Each New Video Game Company Adds Half-a-Million Dollars to the Local State Economy

January 3, 2020

According to the Entertainment Software Association (ESA), the video game industry employs 220,000 people across all 50 states and the District of Columbia. The average salary in the game industry is $97,000 a year. In 2018, the game industry grew to a high of $43.4 billion dollars in revenue.

The ESA publishes data on the number of video game companies in each state, along with how many college programs are dedicated to the video game craft. For a smaller subset of 31 states, it also captures how much the gaming industry contributes to the local state economy and what the average salary is for employed persons in the local video game companies.

This analysis tries to untangle how much one additional video game company contributes to the local economy on average. The one caveat for the data is that the amount that video games contribute to the local economy published by the ESA is for the year 2015. In my analysis, I assume the rest of the data is current as of 2018. I use the 2015 figure for contributions to the local economy as a lower bound as the gaming industry is on a growth trajectory.

First, a few summary statistics. The top 5 states in terms of number of video game companies is led by California, which has 889 video game companies–more than a 300% increase over the next state, Texas, which has 266 companies. Washington state and New York follow closely with 242 and 228 companies, respectively. Rounding out the top 5 is Massachusetts with 121 companies.

In terms of number of college programs dedicated to the video game craft, California again tops the list with 77 college programs, which is a 175% increase over the next highest state, Texas, which boasts 44 college programs. Texas is followed by Pennsylvania, Florida, and New York with 30, 28, and 26 college programs, respectively.

The question of how much does an average video game company contribute to the local state economy is captured by a simple regression of contributions to the local state economy on number of companies. I also control for size of the state with population statistics for each state. A regression predicts how much one video game company impacts the local economy. Also, controlling for the size of the state is important because a larger state may be able to support more video game companies and larger video game companies, which impacts contribution to the local state economy. In other words, I want to be careful to capture the impact of the video game company on the local economy and not the impact of the size of the state.

The outcome of the regression is, regardless of the size of the state, one additional video game company contributes an average of $472,201 to the local state economy. This statistic is very significant, which means that this contribution is unlikely to be due to chance. Keep in mind that the figures for contributions to the local state economy are only published for 31 states.

The takeaway from this analysis is that the video game industry is growing at a fast pace, with a 17% growth rate between 2017 and 2018. Furthermore, the industry is providing high-tech, high-paying jobs. And the addition of one more video game company contributes almost half-a-million dollars to the local state economy.

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