Vertical Integration, Exclusivity, and Game Sales Performance in the US Video Game Industry

Abstract

This article empirically investigates the relation between vertical integration and game performance in the US video game industry. For this purpose, we use a data set on video game monthly sales from 2000 to 2007. We complement these data with information on game developers and the timing of all mergers and acquisitions during that period allowing us to separate vertically integrated games from independent games exclusive to a platform. First, we show that integrated games are associated with higher sales and higher prices than independent games. Second, we find suggestive evidence that most of the difference in performance is due to better release strategies and selection in game quality. We show that post-release marketing strategies do not seem to add value to vertically integrated games. Finally, we also find that exclusivity is associated with lower demand and higher prices due to lower inherent quality and better release strategies, respectively. (JEL L22, L24, L25, L86).

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