Researchers note that value of video games has become especially influenced by “quality” driver over its 30-year history. Customers tend to buy the highest quality games, and therefore, buy less other products of a similar genre. Because of this process, game publishers strive to ensure that their software is best in class and spend enormous budgets on development (De Prato, 2010). Historically, video game industry saw rapid evolution both in their visual components and gameplay complexity. The development was happening in parallel with a power increase of gaming consoles. This condition created an environment where big studios concentrated on exploiting ultimate technologies and processing capabilities for creation of AAA-type games (analogue of blockbusters of the movie industry). Production of these games required high-skilled staff, long development cycles, and enormous budgets (De Prato, 2010). In parallel with creating additional value for the customer, this tendency also generates the “sunk costs” isolating mechanism that defends firm's market positions against smaller development studios.

Increasing value through the “breadth of line” driver by developers is also substantial in the video game industry. Game content is highly heterogeneous. Marchand (2013) indicates that game's genre influences its success rate, though mentions the absence of sufficient knowledge about its impact on sales compared to the movie industry (e.g., Eliashberg et al., 2006; Hadida, 2009). Cox (2014) finds correlation between several genres, mature age ratings, production of sequels and video game revenues.

Publishing and distribution

A video game publisher has two possible options: to develop their products internally or to acquire them from independent game developers. Publisher companies are responsible for licensing the rights for intellectual property, marketing execution, and in many cases the distribution of their product (De Prato, 2010). Distribution of the games is often integrated into publishing, being a very low-margin business. It consists of marketing the games, packaging and storage functions, transportation services (Williams, 2002).

Video game publishing is hugely influenced by “network externalities” value driver through network effect and two-sided characteristic of the market. In a two-sided market, platform providers like Sony or Microsoft achieve their revenues from selling consoles to customers and from selling licenses to third-party publishers. A console with a variety of publishers launching their games is more attractive for consumers and vice versa (Gretz, 2010). In an indirect network effect, the number of software titles influences the value of a console for consumer. The latter, on the other hand, has a proportionate effect on the consoles as they become more attractive for publishers (Clements & Ohashi, 2005; Marchand, 2013). Clements and Ohashi (2005) assume that a penetration pricing strategy should be applied by hardware platform providers. Consoles should be sold at low margin prices to build a strong installment base that will secure the console's long-term success and attract more third-party publishers in the future.

The other value driver during publishing and distribution stages is “delivery”, which relates to publishing games within a certain period of time. Choosing the right release window is significantly influenced by console generation lifecycles that last for several years. Current and previous generation consoles usually don't have backward compatibility which makes the release strategy quite difficult at the interface of console generations. (Marchand, 2013). Choosing a right release window within a calendar year is also crucial. According to academic studies, half of the industry's sales usually occur during the Christmas season which leads to high level of competition between major game titles during the period from October to December (De Prato, 2010).

Creating positive public opinion about the new game prior to its release is very important during publishing and distribution stages of the value chain. Additional value for this purpose can be achieved through “brand/reputation” driver. Major publishers are using established brand properties and the ability to launch large variety of titles using strong network relationships with potential licensees (Williams, 2002). For instance, all the top 10 bestselling video games in 2017 were sequels to well-known franchises (Kain, 2018). As we already mentioned, sequels are often used as brand extensions in the movie industry, therefore, their performance may share similar characteristics for games. However, other success factors of branding, such as star power that is widely used in the motion picture industry, are absent from video games business activities (Marchand, 2013).

To improve their products' reputation and protect high investments in production and marketing, publishers are trying to create excitement about a new game before the release takes place. Such strategy creates revenues that are mostly driven by publisher-revealed materials (prior to the launch consumers don't have an opportunity to share their opinions via word-of-mouth). Therefore, game success is less influenced by its quality (Marchand, 2013).

“Risk assumption” value driver is another factor that influences publishing and distribution stages. Like other entertainment products, games are considered as experience goods. It means that consumers can understand whether they like the game or not only after they bought it and played. Taking into consideration that game price tags are substantially higher than movie tickets bills, it implies serious risks for customers and affects their purchase decision (Marchand, 2013). However, these risks can be avoided through distributing downloadable demo versions of the game or broadcasting live gameplay via online user networks (e.g., PlayStation Network or Xbox Live) (Bashore, 2015).

