So at the moment I'm studying MBA (Master of Business Administration) on Middlesex University London and I wouldn't be myself if I'd chose something different from gaming related topic to focus on. I picked CD Projekt - this is the biggest Polish Game Developer - Its studio is behind The Witcher series and they own GOG digital game distribution platform (similar to better known Steam). While most of my paperwork is rather boring to post the Business Strategy and the PESTEL analysis is something that I personally find interesting. So I hope that some of you interested in gaming industry will find it useful. I also encourage you to share with me your opinion and hints, as this may become handy in my future course study.
If you are interested in what actually PESTEL analysis is please visit this wikipedia page - it's covering the topic pretty well - https://en.wikipedia.org/wiki/PEST_analysis
POLITICS - CD Projekt as the company based in Poland can be facing threats of future regional instability. At the moment none of the political issues is influencing the gaming industry directly. Politicians are not really interested in this field and if I can share my private opinion - the less attention they are are putting to in this market, the better. However I can see that Poland at the moment is in the tough place on the geopolitical area and this may influence the country’s economy as a whole.
ECONOMICS - The videogame industry is growing all the time with games becoming more widely popular type of spending people’s free time - not only kids but also the adults. Growing market gives the opportunity to the company to grow itself. However the market is very uncertain - trends are changing very fast and publishing the game at the right time may be crucial for the company’s existence. Companies are starting and closing their studios all the time and with such high competition it’s hard to keep the business on the stable level.
On the other hand for big company like CD Projekt it may be easier in terms of macro-economic factors - as I mentioned in my work for Unit 2, this organisation owns a Digital Game Distribution Service called GOG. This particular service has about 8%-10% of the global market share, making it second biggest platform of it’s type on the world - that means that by trading in many currencies and in over 100 countries CD Project has big advantage over smaller competitors.
SOCIAL - As mentioned above the gaming industry is growing. And this is because players are getting older - not to be confused - percentage of adults reaching for their first video game is rather low. It’s the players who have been grown on the games that are getting older and with that they can afford more building up the foundations of gaming industry. Thanks to them gaming is no longer a narrow niche - it’s now one of the biggest global markets and one of the most popular type of spending free time. The age of average gamer according to Venture Beat is now 31 (source - https://venturebeat.com/2014/04/29/gaming-advocacy-group-the-average-gamer-is-31-and-most-play-on-a-console/). Now, because gaming become such a big thing it’s facing social expectations like higher diversity representation in the games. For example CD Projekt’s RED game called The Witcher III: Wild Hunt was attacked for not showing enough people of colour in this production. Developers tried to defend saying that the game is based on the series of books where are many different fantasy races, but because the books are based on slavic mythology there is no representation of people of colour. (source - https://www.forbes.com/sites/erikkain/2015/06/04/should-the-witcher-3-feature-people-of-color) On the other hand such a demand can sometimes create a product where black females fight in the uniform of nazi german forces like in the latest Call of Duty WWII from Activision (https://www.forbes.com/sites/erikkain/2017/06/21/this-is-why-there-are-black-nazis-and-no-swastikas-in-call-of-duty-world-war-2-multiplayer) which many criticize for lack of historical authenticity. Diversity in games is now a serious topic and developers need to create their universes wisely to not offend certain groups of interest.
TECHNOLOGY - In Economy I briefly mentioned that thanks to the technological advancement CD Project has huge advantage in the global spectrum. This is because the organisation owns one of the biggest digital game distribution services in the world. Focusing on the development of that platform they are likely to grow over time when other companies without such a popular tool need to work with CD Projekt to distribute their products.
The new opportunity on the market is the VR (Virtual Reality), becoming more and more popular. For many years industry was struggling to create convincing Virtual Reality experience but for the first time technology become advanced and cheap enough to be possible to start creating virtual reality games on the mass scale. This trend from my perspective as a player and game journalist is absolutely natural step forward and now new technology companies like Sony or HTC are racing to become a leader on the new market. For CD Projekt this is an opportunity to create new range of Virtual Reality games and/or create and patent technologies used in the process of creating such a games.
Biggest threat right now for the whole industry are the online Marketplaces for game Keys. To explain the basics - in the digital distribution you are usually buying a key (set of numbers and letters), which you later use to claim a game and download it. Online Marketplaces for game keys were supposed to help players to exchange the unwanted keys for money or other keys, but they were exploited by cheaters and hackers for a fast profit. Mostly by generating fake credit cards, buying games and selling them to the people on the online marketplace before distributor find out that the card is fake. Creators of the marketplaces are trying to fight with it, but in the end this is one of the biggest technological threats at the moment because distributors and developers are these loosing money in the end. For CD Projekt these are the main sources of income. (source - https://www.polygon.com/2015/2/9/8006693/the-truth-behind-those-mysteriously-cheap-gray-market-game-codes)
ENVIRONMENT - Again Digital Distribution. Other than standard distribution is not using potentially toxic materials to create CD’s, it’s not cutting trees to make game boxes etc. This is environmental advantage of digital game distribution which becomes main part of the whole company distribution. All the player needs is a computer or a console. However - games over time are becoming more tech advanced and require stronger components every few years. New consoles are presented about every 4-5 years to keep up with the fast growing consumers expectations. Personal computers can be considered to be a little bit more environment friendly because usually you don’t need to buy a new one to play newest games - in most situations it’s enough to change some components for newer and older can always be sold separately, which gives them longer lifespan. Still - CD Projekt while trying to pursue consumers expectations with better games can be considered partially responsible for the environment.
LEGAL - As the gaming industry is a relatively a new thing it’s still forming its shape. Because of that many new rules are being created like e.g. game restrictions. For strategy creators legal environment may be very uncertain, fluid and changing. The advantage of the organisations like CD Project is that that they are not creating physical product and in a case of critical legal issues in one country they can simply move to another, easier than for example a furniture factory.
Please share your thoughts with me!