With all the hype about how the loathesome Grand Theft Auto IV is going to set a new sales record April 29th for entertainment product (perhaps $400 mil, way beyond the previous record-holder Halo 3), I look to my video game guru Keith Boesky, whose company is responsible for selling the most intellectual property and developers into the game business, to answer the oft-asked question: are games bigger than movies?
"At this year's Game Developers Conference, a Microsoft executive proclaimed not only is the game business bigger than the movie business, but it is bigger than music. This statement was made last month, but we are about to see this repeated a whole lot more. Some stories were triggered by the annual NPD report on industry growth, others will be triggered by the launch of Grand Theft Auto IV. The articles are complete and utter bullshit on so many levels.
"We can look from the standpoint of mild deception. Game revenues are in fact larger, but they are only larger because we charge 6 times as much per consumer. The elephant standing in the room next to this statement is the actual market is significantly smaller. Especially when you consider NPD's number includes hardware sales which are between $250 and $600 per box. This would be the same as counting DVD players in home video sales - which, incidentally, without DVD players are larger than the game market.
"We can also look from the standpoint of gross mischaracterization of fact. Most of the articles are qualified by the 'box office' limitation. Games sales are bigger than box office receipts. As my law professors used to say, 'true but trivial.' How many of those articles explain box office receipts are 8%, or less, of total revenue arising from an investment in a film property. The box office, at best, is nothing more than an indicator of the downstream revenue. A film makes money in the theater, then it makes more money in the pay per view window, then on DVDs, then on cable and on down the line. This is why movie studios refer to the launch of a film as the launch of an 'equity.' The same can be said of the music industry.
"If we walk into an internet cafe and see a game being played, we hear the game being played. If we ride in an elevator and hear a song being played, the owner of the publishing rights hears "cha-ching." Playing on the radio, "cha-ching." Used in a television commercial "cha-ching." Concert tour with merchandise "cha-ching." It would certainly be interesting if Microsoft and Sony had to pay the publisher a fee every time a massively multiplayer online (MMO) game session is initiated, but it just doesn't work like that. Outside of MMO's, once a game is sold, there are no downstream revenue opportunities. Sure a market is forming, but it is not the market mentioned in these articles. Lots of money is made in the game business, but the way it is made has little or no correlation to the industries to which it is most often compared.
"The game industry is a business which stands on its own and has a lot to be proud of. Brilliant creative, advanced technology, a loyal and often rabid fan base and market growth. The industry is influencing culture. Major advertisers are using money formerly allocated to other industries in our industry. We sustain franchises better than any other industry - our most anticipated games of the year are GTA IV, GT 5, Metal Gear Solid 4 and Final Fantasy XIV -- but we still launch multi-million unit franchises like Bioshock and Mass Effect.
"Sure the film business draws from games, but if highlighting games-based films are validations, let's look at the film industries' concern over the release of GTA IV against Iron Man. Our consumers are willing to pay more for our product than any other form of entertainment and choose games over others.
"Finally, and most significantly, while every other form of media is facing decline and trying to reinvent itself, we are continuing a consistent and very impressive growth rate which started in 1988. If you choose to compare industries, when looking at the chart above this post, don't look at the end point look at the trend leading up to it."
No doubt they are. And it’s only going to become more so as the games develop into movies of their own. Plus, it does help that some games’ plots are better written than a lot of scripts these days. Maybe the best writers went to the game industry?
Comment by Michael Dobrofsky — April 16, 2008 @ 2:59 am
Wait wait wait… Nikki gets a bee up her keister about every slasher flick that comes down the pike, but when it comes to GTA all she can opine is ‘hey, this thing is huge and video games are big time!’? I love GTA games, but they are a thousand times more depraved that the worst bit of “torture porn”. I don’t even know if that’s a double standard. More like a no-standard.
Comment by kevin — April 16, 2008 @ 8:02 am
The fact that games are more profitable than features pretty well known, at least from the POV of the geeks I run with. Gaming companies may charge more than the box office, but there’s infinitely more hours of entertainment so basically there’s more bang for your buck. Ever played a game, Nikki? They’re so much fun. However, comparing games to movies doesn’t quite compute.
Comment by T. Barnes — April 16, 2008 @ 8:05 am
Right now, there is a sea change going on in games where you have companies realizing greater and greater profits and deciding that they’re not going to spend $10 million on a game to make $12 million back anymore, which is what the game business model has been for years - leading to many more big failures as people crowd onto those important, pre-Christmas dates. Unlike movies or music, where someone’ll download a new album or go to a new movie almost every other week (in a certain age demographic), games are more expensive and somebody might take - say - an entire month before they get sick of “Call of Duty 4″ meaning that the games that hit the following three weeks tanked.
Also, bizarrely, because there are so many games, the industry and marketing are almost entirely reviews-driven, meaning that a handful of influential reviewers giving something an “8.9″ or whatever impacts sales exponentially. Games are budgeted to that - with a VP commonly saying something like, “Let’s go for a 90th percentile” on this game and spend more money knowing that if the aggregate rating on a game (in a ten “star” type system) is in the top 10 percent, then it’ll sell as there are legions of game buyers who will only drop that kind of cash on something that’s been signed off on by the critics.
Yes, it’s bizarre.
Look at the Activision/Vivendi merger, which earlier this month was approved by the SEC and - today, I believe - was approved by the EU. You have big, huge, profitable Vivendi who has a ton of money due to one single game - “World of Warcraft.” This game and the mountains of money they make off of it allows them to release tons and tons of those “$10 million hoping to make $12 millon, but more often making $3 or $4 million” games each year. They are merging with - or more accurately, purchasing Activision with all that money functionally to replace their low margin infrastructure with Activision’s tradition of much fewer titles, much higher budgets and much better quality and sales.