Protecting resources and capabilities of the firm during the publishing stage of the value chain is a crucial issue for the video game industry. Defensive market position can be created through “property rights” isolating mechanism which is necessary on this level to prevent piracy of the final product (De Prato, 2010). Game publishers usually embody specialized copyright protection systems that can be easily implemented in the production process but difficult to hack. Digital Rights Management strategy is negatively received in music and movie industries but frequently adopted by game producers and publishers (Vernik, Purohit, & Desai, 2011). In addition, digital distribution complicates the costs of hacking the game with all its online features (Marchand, 2013).

Additional way to create a defensive market position during this stage can be obtained through the “dedicated asset” isolating mechanism. For instance, some publishers that do not have their own distribution networks can create partnerships with rivals for distributing their products cooperatively. Bigger publishers, that possess distribution capacities, do not always generate the desirable economies of scale with only their own titles, therefore, they need to cooperate with other firms to distribute larger quantities of products (Williams, 2002). This opportunity can be used by smaller publishers to exploit such capacities as an external resource for distribution of their games.

Retail

Traditional retailers in the video game industry are electronic chains, multimedia shops, specialist shops and ordinary distribution stores. However, with the raising availability of high-speed internet, video games become products that are potentially transmissible online (De Prato, 2010). Based on this assumption, Jockel et al. (2008) investigate the impact of online distribution on physical retail segment of video games and conclude that publishers gradually disintermediate traditional actors via transition of their products to digital media stores. Such stores are established by console manufacturers (PlayStation Store by Sony; Xbox Live Marketplace by Microsoft; Nintendo eShop by Nintendo) or by leading publishers (e.g., Origin by Electronic Arts).

Additional value on this stage can be reached by implementing “technology” driver via various digital media stores online functions. The quantity of game titles grows rapidly from year to year. It creates conditions where automated recommender systems become crucial sources of information for customers to avoid risks of buying the wrong game. Such functions might also become additional sources of marketing activities to promote new game titles (Marchand, 2013). Another important game technology that substitutes traditional retail is cloud technology (Michaud, 2012). Instead of using the hardware power of a console, it allows to play games through an online web server that runs all the computer processing. With the help of cloud technology, any mediocre device that has access to Internet can play games of even highest system requirements. This technology has an ability to completely change the current value chain system and shift it towards a subscription-based model when all the games from publisher's library are available online for a monthly fee.

Consumption

Consumption stage is especially important for generating value in the video game industry. As we mentioned, according to Normann & Ramirez (1993), firms can reconfigure roles and relationships among different value chain actors (such as customers) and mobilize them in the value creation process. Based on this approach, video game users are no longer viewed as unilateral consumers of the final product, but as prosumers who can create additional value for themselves. They are backwardly integrated into the value chain and significantly influence such value-added activities as game content creation (Jockel et al., 2006).

“Service” value driver becomes significantly important during this stage. With high accessibility of downloadable updates, developers can widely use the opportunity to patch and change any feature of the game when needed after it was initially purchased by consumer. Moreover, firms are interested in understanding game expectations of the end user and integrating him in the co-development process which helps to troubleshoot gaming issues and prevent loss of gamer engagement. For this purpose, prosumers are provided with special tools for in-game content creation and sharing this content with other players; they are also prompted to share their impressions and experience on the game. As a result, the product is continuously and automatically updated by game developers according to the desires of prosumers (Jockel et al., 2006). Such service expertise can compensate for poor customer experience with a product early in its lifecycle, as bugs are identified and fixed (Walker, 2009). The most successful products in the industry are constantly improved to provide better experience and constant stream of new content. According to Stenros and Sotamaa (2009), “business-wise the objective behind the ?ow of upgrades and add-ons is not only to create some additional revenue but perhaps even more importantly to create a long-term service relationship with the customer” (p. 4).

The large part of value created through “quality” driver is often devised on the consumption stage of the value chain. Social media gives opportunity to disseminate information about game's quality during the consumption stage and share it online with global groups of friends, followers and subscribers. This feature becomes an integral element of buzz-marketing approach for game publishers (Marchand, 2013). Cox (2014) also notes the correlation between professional game reviews and quality perception of games.

To defend firm's market position, “transition costs” isolating mechanism is implemented during the consumption stage. It can be achieved through such concept as DLC (or downloadable content). DLCs represent additional game content which enhances the video game's features or prolongs its gaming experience. Such content is responsible for driving players' continuing interest in the game and can be free, paid or a mix of both. It keeps player interest alive and makes them come back for the new features, therefore, creating a sense of continuing support for the game and reducing the drop out (Gonzalez-Pinero, 2017). At the same time, platform providers seek additional non-gaming ways to increase uniqueness and raise customer switching costs. Some of them have started providing access to movies, television and music: Amazon, Netflix and Spotify apps for Xbox / PlayStation (Marchand, 2013). They also establish online social networks such as the Xbox LIVE or the PlayStation Network which allow gamers to communicate with each other and reach game-related achievements.

