Network Effect in Games: Winner doesn’t take it all
Why doesn’t the network effect appear to work in the games industry?
At an individual game level it does, of course. The network effect means that games like Call of Duty become incrementally more popular to the detriment of other, possibly superior games, because of the halo (no joke intended) effect caused by the sheer volume of players.
So far this does not appear to be the case with developers and game development technology. At GDC last week the show was full of platforms, formats, tools and SDKs courting the games developer. The choice for developers is very wide indeed: PC, web, mobile, console, social and so on. Then there are the platforms: iOS, Android, Xbox, Playstation, and the rest. Then pick a programming language and technology stack. The multiple options available lead to an incredible number of possible end states for a games developer.
Other industries have seen the potentially crushing impact of the network effect, step forward Nokia, BlackBerry et al. Why not games?
The network effect would see developers choosing certain technologies and products, and those technologies and products becoming increasingly popular to the detriment of the others – leading to the eventual demise of weaker players.
Why hasn’t happened in games development? Is it simply a matter of time? Perhaps, but there aren’t really any early signs of it happening. Brand loyalty to a specific console and their associated exclusive franchises is one possible reason, but this is becoming less and less common. Is it because the market is driven by consumer, not developer, generated demand? Again, possibly. But then, nobody knew they wanted to spend hours linking three candies together until a developer told them they did.
Perhaps the answer is that gaming is too wide a category to be subject to network effects? But we see this play out in other large tech categories:, in the smartphone market you basically have two choices today, irrespective of whether you’re ‘hardcore’ or a ‘casual’ smartphone user.
Games platform providers, hardware manufacturers, tool and SDK providers rejoice and keep running your developer programs — you may be one of the few industries immune from the network effect, for now.