Game On!

As Mendoza developed as a hub for the study of the business of video gaming, faculty created a virtual research lab to foster collaboration.

It was just before January 2021 when Nicholas Berente, professor of IT, Analytics, and Operations (ITAO), realized how many of his fellow Mendoza College of Business professors were studying the video gaming industry.

Daewon Sun, professor of ITAO, was looking at game monetization, such as virtual currency and player rewards. Xinxue (Shawn) Qu, assistant professor of ITAO, researched market competition in the video game industry, including purchasing decisions and the impact of upgrades. Xuying Zhao, associate professor of ITAO, published on the topic of selling premium content. Berente studied the impact of autonomous tools, in-game analytics and artificial intelligence technologies on design outcomes.

Gaming — to the shock of no one who hasn't been under a rock for the past 20 years — is huge. In business terms, the video game industry is expected to be worth $321 billion by 2026, according to PwC's 2022-26 Global Entertainment and Media Outlook. It's now the largest category in the entertainment industry, surpassing both film and music. With an industry that is still considered young, constantly growing and with major technological implications on the horizon for all business (i.e. metaverse), a logical question arises: Shouldn't every business school be taking a deeper look at the business of video games?

This realization of the mammoth potential of the video gaming industry as an economic force and of the incredible pool of gaming-related research talent already existing at Mendoza led to the creation of the Gaming Analytics & Business Research (GAMA) Lab. The GAMA Lab is a virtual collective of business researchers and industry members who are working together to study the business of gaming. From in-game economics and gaming development to the larger market, researchers are collaborating to develop a better understanding of several different facets that have far-reaching implications for the industry, AI and the economy.

"Gaming is like a petri dish for exploring AI. It's an incredibly fast-moving business that employs new business models. There are so many reasons we want to study it," said Berente. "And the beauty is that anything to do with video games is digital, so you are capturing digital traces of everything that people do."

Capturing digital traces means the opportunity to analyze data — lots and lots of data. When players navigate game environments, they interact with each other and with AI agents called "non-player characters," and purchase all sorts of products, creating data every step of the way. With this data, researchers can explore everything from virtual group dynamics, to human-AI interaction, to purchasing decisions.

Data also comes from game development. Game developers are innovating with digital technologies, AI tools and virtual environments to generate cutting-edge content in a highly competitive industry. Game developers are continually experimenting with new ways to drive engagement, strengthen customer relationships, expand their platforms and explore new business models. The fast-paced innovation of the gaming industry has potential lessons for all sorts of product development organizations.

Research from GAMA

Studying the business of gaming is a unique niche for a business school — one that has the potential to attract faculty looking to build a robust research program in the gaming analytics space and work collaboratively with others in the same area. "Everyone is doing analytics. So for Mendoza, studying aspects of the gaming industry is one of our differentiators," said Berente.

Currently, the GAMA Lab is focusing its research on the gaming industry in three areas: in-game economics, game development and AI, and gaming market economics.

GAMA Lab member Shawn Qu looks at elements outside of the video game environment, such as marketing analytics for games. In 2022, he published "Predicting Time to Upgrade under Successive Product Generations: A Survival Model with Exponential-Decay Baseline Function" in the journal of Production and Operations Management. The study analyzed more than 60,000 players as they played across multiple generations of the same game.

The goal was to explain and predict consumers' upgrade behaviors when it comes to purchasing new generations of video games. Qu and his co-authors developed an Expo-Decay model, which can better predict the sales of a game's next generation. (The source code for the model is available upon request from the authors.)

Qu, an expert in technology adoption, data management and predictive analytics, said companies can benefit from this research to better predict sales since the model can incorporate features regarding user behavior and any factors that influence their purchasing decisions.

As for GAMA Lab member Daewon Sun, his interest in gaming stemmed from his family. "One day, my son asked me, ‘Dad, can you give me some money so that I can buy virtual currency?'" Sun, like most parents would, said no. But after observing his son, Sun realized that if he doesn't pay that extra cost, his son has to play longer, motivating him to put the game before other aspects of his life, like sleep and school work. Additionally, Sun's wife began playing a game on her phone. However, Sun noticed that once she conquered the game, she suddenly lost all interest and stopped playing.