Support activities

In conjunction with drivers that generate value on different levels of the value chain, several support activities of the video game industry can be mentioned. As we know, according to Porter (1985), support activities reinforce the primary ones by providing purchased inputs, technology, human resources and various firmwide functions along the entire chain. Several drivers associated with video game publishers / console manufacturers infrastructure are implemented on this level.

“Vertical integration”, considered by Walker (2009) as the cost driver of competitive advantage, is widely present in activities of major publishers and console manufacturers. On the development level of the value chain vertical integration can happen in three possible ways. First-party developers are internal subsidiaries of publishing companies. They constitute an example of basic upstream vertical integration within the industry. Second-party developers are the ones that sign contract with a specific publisher to develop games for this publisher exclusively (vertical integration by contract model). Finally, third-party developers are independent firms that develop games on their own. However, their business activities still involve the costly licensing procedure with publishers and console providers. The manufacturing process of physical copies is a part of the licensing deal and one of the main vertical integration factors during publishing and distribution stages. The major three console manufacturers (Sony, Microsoft and Nintendo) maintain strict control over production of game disc copies through a small number of duplication facilities (Williams, 2002). As we already mentioned, the three leading console manufacturers are also the top game software publishers (Marchand, 2013). In addition, distribution activities, such as packaging, transport, storage and shipping functions, are often incorporated into publisher's infrastructure (Williams, 2002). All the above-mentioned factors illustrate the extent of vertical integration business activities of leading publishers and console manufacturers.

“Organizational practices” represent another cost driver of competitive advantage in the video games industry. According to Walker (2009), organization practices are the firm's specific process innovations that develop a range of efficiencies in its activities. Such practices can be clearly seen in a tendency of disintermediating traditional retail actors of the video game industry (Jockel et al., 2008). Traditionally games were distributed on cartridges and physical disks that included box packages, printed artwork and manuals. However, modern industry is rapidly moving towards digital distribution model. This shift offers a variety of advantages for game publishers. By avoiding physical retail actors and compact disk production costs they increase their profit margins. Moreover, publishers and producers achieve more direct relationships with their customers. For example, such services as PlayStation Network not only provide services for digital distribution and social networking between players, but also collect data about customer usage patterns and preferences. These practices yield important information for upcoming offers of publisher's future games (Marchand, 2013).

The value of games is often increased on a firmwide level through implementation of “complements” driver. Complements can be carried out from other entertainment industries (e.g., the movie industry) and generate related content. Such practice provides insight for games (e.g., reworking film plot for a movie-based video game), or vice versa (production of a movie that is based on a specific game title) (Marchand, 2013). Some products even offer hybrid experiences, like Star Wars as a constellation of games, movies, and other merchandise. Such industry links provide additional value as brand extensions that enhance cross-product consumer experience. Extension opportunities sometimes appear even apart from the entertainment segment. Angry Birds franchise acquired substantial part of its profits from licensing intellectual property to merchandise various toys and other products besides digital games (Marchand, 2013).

Finally, video game industry is considered an international market. Modern top-level AAA games need to be published, distributed and consumed worldwide to break even their enormous budgets. Therefore, the “geography” value driver that extends company's scope to multiple regions is extremely important. According to Newzoo (2017) global games market report, the total size of digital games market (consoles, PC and mobile) in 2017 was $108,9 billion with North America region having 24,8% market share, Western Europe - 17 %, Asia Pacific - 47%, etc.

1.6 Comparison of global movies and video game industries' competitive strategies on different stages of the value chain

Both global movie and video game industries are related to the entertainment segment in research studies. According to Vogel (2010), “Anything that stimulates, encourages, or otherwise generates a condition of pleasurable diversion could be called entertainment” (p. xix). It encompasses activities that people enjoy and look forward to doing, hearing or seeing. Classification of entertainment industries segments provides the division on entertainment software (e.g. films, recordings, and video games), and of hardware - the physical equipment or platforms on which the software is executed, like cinemas for the movie industry or game consoles for video games.

