 with total market share of 34.5 million.  I, for one, can’t wait to see what comes next from the Big 3 home console manufacturers.  When we have such tough market competition and the potential revenues continuing to grow I can’t help but wonder what the best strategy to capture market share may be? 

Now that telecom providers like AT&T and Verizon are starting to provide full packages of multimedia services in addition to traditional services such as land line, wireless, and internet through multiple bundled options, it is not a far stretch to assume that they will soon be adding computer games to their list.  

A lot of people think that Apple somewhat covertly entered the handheld computer gaming market with the introduction of the iPhone and iPod Touch – especially since gaming applications are one of the biggest sellers on the iTunes App store.  Is there a conflict with AT&T’s strategy since the iPhone is only available on the AT&T network in the US?  What are Google and Yahoo going to do?    

There are thousands of questions that are soon to be answered.  Not by me, but by you – the consumer.  We’ll try and keep track of some of the goings-on in this department.  In future installments, I am going to write more about the computer gaming industry, the industry leaders, and the best (and most well known) gamers and so on. Up next: Social Implications and the Effects of Computer Gaming on today’s young people.  

Well folks, thanks for reading this first article. I hope you enjoyed my writing and learned something along the way.  Please send me your questions and valuable comments.

By Pushban Rajaiyan,

Pushban Rajaiyan is a computer gaming enthusiast and result oriented operation management professional with a strong background in B/OSS.  He has over a decade of telecom consulting experience, most recently with SCI Group - consulting to Verizon.  Previous to SCI Group, he was with Amdocs Inc., where he provided technical expertise to other leading telecom providers such as AT&T, Cingular, Nextel and Sprint.  

In his current role with SCI Group, Pushban is responsible for business development and enhancing the strategy planning organization.  He is presently completing his Executive MBA from SMU Cox Business School in Dallas, TX.  Post graduation, Pushban expects to continue his career as a top-level strategist in the telecom and media world.  He can be reached at push123@gmail.com

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