Gaming industry

Once a niche market and considered by some as a curiosity in the mid-1970s , the computer and video game industry took in about USD$7.1 billion in the US in 2005 (esa annual report). However, contrary to popular belief, the video game industry is not "bigger than Hollywood"; while video game sales have exceeded the film industry's annual box office, Hollywood generated $31 billion in total 1999 revenue.





History
William Higinbotham, a scientist, created "Tennis For Two" in 1958. It was never commercially released because it wasn't an actual video game. It was meant to be an electrical experiment.
By the late 1970s, the computer game industry formed from a hobby culture, when personal computers just began to become widely available. The industry grew along with the advancement of computing technology, and often drove that advancement. Today, the video game industry is a juggernaut of development; profit still drives technological advancement which is then used by other industry sectors. Though maturing, the video game industry is still very volatile, with third-party video game developers quickly cropping up and, just as quickly, going out of business.
In Asian countries, notably Japan and Hong Kong, the video game medium did not reach major popularity on a mass scale until the arrival of the manga series Game Center Arashi in the late 70s. The series helped the public understand the possibility of the product and the entertainment value at the cultural level.

Economics
The video game industry is currently facing financial strains[citation needed] as it attempts to fairly compensate its talent, while continuing to turn a profit. The result is that the game developer—the traditional source of new games—is essentially dying out or is being incorporated into large publishers.[citation needed] The game industry is currently experiencing a phase of consolidation and vertical integration as a reaction to spiraling costs.[citation needed]This climate has also given birth to vibrant indie game developers comprising tiny companies trying to use the internet rather than traditional retail channels to reach an audience.
Early on, development costs were minimal, and video games could be quite profitable. Games developed by a single programmer, or by a small team of programmers and artists, could sell hundreds of thousands of copies each. Many of these games only took a few months to create, so developers could release several titles each year. Thus, publishers could often be generous with benefits, such as royalties on the games sold. Many early game publishers started from this economic climate, such as Origin Systems, Sierra Entertainment, Activision and Electronic Arts.
As computing and graphics power increased, so too did the size of development teams, as larger staffs were needed to address the ever increasing graphical and programming complexities. Now budgets can easily reach millions of dollars, even if middleware and pre-built game engines are used. Most professional games require one to three years to develop, further increasing the strain on budgets.
Some developers are turning to alternative production and distribution methods, such as online distribution, to reduce costs.