Figure 8. Creative value chain defined by UNESCO Institute of statistics. Reprinted from “Creative industries value chain: the value chain logic in supply chain relationships”, by E. Madudova, 2017, Marketing and Branding Research, 4, p. 230)

The other approach is to consider both movies and video games as creative industries in which creativity is an input and intellectual property is an output product (Potts & Cunningham, 2010). Based on analysis of creative companies, the UNESCO Institute of Statistics (2009) introduced a generic culture creative-based value chain which consists of five main stages of value creation. They include: creation - the originating and authoring of ideas and content; production - making and production of cultural works; dissemination - distribution of mass-produced cultural products to consumers and exhibitors; exhibition and reception - provision of live experiences to audiences through granting or selling access to consume time-based cultural activities; consumption/participation - activities of consuming cultural products and taking part in cultural activities (Figure 8).

We can see that the value chains of global movie and video game industries have meaningful similarities as well as both can be associated with the value chain of creative industries. There is no exhibition segment in the video game industry, however, its cycle of development is similar to the movies production and distribution model can be compared to home video segment (Tomaselli, Di Serio, & de Oliveira, 2008).

To analyze and compare competitive strategies of the global movie and video game industries on different stages of the value chain we used the value chain models proposed by Eliashberg et al. (2006) for the movie industry, and by Williams (2002) for the video game industry.

Eliashberg et al. (2006) suggest the value chain model which puts emphasis on major studios business activities. It follows the studio concept by merging development, financing, and production into a unified stage called “production” (due to vertical integration, typical to major studios) followed by “distribution” (which also incorporates publishing activities) and “exhibition” stages.

As in Eliashberg et al. (2006), Williams (2002) organizes the business activities of the video game industry into a linear sequence and describes four main stages related to the video games software lifecycle: development, publishing, distribution and retail. Williams (2002) admits a significant level of vertical integration on certain levels of the value chain and marks the tendency of many distributors to become vertically integrated into publishers. Therefore, we decided to combine these two stages for the purpose of our analysis.

In addition, according to the value constellation model of Normann and Ramirez (1993), we took in account the fact that value can be co-created by customers who reconfigure the roles and relationships within the chain. According to this approach, consumption level can be used by firms to mobilize customers for additional value creation.

In Table 4 we allocated the factors affecting competitive strategies in the global movie and video game industries that we were able to define in previous paragraphs by analyzing the existing research. The factors are designated in accordance with major movie studios and leading video game publishers / platform providers business activities. One group represents the value and cost drivers from Porter's (1985) approach, based on classification by Walker (2009). The other group is formed by isolating mechanisms (Besanko, 2007; Rumelt, 1984) of the resource-based view and classified according to Walker's (2009) list. Given that all the activities along the value chain are divided by Porter (1985) into primary ones (involved in physical creation of the product, its sales and transfer to the buyer) and support activities that uphold the entire chain, we grouped some of the factors that are related to various firmwide functions into the “support activities” group.

Table 4

Competitive drivers in global movie and video game industries

The existing research confirms that global movie and video games industries competitive drivers have certain similarities. Publishers are considered to have more power in both industries then developers and producers. They have closer access to consumer, obtain sources of necessary capital, and, therefore, have more strength in negotiation process. They also tend to reduce risks of failure by spreading the portfolio of game/movie titles to a wide range of consumer audiences. The developers/producers receive less margin and have less autonomy in content-creation decisions (Tomaselli et al., 2008).

During the publishing stage, branding of sequels to popular franchises is an essential part of communication strategies in both industries. In addition, successful games can be adapted for the movie industry, and vice versa and generate related content (Marchand, 2013). Advantages of such strategies include economies of scale for cross-product advertising and higher revenues due to increased public attention. Despite high licensing costs, such strategy substantially reduces the risks that development costs will not be recouped (OECD, 2005).

In terms of distribution issues, industries have certain similarities in strategic release scheduling. However, certain peculiarities occur. While movie studios release their products throughout the year to avoid competition with other pictures, researchers state that games are often disproportionally released between October and December (Marchand, 2016). Certain studies also point out that game producers can learn peculiar practices from movie studios that have broader expertise in pre-release buzz marketing (Marchand, 2013).

The common factor during the consumption stage is that both movies and video games are experience goods. It means that consumers can understand whether they like a product or not only after they have watched or played it. This quality implies high risks for consumers and influences their purchase decision (Eliashberg et al., 2006; Marchand 2013, 2016).

Marchand (2016) in his analysis of factors that influence video game sales states that most of them are similar to those allocated for the movie industry by Hadida (2009), Hennig-Thurau, Marchand, & Hiller (2012). Product variables (such as genre, age rating, number of prequels, advertising spending), and third-party quality information sources (consumers' and experts' evaluation) have similar control over product performance.

