The impact of user-generated content authorization on demand in the game industry

The expansion of information exchanges via social media among consumers has dramatically changed the consumer purchasing process. We empirically analyze how user-generated content (UGC) authorization impacts the demand for Japanese video games. There are three important evolutionary points to consider. First, we focus on the gaming industry, under-researched yet seeing increased engagement with UGC, where gameplay authorization surged from 0.20 in 2017 to 0.55 in 2021. Second, we use a structural demand model that explicitly incorporates whether there is authorization or non-authorization of gameplay. Third, we estimate the heterogeneity of goods using BLP with a two-step nested logit model. As a result, the publishing and official authorization of gameplay guidelines are shown to have a significant positive impact on the sales of video game software, with a change in the demand structure for game software in 2021. Distinctively, genre classification (upper nest) and gameplay authorization status (lower nest) were significant, with the former outweighing the latter. This indicates a consumer’s propensity to select a game genre prior to seeking gameplay information, with gameplay authorization status subsequently impacting interest levels and final game choice. © The Author(s), under exclusive licence to Springer Nature Switzerland AG 2023.