Software Notebook: State is a big player in gaming

AS HOME TO Nintendo of America, Microsoft and a slew of independent video-game makers, the Seattle area has long seemed like a hot spot for the industry. Now there are numbers to back that up.

California's piece of the video-game world is still considerably larger, according to a report released last week by the Entertainment Software Association trade group. But the ESA study put Washington at No. 2 -- leading the rest of the states with nearly 9,300 people in jobs related to video-game development and publishing.

Another recent report, commissioned by the enterpriseSeattle economic development group, came up with a larger number: 15,000 jobs related to the video-game industry in the Seattle region.

Either way, one reason for the state's prominent industry position is the presence of big players such as Nintendo and Microsoft, two of the Big 3 console makers. But around those giants has grown a sizable community of smaller companies that make and publish all sorts of video games.

The ESA study included nearly 60 "entertainment software locations" in the state, including stand-alone companies and satellite offices of larger video-game developers. The enterpriseSeattle study found 150 companies involved in the video-game industry locally.

A reality check: Even at 15,000 jobs, video-game employment in Washington would be less than half the number in California, as reported in the ESA study. And economic contributions of the video-game industry amount to less than 1 percent of Washington's gross domestic product, based on ESA data.

In other words, in terms of regional employment, this isn't aerospace. Seattle doesn't appear at risk of a bust if the video-game industry tanks.

The number of jobs is "certainly significant. It's not peanuts," said regional economist Dick Conway, co-publisher of the Puget Sound Economic Forecaster. "On the other hand, it's not something yet that would drive the economy in the same way that aerospace has or the software industry in general has."

A key question for economic development officials is whether these emerging industry sectors have significant potential for growth, bringing new companies and jobs.

In that regard, there's no shortage of competition among various U.S. regions.

One notable aspect of the industry is the distribution of video-game development and publishing in different regions, said Steve Siwek, principal at Economists Inc. of Washington, D.C., who conducted the ESA study.

"What you do observe in the video-game business is that there are a lot more centers of publishing and developing around the country and, indeed, around the world," he said. "You don't seem to have quite the concentration as you do ... in the movie business, for example, which is heavily concentrated in California and New York state."

According to the ESA data, about 60 percent of the direct employees of video-game companies in Washington state are involved in game development, as opposed to game publishing. The split is closer to even in California, and more skewed toward game development in Texas, the No. 3 state on the ESA list.

But the bigger statistic to watch is the industry growth rate. The ESA says the video-game industry's contribution to the Washington economy grew 14 percent, to $497 million, in 2006, adjusted for inflation. That was less than the 17 percent growth for the industry as a whole, but still well above the 4 percent growth in the broader economy.