Some researchers, such as Gonzalez-Pinero (2017), suppose that future progress may open the possibility of multi-platform experience in which the current borders between a movie and a game will be erased. The product creation will continue in new formats or as a fusion of existing formats we already know.

Major differences between industries occur during publishing and distribution stages because of the two-sided characteristics of the video games market. While an increased variety of software games boosts the value of hardware for customers, this process has returning effect on the consoles by raising their attraction for game publishers (Clements & Ohashi, 2005; Marchand, 2013). The indirect network effect influences competitive strategies of main actors in such examples as penetration pricing strategy for hardware, which helps to create a wide install base for the console, or single/multiplatform release choice strategies for independent publishers.

Branding issues during the publishing stage also differ between the two industries. Although sequels serve as brand extensions both in movies and video games (Marchand, 2013; Moul & Shougan, 2005), other success factors such as star power or director's reputation have no specific equivalents in the game industry.

Additionally, major differences between the two industries can be seen on the level of exhibition / retail and consumption stages. The “Paramount decrees” also known as the Hollywood antitrust case of 1948 prohibited the vertical integration of the movie industry after the ?ve major studios-distributors were found guilty of vertical and horizontal price ?xing. Certain business activities (such as block-booking and admissions price ?xing) were declared illegal and the majors were forced to stop their theater operations (Wasko, 2005). From that moment, the business model of major movie studios was focused mostly on production and distribution stages.

On contrary, the video game industry major publishers and console manufacturers (such as Sony, Microsoft and Nintendo) gradually gained direct control over selling their goods to the public by establishing Internet-based digital media stores (PlayStation Store, Xbox Live Marketplace, Nintendo eShop) and, therefore, disintermediating traditional retail actors like ordinary distribution stores (Jockel et al., 2008).

Additional control is achieved by game publishers during the consumption stage, after the initial purchase has been made. Modern video games can be viewed not so much as a one-time product, like movies, but as long-term service relationships with the customer (Stenros & Sotamaa, 2009). Constant flow of changes, patches and upgrades adjusted according to customer's wishes can raise the value of the final product and generate more revenues from additional downloadable content (DLC) for the game.

According to the allocation of major competitive drivers along value chains of examined industries, we can suppose that both major movie studios and video game leading publishers / console manufacturers implement strategic designs with strong emphasis on differentiation in their primary business activities, at the same time carrying out cost emphasis drivers such as vertical integration through various firmwide functions. This notion supports the idea of the dimensional approach (Campbell-Hunt, 2000; Karnani, 1984; Miller & Dess, 1993) or so-called hybrid strategies (Salavou, 2015), where Porter's (1985) generic strategies are viewed as dimensions that can be emphasized separately inside the chosen strategic design. Emphasis on one of them does not exclude the implementation of the other. Such hybrid strategies provide certain benefits to the firm because they are more difficult to imitate and better able to respond to changing market environment.

2 Empyrical findings: case study research

2.1 Research methodology and cases description

Based on previous findings and intricacy of the analyzed problem, our research is organized according to qualitative approach. Qualitative research design makes it evident that every theory only partially covers the researched phenomenon, while rich process descriptions provide opportunity to rely not on a single theoretical lens but to use various models and consistently compare wide range of insights provided by different theories (Doz, 2011).

The comparative case study research method makes it possible to identify differences and similarities between the compared cases and adopt a qualitative approach for testing theoretical frameworks on a phenomenon being explored (Collinson & Pettigrew, 2009). The case study is carried out between the two groups of cases in accordance with the compared industries:

Group 1. The global movie industry analysis is based on cases of so-called “Majors” or “the Big Six”. They include companies located in Hollywood, United States, that produce, finance and distribute their own films (Eliashberg et al., 2006). The majors comprise Paramount Pictures, Sony Pictures Entertainment, Universal Pictures, Walt Disney Pictures, Warner Bros. Pictures and 20th Century Fox.

Group 2. The global video game industry analysis is based on cases of major platform providers and software publishers. They include the three leading console manufacturers (Sony Interactive Entertainment, Microsoft, and Nintendo) who are also the top software publishers (Marchand & Hennig-Thurau, 2013). In addition, we include the top third-party publishers in our studies. These companies compete with console manufacturers in terms of revenue size and often release their products for two or three consoles simultaneously (such as Activision Blizzard, Electronic Arts, Namco Bandai Entertainment, Take Two Interactive Software, Square Enix Holdings, Ubisoft Entertainment, Warner Bros. Interactive Entertainment, and Konami Holdings).

