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The changing game industry and economic cycle theory
Umeå University, Faculty of Social Sciences, Department of Geography and Economic History, Economic history.
2015 (English)Conference paper, Abstract (Refereed)
Abstract [en]

This article will discuss recent and historical transformation periods within the game industry and put them in a macro-economic context. The last couple of years have been very turbulent within the game industry. Numerous game developing companies have shut down, even some of the well-established and high profile game studios have closed. Electronic Arts, Lucas Arts and Microsoft have terminated or sold many of their game studios. The highly acclaimed US studio Irrational Games announced in 2014 that it was going to close down and start a transformation into a smaller studio. Retailing has also struggled. The Scandinavian wing of the chain store GAME went bankrupt in June 2015.

This transformation comes as a number of radical (maybe even disruptive) innovations and new business models have been introduced (Baumane-Vitolina and Apsite 2013, White and Searle 2013, Hotho 2013). The new dominant paradigm is based on digital distribution and a further emphasis on networking and mobility. This have, due to scalability and low marginal costs, made new game genres e.g. indie, episodic and social games more economic and technically realistic. New ways to finance game development have also emerged e.g. crowdfunding and early access schemes. Finally we seem to be at the verge of some major technological breakthroughs in VR, open source hardware/software, voice recognition and artificial intelligence.

Schumpeterian innovation theory has become a popular way to explain and understand industry change in the last decades. This article will however focus on another aspect of this theory namely economic cycle theory. Schumpeter and other scholars argue that major technological innovations will occur in development blocks, and as a result reshape the structure of the economy. This will result in economic cycles (Schumpeter 1934 and 1939, Kondratiev 1935, Keynes 1936, Dahmen 1984). Scholars have periodised these cycles in different ways. Within the Nordic structural analytical tradition have Lennart Schön, among others, found evidence for a 40-year cycle. It is possible that the 2007-2009 financial crisis marked the beginning of a new cycle and that we have now entered a transformation period (Schön 2013). An economic crisis will accelerate the destruction of existing structures and will reallocate resources to new sectors and innovations in what Schumpeter would call a great gale of creative destruction (Schumpeter 1942).

The hypothesis in this article is that cycle theory can be used to explain the development of the game industry since the 1970s. The theory may help us build a better understanding and periodization of the game industry evolution. This article will contribute to game research within the fields of history and social sciences. The article will focus on three questions in relation to the game industry. Why have so many major structural changes occurred within the game industry in recent years? Have there been similar periods historically? How can we understand and periodise major changes in technology and business models within the game industry?

Place, publisher, year, edition, pages
Keyword [en]
Game industry, business models, innovations, economic cycle theory, history
National Category
Economic History
Research subject
Economic History
URN: urn:nbn:se:umu:diva-109828OAI: diva2:859249
CEEGS 2015, Central and Eastern European Game Studies Conference, Kraków October 21-24, 2015
Available from: 2015-10-06 Created: 2015-10-06 Last updated: 2015-12-07Bibliographically approved

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