Kind of like the perception of Paramount when they bought DreamWorks hoping to replace all their creative types with the DreamWorks brand.
Vivendi will probably lay off tons of people to be replaced by Activision folks and you will see a more streamlined (read: shareholder friendly) portfolio moving forward as - like in the movie business - profits are put ahead of creativity.
It was bound to happen as just too much money is being made out there for a whole slew of MBAs to attach themselves, kick out the actual game-playing nerds who started the companies and use buzzwords like “maximize audience share” et. al.
You have to wonder if, say, a real masterpiece like “Bioshock” will actually even have a place in the new business world of video games when the people holding the purse strings become like Hollywood agents who only actually go to movies when they’re a client’s or to be seen at a premiere - never really just for a Friday night’s enjoyment.
Comment by Game guy — April 16, 2008 @ 8:20 am
Games, at a minimum, are a 10 hour experience.
60 bucks, 10 hours, 6 bucks/hour entertainment cost.
Not a bad value. No one mentions this.
Comment by The Hague — April 16, 2008 @ 8:37 am
‘loathsome GTA’? Have you ever once played ANY of the GTA series? I love that people bash those games, which are marketed and sold only to the R-rated set NOT kids, but when Scorcese comes out with his latest gangster opus with people getting their heads chopped off graphically with shovels or whatever, it’s art.
Utter nonsense. GTA is a great game for the adult set; oh and it is a LOAD of fun. More fun than the last 3 Scorcese ‘films’
Comment by manny — April 16, 2008 @ 11:45 am
I can’t wait till GTA4 comes out. it’s going to be such a sweet game. I’m one of those people that goes first day and wait in line to pick it up.
Comment by Outdoor Movies — April 16, 2008 @ 12:33 pm
The “loathsome” comment also caught my eye. I think the generations who didn’t grow up with Nintendo and Sega don’t understand video games, much like how their parents didn’t understand rock and roll.
That which is unknown and threatening = loathsome, the devil, the root of all evil, etc…
Comment by Josh Goldstein — April 16, 2008 @ 1:14 pm
Great story, but the hardware numbers are a little low; and third-party game supporters are excluded, which is another billion dollar industry.
By third-party game supporters I mean the thousands game server providers for online gaming, and software makers such as teamspeak, xfire, and ventrilo.
This also doesn’t include the millions of dollars people pay for membership into leagues such as CEVO, Major League Gaming, etc. etc.
Not to mention, there are no high dollar actors to pay. The highest pay gamer in the world (John Wendell aka Fatal1ty (sp)) - makes around 120k a year, which is chump change by Hollywood standards.
Comment by Marcus Leach — April 16, 2008 @ 1:20 pm
GTA represents at least 20+ hours of entertainment. Many GTA fans play it continuously for months. Talk about value. Much better value than a movie ticket.
I saw the GTA4 demo and it looks good. Real REal good! (Sorry Iron Man but your days are numbered! - Especially since GTA has the New York/Sopranos vibe going. Plus the realism factor.) Vice City was kind of cartoony but you could have fun soaking up the Miami sun just driving around listening to the radio — not killing anyone!
But I won’t be buying GTA4 because I don’t want to shell out hundreds of extra dollars for the hardware. On another note, the violence is pretty deplorable. It was an issue before but I just thrust myself into it and enjoyed it. but I’ve evolved a bit (I like to think) and don’t want to put junk food into my brain.
Comment by Marcus L. — April 16, 2008 @ 3:10 pm
Slamming GTA for its violence misses the point entirely: at heart, GTA is an ironic commentary on violence in American media. That’s why Vice City is a Scarface/Godfather/Sopranos pastiche, and San Andreas is rooted in 90s West Coast gangsta culture and ends with a re-enactment of the LA riots. In addition, almost all the necessary violence in the game is directed at other criminals or (usually-crooked) cops; violence against random innocents is pretty much entirely up to the discretion of the player. And shit, we’ve all got that choice to make in our real lives.
Comment by ddb4 — April 16, 2008 @ 5:06 pm
Video games are where it’s at. People want to disconnect and feel enveloped. Why do you think so many people are so heavy into the various MMORPGs? Second Life, WoW, PotBS etc. Guys going to work, coming home and playing until they have to work again.
Wrong site to say this on, but movies are old hat; they are now secondary forms of entertainment. I can download movies from my PC, XBox 360 or PS3 and stream them to my TV whenever I want. Which is less and less of the time having seen the crap that keeps coming out.
And video games are just getting better. Online play, interaction with a community, emotional highs and lows, rollercoaster stories and they’re fun.
Can’t remember the last time I went to movie here in LA and had fun.
Comment by Keilwerth LA — April 17, 2008 @ 9:35 am
GTA IV is big. This year(2008) is going to rake in mega bucks for game companies. Games have so many business models unlike movies and so altogether the industry will grow to me much bigger than many movies or music.
For example with online games advertising is huge. The number of free online flash games that are being developed is staggering.
Subscription based sites like Club Penguin have done great.
Casual games are booming although the price points need to come down to the $5-$10 range.
In game sales and micro transactions for items within games will also grow to be big.
So if you are developing a game there are many ways to make moeny.Will see how big this all gets.
SIMs alone brought in $4B.
9:47 PM
Will see.
Comment by gameseekr — April 17, 2008 @ 9:57 am
Hate to pile on, but the “loathsome” comment definitely gives the impression of a knee jerk reaction from someone who probably hasn’t even played any of the games (or maybe hasn’t played recent video games at all).
Interesting article, but that comment makes me take it all with a grain of salt.
Comment by milo — April 18, 2008 @ 7:08 am