While choosing the cases, we took in account that both industries are considered as oligopolistic markets (Eliashberg et al., 2006; Marchand & Hennig Thurau, 2013). Therefore, analyzing the industry leaders would provide more holistic description of the investigated phenomena. In addition, the above-mentioned companies are vertically integrated along the value chain. It provides us with an opportunity to compare their business activities along all the stages of value creation, from initial product development to the consumption stage.

For comparing competitive strategies on different stages of the value chain between the case groups we used several types of sources. The first group contains data about individual films / video games revenues and is represented by Box Office Mojo and VG Chartz websites. Both sources collect data in a systematic way weekly, monthly and yearly. They are extensively used as a source of information among researchers and provide details about movies / video games release dates, genres, age ratings, movie revenues, and number of video games sold.

The second source type was used to understand the performance of movies and video games according to their ratings and reviews. For the purpose of rating evaluation, we used Metacritic website (www.metacritic.com), which aggregates professional and user-made reviews from various mass media sources about entertainment products (including both movies and video games). For each individual game or movie, the website provides an average score on a scale from 1 to 100. The score is calculated according to the collected number of reviews and the importance of each critic.

The third major group of sources allows to retrieve theatrical and video game market statistics from the reports of related organizations, such as the Motion Picture Association of America and Newzoo (one of the leading providers of market intelligence on game industry). This type of sources is used for analyzing the behavior of key players in both industries globally and by individual regions.

Finally, to obtain real life examples and collect insights of industry practitioners, we used various news sources on topic of our research. Material for the analytical part of our study was collected both from general news sources (such as BBC News, Business Insider, Forbes, Fortune, New York Times, The Economist), specialized websites on movies (Variety, The Verge) and on video games (Gameindustry.biz, IGN, Kotaku).

2.2 Practical implementation of global movie and video game industries' competitive strategies on different stages of the value chain

Production / Development

Competitive strategies that increase customer value can be applied by major movie studios and video game leading publishers through various drivers.

For instance, the “technology” driver allows to achieve advantage in differentiation through heavy funding of production and development processes. In the movie industry computer generated imagery (CGI) is widely used to create animation and special effects that entertain both adults and children. For some films that use special effects, the process almost doubles the cost of a movie (Morris, 2012). The performance of movies released in 2017 by major studios shows that 37 out of 79 movies had production budgets equal to or higher than $50 million and 19 movies among them hade budgets equal to or higher than $100 million. For the Walt Disney company proportions are even more significant - 4 movies out of 8 had costs starting from $160 to $230 million (Appendix 1). Among the other 4 movies, whose budgets were unavailable at Box Office Mojo, it is assumed by the analysts that “Star Wars: the Last Jedi” had an approximate budget of $200 million (Reimer, 2018); “Coco” and “Cars 3” could have a price tag between $175 and $200 million (McNary, 2017). Therefore, all the movies distributed by Disney's distribution subsidiary Buena Vista, except the small-budget documentary “Born in China” were heavily blockbuster driven. High budgets are often used to obtain sufficient technologies for creating movies in more visual appealing and spectacular genres, such as action, adventure, sci-fi, animation and fantasy.

The overall “quality” driver is another factor that increases the final value of a movie. Like the advancements in technologies, it is significantly driven by high budgets invested in the production process. This tendency can also be viewed from the perspective of “sunk costs” isolating mechanism that puts additional barriers for smaller studios entering the multi-million blockbuster market. According to Box Office Mojo 2017 statistics, the majors' market share covered 80,4 % of the industry in 2017, leaving only 18,6 % for other studios. Among the majors, share of revenue captured by blockbusters is very significant. Correlation coefficient between box office gross worldwide for the examined movies and their budgets is equal to 0,76. Therefore, the invested amount of money and customers' willingness-to-pay are closely interrelated (Appendix 1).

As it was stated by Tomaselli et al. (2008), the video game industry cycle of development is quite similar to the movies production. It is for this reason that the video game industry development stage is driven by comparable factors of “technology”, “quality” and “sunk costs”.

The “technology” value driver of the video game development stage is super-demanding and labor-intensive. According to words of Steve Theodore, former director of the Bungie game studio, it includes such processes as modelling, animation and texturing, required to make high-resolution models and turning them into game assets. The other highly sophisticated mechanisms include virtual physics interactions, artificial light scattering and numerous transitions between animations that keep the game smooth and responsive. The total labor involved in creating and animating one game character can reach up to one hundred days counting all the people involved, including dozens of modelers, texture artists, riggers, technical animators, shader artists, motion capture actors and more (Theodore, 2016). Graphics in top-level games are created by teams of around 500 people (The Economist explains, 2014).

