The Entertainment Software Association (ESA) has released a new economic impact report today for the U.S. video game industry that says gaming directly generated economic output of $40.9 billion in 2019 and provided direct employment to 143,045 people.
Total income generated across the game economy totals $35.28 billion, including $17.37 billion in direct compensation to video game industry workers (equivalent to $121,459 in compensation per worker). The figures the game industry indirectly supports are even more impressive at $90.3 billion, and it makes sense that number should only rise in 2020, given the growth of gaming as a lifesaver during the pandemic. According to the ESA, this report includes as much of the game industry as it could measure — triple-A, double-A, indie, mobile, and so on.
The ESA is the game industry’s lobbying group. Some people might view any economic impact report as propaganda, but as propaganda goes, this is quality stuff. It was produced by the economic analysis firm Teconomy Partners. This kind of data helped me patch together a picture of the world’s game economy in 2017, as back then the ESA created its own map of the U.S. broken down by the number of game industry jobs in each state. The game industry is creating high-paying jobs, driving advanced technology development, supporting entrepreneurial efforts, overtaking other entertainment industries, and spreading the wealth to many different states — both red and blue. While the game industry has become a cultural force as strong as movies and television, it has also become an economic force that fuels a strong ecosystem in the U.S.
“This is the most comprehensive report we’ve ever done,” ESA CEO Stanley Pierre-Louis said in an interview with GamesBeat. “We’re a digital industry increasingly going right from physical to digital. And because our audiences expect the content to be delivered in a variety of ways, it has forced our industry over the years to modernize. And that modernization was put at the forefront at the beginning of the COVID-19 crisis. We were one of the earliest industries to transition to work from home. We were able to pivot in ways that other industries weren’t able to do. The consoles came out. That’s part of what has really driven the enormous growth of the industry.”
All told, there are 11,400 individual businesses related to gaming across all states. (A report in 2017 counted far few businesses, focused mostly around game studios). That number includes a lot of stores, but it suggests the game companies — which directly employ 143,045 people and indirectly support a total of 428,646 jobs in the U.S. — have become a huge economic engine for the country. The industry estimates it contributed $59.76 billion in value-added growth paid $12.6 billion in taxes in 2019. That broke down to $8.2 billion in federal taxes and $4.4 billion for state and local governments. That’s important information to get across at a time when U.S. President-elect Joseph Biden is about to take office.
“The economic impact ends up being really important to policymakers, when we think about where they engage our industry and where they prioritize it, and we think it’s important for them to really understand what this entertainment sector has been doing within entertainment but also for the economy writ large,” Pierre-Louis said. “So we’re excited about having the ability to put together a report that will help fuel the industry’s important role in our economy and important public policy discussions. We’re trying to get that message out because it helps increase the stature of our industry with a really important audience, which is policymakers. Sharing that with our industry is equally important because they should know and our audiences should know that we’re bringing a very positive impact to the national culture and to the national economy.”
Video games are also driving spillover positive effects for other U.S. industries, fueling innovation in computation, graphics rendering, interface design and haptics, mobile systems design, networking, and software engineering.
“Others may not have kept up with the impact that we’ve had on culture, on society, and now on the economy,” Pierre-Louis said. “One of our jobs is to make sure that they understand what our contributions are. Sometimes it means showcasing what games look like so that they understand that the new engines are making things visually amazing. A lot of people don’t know that when they’re watching Mandalorian, they’re looking at a game engine being rendered, as opposed to something being filmed in a traditional way. And that’s mind-blowing to those who aren’t in the space. And so a lot of what we have to do is inform and educate policymakers on the growth of our industry, not only economically, but also technologically, and in terms of the narratives that we carry, and about who we are as an industry and who our fans are.”
Similarly, innovations pioneered within the video game industry are finding applications in other areas of the economy, in areas as diverse as medical imaging, medical robotics navigation, military training and simulation, and new educational and training applications using game-based learning. Games are also changing entertainment and culture, spurring the development of valuable movie franchises, physical toys, and even expanding sports leagues and spectator events. In effect, the video game industry forms a highly influential core that is at the heart of an expanding ecosystem of advanced industries and applications benefiting the United States, Pierre-Louis said. Games are driving tech forward via smartphones, virtual reality, augmented reality, and artificial intelligence.