These experiences piqued Sun's interest in investigating virtual currencies as a new business model as well as the impact of gaming on social welfare. In 2019, he and fellow co-authors published "Selling Virtual Currency in Digital Games: Implications for Gameplay and Social Welfare" in Information Systems Research.

The study found that selling virtual currency could lead to a win-win-win situation for the game company, players and society. It removes the conflict of interest between the company's goal of longer playing time to maximize ad revenue from in-game ads while potentially reducing excessive gaming.

More recently, Sun started to explore the concept of gamification or the impact of gaming for educational purposes. "Everyone is exposed to video games and enjoys playing them, right?" said Sun. "So if we can somehow develop gaming for education or identify unique aspects of gaming that allow us to improve how we teach something, maybe we can use that behavior to improve how we work in the classroom."

Future of GAMA

In addition to conducting research, the GAMA Lab wants to encourage conversations not only with other business academics, but also with members from the gaming industry to shed light on trends and emerging challenges.

This led to the Gaming Research in Management Workshop in March 2022, which was the GAMA Lab's first step to make connections outside of the University of Notre Dame. Hosted at Mendoza, the aim was to initiate collaborations between the College and Tel Aviv University's Coller School of Management via funding from the Schlindwein Family Tel Aviv University - Notre Dame Research Collaboration Grant.

Twenty-five researchers and industry members attended. The event laid the groundwork for establishing a community of researchers studying multiple aspects of video games while also building connections with leaders in the gaming industry.

"Our lab and researchers from Tel Aviv presented their work, and then people from gaming companies like Electronic Arts, ESL Gaming and Tilting Point held a panel to react to our findings. That gave us some ideas about future directions for research," said Berente.

Today, the GAMA Lab has extended its reach outside of the College with collaborators at Tel Aviv University, Arizona State University, University of Colorado Boulder and the University of Cologne. Additionally, gaming companies such as Ubisoft, Epic Games and Electronic Arts are working with the lab.

"That first workshop went so well that we've actually proposed to host a professional development workshop at the Academy of Management annual meeting in Boston," said Berente. "Led by us, it will be a long-form session where people will send in their gaming analytics and business research."

One direction for research that has come out of conversations with different gaming companies is combating negative behaviors or toxicity in multiplayer gaming. Toxicity in video gaming has become a large issue for the industry as a whole. Currently, video game culture tends to thrive on negative behaviors including harassment, hate speech, trolling and spamming.

Video game developers don't want to be seen as contributing to or supporting this kind of behavior, which means hiring is affected by the type of environment companies are supporting in the games they produce and sell. In response, some have tried to enforce what they call "positive play," encouraging more inclusive and ethical gaming environments.

The problem? Players stop playing, and that kills a company's bottom line.

"There are all sorts of ethical issues around gaming: addiction, inclusivity, energy consumption, video game violence," said Berente. "It's an interesting, cross-disciplinary business problem and it fits what we do at Notre Dame and Mendoza to consider ethical business practice."

The GAMA Lab has made connections with industry members who are particularly interested in making video games less toxic and creating a more ethical in-game environment.

But the lab also has its eyes on the metaverse, which, according to Berente, has the potential to be as disruptive to the business landscape as Amazon was to department stores. It could mean a broad shift in not only gaming, but how all consumers interact with technology, and that's something GAMA wants to be at the forefront of.

In the next couple of years, the lab is also looking to include students. The hope is that undergraduates and graduate students could support the lab's research efforts while faculty could help students to develop their own research skills. Berente and other lab members also have been a part of interviewing the next cohort of Mendoza's Ph.D. students, and he hopes that having the GAMA Lab will encourage students over the course of their program to consider researching the business of gaming.

"We would like to get a little research machine of students going, where undergraduates and graduate students work together because students help bring all of us together," said Berente. "I'd like to get our own data sets, grow our own identity and publish more research, definitely. But I also want the GAMA Lab to be a part of a broader movement that addresses the business needs of the gaming industry."

Illustration by Federico Gastaldi.