Such labor-intensive technological processes show that the industry is substantially “quality” driven and seeks to increase additional value for the customer. For this purpose, major publishers are striving to invest high budgets into game development. It should be noted, however, that the exact information about game budgets is almost never released publicly. Generally, companies merge all the development costs in investor reports without paying significant attention to respective product budgets. We have only fragmented information from the video game industry practitioners about their costs of development. For example, President of Sony's Worldwide Studios Shuhei Yoshida told that AAA (top level) games for PlayStation 4 have a price range slightly higher than $20 to $50 million. According to Ubisoft CEO Yves Guillemot, the regular production budget of a console video game is around $60 million. Take-Two Interactive in its 2012 investors report admitted that the cost of development for their game titles ranges from $10 to $60 million, while top titles exceed these volumes. However, the largest and most detailed games can cost even more: “Star Wars: The Old Republic” (2011) was reported to have $150 - $200 million cost, while “Grand Theft Auto V” (2013) had $265 million budget (The Economist, 2014). Obsidian's executive producer Adam Brennecke told in one of the interviews: “based on the average salary for a developer plus overhead, it costs about $10,000 per person at the studio” to produce a game (Schreier, 2017a). Using these numbers, Jason Schreier conducted that for a massive publisher who is trying to reach maximum graphical quality, game development teams can include 400 and more specialists with the development cycle of three years. This would imply $144 million production budget (Schreier, 2017b). The above-mentioned numbers are at the same level as blockbuster-oriented Hollywood movies.

In addition, according to above-mentioned game developer Steve Theodore, big budgets can be a critical way to achieve an important barrier to entry and serve as a “sunk costs” isolating mechanism for defining firm's competitive strategy. Only a handful of companies can raise several hundred million budgets for development and marketing. Even less of them can manage the efforts of a several hundred-person teams in multiple countries simultaneously (Theodore, 2017). Such practice implies to have fewer competitors and correspondingly better opportunities for the firm's products.

Finally, both video game publishers' and major movie studios' competitive strategies are influenced by the “breadth of line” value driver and diversification of firm's portfolio through different genres, age ratings and franchises.

Among the examined 79 movies released by the movie majors in 2017, we were able to distinguish 28 individual genres (Box Office Mojo, n.d.). The most popular of them are the following: animation (11 movies), action/adventure (9 movies), comedy (9 movies), action (5 movies), drama (5 movies), action comedy (4 movies); comedy/drama (4 movies); horror (4 movies). The age rating is also broadly ranged with 17 movies rated as “PG” (parental guidance suggested), 35 “PG-13” rated movies (inappropriate for children under 13) and 25 movies rated as “R” (contains material unsuitable for spectators under 17) according to the Motion Pictures Association of America (MPAA) rating system. The only underrepresented age group is “PG” rated movies (suitable for all audiences) with only 2 motion pictures under such label.

Similar to the movie industry, the “breadth of line” can also be a significant value driver for major publishers of video games. Among the top 100 most sold game titles throughout 2017, eleven genres can be distinguished (VGChartz, n.d.). The most popular of them are action (23 games), shooter (21 game), role-playing (20 games), sports (11 games) and racing (7 games). The age rating is also diversified according to Entertainment Software Rating Board (ERSB) system: 40 games were rated as “E” (suitable for everyone), 22 games were “T” rated (suitable for teenagers and older), and 38 games received the “M” rating (suitable for 17 years and older) (Appendix 2). Genre and age diversification by major studios and game publishers can be explained by the desire to satisfy a wide range of preferences of various groups and ages of gamers / moviegoers.

Publishing and Distribution

On this stage of the value chain actors are responsible for licensing the rights of intellectual property, marketing execution, and various distribution decisions (e.g. when, where and in what sequence to release the product).

Some of the key factors for creating competitive advantage on this stage are marketing activities oriented towards branding and creating various brand extensions. Both movie and video game industry publishers are dominated by the idea of licensing the rights and exploiting the successful intellectual properties. Therefore, “brand/reputation” value driver is fundamental during publishing and distribution stages.

