The Evolving European Video Game Software Ecosystem - The Video Game Industry: Formation, Present State, and Future - page 211

development operations and are allegedly risk-aware, taking on games that
most easily fi t into existing markets (i.e. genres) and the limited shelf-space
of non-specialist retailers. This means that truly innovative games may not
reach the market (Miles and Green 2008) Developers also have increased
in scale, professionalized and specialized in order to stay competitive (Kerr
2006). These power relations are likely to change due to recent trends (see
next section).
Consequently, the value capturing distributes dif erently in dif erent seg-
ments. In the ol ine PC segment about 30 per cent of the retail price goes
to the retailers, about 10 per cent to distributors and 60 per cent is shared
between the publisher and developer (of which publishers usually take the
most). In the console market, console manufacturers take another 20 per
cent of the developer/publisher share. 11
We conclude this section by summarizing the competitive position of the
European video game industry, seen from an international perspective. Cur-
rently, European companies are present in all parts of the game software
value network, albeit unevenly. Europe is absent from the console hardware
segment, which is instead dominated by one U.S. fi rm (Microsoft) and two
Japanese fi rms (Nintendo, Sony). This is a major weakness because the con-
sole segment is by far the most signifi cant (60 per cent of the market) and
because the console manufacturers act as platform leaders and to a large
extent control the value networks. Another signifi cant weakness is that so
few European companies are among the major publishers, a part of the value
chain that is again dominated by the same U.S. and Japanese players.
However, Europe hosts a large population of developers' studios; often
the creators of major market successes. A large share of these highly cre-
ative small development studios can be found in the UK, but also in France,
Germany and the Nordic countries (De Prato et al. 2010). However, with
the exception of the UK, most of the large developers are still found in
the U.S. (and Canada) and Japan, and many of them are controlled by
(or dependent upon) large international publishing companies (Miles and
Green 2008). Finally, the European industry also supplies a quite large
share of the world's middleware needs. Middleware solutions also help EU
companies to compensate for the fragmentation of the EU markets.
In the next section, we will look at a number of trends, which poten-
tially could disrupt the current value networks and present opportunities
(or threats) for the European video game industry.
DISRUPTIVE TRENDS
The current game industry value network is challenged by a number of
potentially disruptive trends. First, it needs to be recognized that the video
game market is still a growth market and we can expect growth to con-
tinue, at least in the medium-term future. For instance, according to one