Research offers survival guide for game developers amidst industry shake-ups

As the gaming world buzzes with the recent unveiling of the Nintendo Switch 2 and anticipated releases of the PlayStation 5 Pro and Xbox Series X refresh, a timely study sheds light on how game developers can navigate these industry upheavals.

New research in the INFORMS journal Strategy Science examines how developers adapt to “innovation shocks”—unexpected technological advancements that redefine the gaming landscape.

The study, “Strategic Responses to Innovation Shocks: Evidence from the Video Game Industry,” looks at how game developers responded to the launch of Sony’s PlayStation 2 in 2000, a moment that sent shockwaves through the industry and forced companies to rethink their approach to game development. The findings reveal that developers with experience working across multiple platforms were best positioned to pivot quickly, using their broad skill sets to adjust to new hardware demands.

“The companies that fared the best weren’t necessarily the ones that rushed to adopt new technology first,” said lead author Nicholas Argyres of Washington University in St. Louis. “Instead, they were the ones that had built up the right mix of flexibility and expertise over time, allowing them to adapt efficiently without overextending themselves.”

Companies that specialized in PC game development had an additional advantage. Because their programming expertise was more adaptable across platforms, they were able to transition more smoothly into the evolving console space.

Meanwhile, not all developers had the same incentives to expand across platforms. Games tied to major movie franchises, sports leagues or other licensed properties were most likely to be released on multiple consoles from the start. With high licensing costs and a short window to capitalize on public interest, these titles benefited from reaching the widest possible audience right away.

“Studios working with high-profile licenses, like major Hollywood films or sports leagues, couldn’t afford to wait,” said co-author Lyda Bigelow of the University of Utah. “They had to release on multiple platforms immediately to maximize revenue before consumer interest faded. That’s a strategy we still see in the industry today.”

In contrast, smaller studios specializing in niche, cult-favorite games often stayed loyal to a single console for longer, prioritizing the depth of their fanbase over immediate mass-market reach.

The research also highlights how the PlayStation 2 era marked a turning point in gaming, ushering in the rise of cross-platform releases. Before this innovation shock, many games were exclusive to a single console, forcing developers to take a gamble on which platform would dominate. But as new hardware and development tools emerged, studios increasingly opted to launch their games across multiple platforms at the same time, reducing their risks and maximizing profits.

“The shift toward simultaneous multiplatform releases was a game-changer,” said co-author Hakan Ozalp, University of Amsterdam. “It wasn’t just about making more money—it was about reducing risk. Developers who stuck to a single console ran the risk of backing the wrong horse in a rapidly changing market.”

“Innovation shocks like new console releases present both challenges and opportunities,” added Argyres. “Our study highlights that strategic adaptability, rather than immediate adoption of new technology, is crucial for developers aiming to succeed in a rapidly evolving market.”

As the gaming industry stands on the cusp of another transformation with the next wave of console releases, this research offers valuable lessons for developers, publishers and industry leaders looking to stay ahead in an increasingly competitive landscape.