2000-2004
The rise of the
modern gaming industry

If the 90s was a time of great technological jumps, then the start of the new millennium was a time of drastic changes in the business side. It was a period of consolidation that reshaped the gaming industry.

Previously, the successful fifth generation of consoles, led by the PlayStation and the Nintendo 64, had sold millions and greatly expanded the gaming audience. Now the PlayStation 2 was spearheading the sixth console generation and breaking all sales records, eventually becoming the best-selling console of all time. But the development costs for fancy 3D graphics still kept rising at an alarming pace – making games was a highly profitable, but also extremely risky business.

While home computers were more popular than ever before, their games were outshined by the outstanding success of the PS2. A few PC companies like Maxis, Valve and Blizzard struck gold with hits such as The Sims, Counter-Strike and Diablo II, but the top-selling list was entirely dominated by consoles and handhelds.

Former PC giants like Sierra, Brøderbund and Origin had already been sold in the late 90s, and the harsh climate of the early 00s saw the demise of Interplay, SSI, Westwood Studios, DreamForge, Infogrames, MicroProse, Acclaim and the 3DO Company, among many others.

EA and Activision acquired many of these, further consolidating their position as rulers of the US market, while others had no choice but to close their doors and declare bankruptcy. Many analysts weaved grim prophecies about the “Death of PC Gaming” at the time and, while PC games didn't die, they definitely suffered in the 2000s.

In Japan, many companies would merge in order to handle the everincreasing development costs: Square would merge with Enix, Bandai with Namco, Koei with Tecmo and SEGA with Sammy Corporation. On the hardware side as well things were getting tighter, with 3dfx being acquired by Nvidia and ATI by AMD, leaving the graphics cards market as the duopoly between AMD and Nvidia that stands to this day.

One of the biggest changes happened in the console market: SEGA left the fight with heavy losses after the consecutive failures of the Saturn and the Dreamcast. But a new challenger, Microsoft, rose in its place.

The first successful US console since the Crash of 1983, the Xbox would have a major impact in the industry. Culturally and geographically close to Western developers, the Xbox was the gateway for companies eager to try their hand in the blooming console market. To ease them in, the Xbox (a contraction of “DirectX Box”) was designed from the start so that veteran PC developers could easily understand and work with it.

Signalling the start of a new era, the early 2000s was a time of change, and companies either adapted or died.