I think the video game industry is even larger than the film industry now.
It's what people want. On the flip side, remember that commercial poking fun at the commies who gave no economic value to what people wanted: Eveningvear... very nice.
It drives purchases of high-end computer systems. Most people who have any use for a computer at all already have one that is quite good enough for surfing the net, writing letters, balancing the checkbook, etc.
It drives it in many ways:
First, the purchase of the game itself.
Second, often people need to upgrade their video cards to play the latest and greatest 3d games. That's anywhere from $150 - $500.
Also, computer ram / cpu upgrades can be necessary. Some people just buy whole new systems.
In the categories above, the higher end the purchase, the larger the profit margin for the manufacturers.
Additionally, there are other smaller impacts, on things like monitor sales (people want a bigger / better monitor), OS upgrades (getting rid of win ME to run on win XP), or internet connections (ditching dialup and getting broadband).
A breakthrough video game is just like any other major innovation - in sparks demand and purchases of related items.
Hey Arch,
Just FYI: For the past three years the Video game business has made more money than Hollyweird.(Boxoffice+DVD sales) MS will spend 20 to 25 million marketing Halo 2 this year... and that's only one game. I have alot of peers without a job right now. This sure breath a little life back into the PC market and the industry as a whole.
Take Care