Friday, April 4, 2008

Reality Check: Games Are Not Bigger Than Movies Edition


To paraphrase great American and 1988 Vice Presidential Candidate, Lloyd Bentsen "I know the movie business, and video games, you are no movie business." (I am allowed paraphrase him because I peed next to him once in the Dallas Airport - really). Trust me, its a good thing. So why do we keep comparing video games to film, and now music?

At this year's GDC, 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 I am writing about it now because we are about to see this story 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 GTA 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 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 "chaching." Playing on the radio, "chaching." Used in a television commercial "chaching." Concert tour with merchandise "CHACHING." It would certainly be interesting if Microsoft and Sony had to pay the publisher a fee every time multiplayer 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 of highlighting games based films as 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.

In the interest of making sure adequate fodder remains, let me make some suggestions to the media of some equally relevant things the domestic US Video Game Industry industry is actually larger than:


1)  Aggregate sales of Sales of Viagra, Cialis and Levitra.

2) 10 days of Wal-Marts gross revenue in 2007.

3) Exxon's 2007 fourth quarter profit.

4) The total US sales of adult diapers - by a factor of 4.

5) The GNP of Bhutan, Burundi, Equatorial Guinea, Tokelau, Somalia, Tajikistan, Swaziland, Afghanistan and Nicaragua - combined!






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