To interpret what this means, the ESA wants government regulators and the public to know that games create jobs and help the U.S. become more competitive. So the politicians should create conditions that help the industry grow, not hinder it. Games are a unique crossover of culture, entertainment, and technology and fuel the visual arts, storytelling, creativity, and entertainment culture, the ESA said. About 75% of people in the U.S. had at least one gamer in their household in 2019, and 70% of U.S. children play games. The average age of gamers is 35 to 44 years old, and 41% of gamers are women. All told, 214 million people in the U.S. play games.
The ESA said that during the pandemic the industry has been a source of entertainment, stress-relief, and escape for people social-distancing in their homes, as well as an avenue for much-needed social interaction through the networks of multiplayer games. It has also been a refuge for investors, as demand for video games and hardware provided one of the few positive pathways for financial growth in the crisis. There are even games that help people understand the pandemic, driving enhanced comprehension of epidemiology, the spread of infectious diseases, and strategies to combat them.
The ESA said game storylines are increasingly tackling pressing social issues and introducing players to different perspectives and outlooks. They allow participants to put themselves in different shoes to explore simulated worlds and varied situations. Similar to entertainment mediums like literature, film, and other arts, video games have emerged as both an entertaining escape and a serious tool for exploring our world and the human experience.
The ESA expects that games will continue to drive technology forward. As an example, an expansion of gaming will fuel the adoption of 5G broadband networks. With digital distribution and remote working, game companies have been able to weather the pandemic and grow. There are major geographic clusters of video game companies in California, Washington, Texas, Florida, and New York. But the industry is represented in urban and rural areas across the entire country.
Market researchers at IBISWorld estimate the U.S. video game industry (comprising activities in the development, production, and sales of video game consoles, accessories, physical games and software, and online games and software) grew 14.4% between 2014 and 2019.
The ESA’s 2017 report on the game industry was created by Stephen E. Siwek. The report quantified the basic parameters of the industry and its economic footprint across the U.S. and individual states, providing details on business and establishment numbers, employment volumes, revenues, wages, and other factors. The report used economic multiplier assumptions to develop an estimate of indirect impacts generated by the direct output and employment of the industry.
But for this report, the ESA has sought a somewhat expanded exploration of the impacts of the industry using indirect analysis — where the revenues of suppliers and the spending by employees and supplier employees is counted — to identify the full employment, personal income, value-added output, and tax revenues associated with the video game industry value chain and the expenditures of the industry’s suppliers and employees. It not only measured the publicly traded game companies, but startups and venture capital investments, the effects of video games on technology innovation, and spillover growth in sectors such as education and training. It also measured crossover impacts of games into other media, such as motion pictures and publishing.
Unfortunately, a well-defined video game industry is not separately captured within the federal government’s North American Industrial Classification System (NAICS) as a distinct industry. Video game software statistics cross multiple categories, and the same goes for game hardware. So the ESA has to make its own estimates. Companies such as Microsoft, Sony, Apple, and Nvidia complicate the picture because they have big operations in other industries.
The estimate of 11,427 video game industry establishments means there are about 12.5 jobs per establishment. Those establishments include development studios, publishers, distribution, retail, and arcade entertainment places. The software and video game developer and publishing components of the industry account for 61,230 jobs (42.8% of video game industry employment), and hardware accounts for 27,283 jobs (19.1% of industry employment). The platforms for distributing and retailing games include a combined 44,483 jobs (31.1% of employment). The average size of software companies is 36.8 employees, while the average size of hardware companies is 454.7 employees. Retail has just 6.5 jobs per store, and the industry’s impact ranges from jobs at Best Buy and GameStop stores to publishers like Electronic Arts.
The ESA noted other data sources, such as the accounting firm PwC, which estimates U.S. market sales at $25.62 billion for 2019. Market researcher Newzoo said U.S. game revenues in 2019 were $36.9 billion when counting PC, browser, console, tablet, and smartphone games.
“This large industry really is very personal to people. So we think of it as our own universe,” Pierre-Louis said. “But when we look at the broader impact we have on being able to not only create jobs but really family-sustaining jobs at a time when it’s been tough, it’s humbling.”
“We have jobs in every state in the country, which is fantastic,” Pierre-Louis said. “We have an economic impact in every state in the country. And we try to identify what that is.”
“This report is geared toward letting thought leaders know about the impact that we have,” Pierre-Louis said. “We talk about the fact that more than 214 million Americans [are] playing video games. A year ago, that number was 165 million Americans. We’re seeing a lot more people playing games.”
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