In the movie industry, “brand/reputation” competitive advantage can often be obtained by means of exploiting a well-established franchise or attracting famous actors and directors. For the purpose of our research, we studied world grosses of 79 movies distributed by major studios in 2017 and arranged them on a principle, whether a movie was built on a commonly known franchise (a sequel or a remake of a famous movie, a plot based on a famous book, a comic book universe) or not (Appendix 1). According to the obtained data, an average box office revenue of a franchise-based motion picture in 2017 was $432 million. Meanwhile, non-franchise motion pictures received only $159 million as an average. The former ones were also prevalent in their quantities among the major movie companies (42 out of 79 examined movies were based on a franchise). However, the average rate of return for a sequel was lower among the examined movies - 330 % for a franchise-based motion picture against 570 % for a non-franchise. It can be explained by performance of some low-budget movies which suddenly became box-office blockbusters, such as the horror film “Get Out” that made over $250 million of a $4.5 million budget. The movie even received an Oscar academy award for the best original screenplay (Robinson, 2018). Despite such examples, major studios show reluctance to invest in non-franchise products with an average of $52 million budget for a non-franchise motion picture against $96 million for a sequel or other intellectual property-based product (Appendix 1). Motion picture industry practitioners are guided by the rule of thumb that franchise property should reduce the risk of failure. In addition, franchise-based products more frequently give opportunity to command extremely high profits. According to the examined data, 14 out of 17 movies that received more than $500 million in the box office were franchise-based, and all the blockbusters with revenues higher than $1 billion were sequels. Therefore, licensing the franchise is a prerequisite for successful branding in the movie industry.

The other method of increasing value during the distribution stage can be achieved by using the “delivery” driver. Delivery choices can have two possible options: to release simultaneously worldwide or to arrange a sequential release from country to country. If publisher expects a movie to be extensively successful (e.g. it is launching a blockbuster sequel, or a remake based on a well-known property), simultaneous release could be the best solution, because it will protect studio from losses due to piracy. For example, the top-three box office franchises of 2017, “Star Wars: the Last Jedi”, “Beauty and the Beast” (the Walt Disney Company) and “The Fate of the Furious” (Universal), were released at the same weekend almost in every market of their global distribution (Box Office Mojo, n.d.). However, creating a positive reputation through critic evaluations and word-of-mouth advertising can become especially important for a brand-new movie concept. For this kind of movies, sequential release, when information about a film gradually spreads from one market to another and creates positive buzz, can bring higher box office grosses. For instance, Oscar awarded horror movie “Get Out” had a sequential release strategy. On 24th of February it was introduced in the United States, then on 15-17th of March - in the United Kingdom, Trinidad & Tobago, Slovenia, Singapore, the Philippines, Iceland, Greece, Estonia and Cyprus. On the 24th of March - in 2 additional countries, on 29-30th of March - in 4 additional countries, on 6-7th of April in 6 additional countries and so on (Box Office Mojo, n.d.). Sequential release can contribute to a success of high quality movies that lack enough consumer awareness. It creates an environment where active moviegoers start spreading positive word-of-mouth about the movie's attributes through various information channels. Then, after a film attracted sufficient level of awareness, a studio continues its release in additional countries.

Like in the movie industry, increase of value through “brand/reputation” and “delivery” drivers is a common practice for video games. Publishing franchise-based titles is extremely popular. Among the examined pool of games, 83 out of 100 titles were sequels. In addition, the performance of sequels showed higher indicators with 1 957 127 copies sold as an average for a sequel against 1 251 615 for an average non-sequel game (Appendix 2). As for delivery strategies, the video game industry is not limited by constraints of exhibition capacities like distribution of movies. Due to widely spread digital distribution techniques, games are almost always released simultaneously worldwide. We were able to identify only some minor exceptions of non-synchronous releases for the Japanese market (VGChartz, n.d.). Furthermore, our observations did not support Marchand's (2016) idea that video games are disproportionally released between October and December. In 2017 the release windows of PlayStation 4 video games were equally spread throughout the year. Among the 179 observed games (Metacritic, n.d.), releases were distributed as following: January (12 titles), February (12 titles), March (19 titles), April (16 titles), May (14 titles), June (13 titles), July (12 titles), August (22 titles), September (16 titles), October (19 titles), November (15 titles), December (9 titles). The allocation of game releases along the entire year can be explained by the desire to avoid competition with potential rivals.

Additional issue that should be taken in account while choosing a release date for game titles are consoles' lifecycles, which often last for 5 to 7 years. In most of the cases, the next console generation released by platform manufacturer lacks backward compatibility for previously released games. This creates conditions when third-party publishers tend to wait until the new console achieves high installment base and only after that they release titles for a new platform. Console generations release dates are presented in Table 5.

Table 5

Game consoles' generations release dates.

Note: adapted from “The traditional console lifecycle is dying”, by J. Thang, 2016, July 27, Gamespot. Retrieved from https://www.gamespot.com/articles/the-traditional-console-life-cycle-is-dying/1100-6442192/