NYT Piece on the video game business

Finding a way to hedge risks won’t be easy for the video game business. While movie studios have a reputation for profligate spending, they have always had a cushion the video game business lacks - ancillary revenue. Home video rentals, DVD sales, broadcast rights for television, toy spinoffs and licensed video games all help movies that bomb at the box office eventually make profits.

The article points out that this is much, much tougher for video games. How long can the budgets keep increasing?

Like most entertainment businesses budgets will increase and so will the hiring of “big name” voice actors, musicians, writers, designers and such. They will continue to bloat while the sales increase at a rate that doesn’t quite justify the bloat. Publishers will take less and less risks and we will continue to get middle of the road titles, that are not bad by any means but not great either.

Can you blame them? Well, yes on one level you can because there is the “let’s throw 10 games against the wall and hope one sticks” mentality that is common in the money circles. Instead of sticking to a small group of developers and giving them the resources and time needed to make outstanding titles they will stretch everyone to the breaking point in the name of spreading risk.

Like other entertainment industries some small group will come along and make a game that sets everyone on their ears. The concept will be co-opted by big publishers and the cycle will start again.

I’m amazed that the industry allows game rentals without some sort of retail grace period.

The game industry doesn’t have a choice.

You can do anything you want (rent, lease, charge by the minute to play) a console game that you purchased, and the developer and publisher can do nothing about it. It is a specific exemption carved into US Copyright law at the same time that software for computers was made specifically un-rentable.

–Dave

The game industry had their first run sales similar to movies, the arcades. They’ve allowed those to mostly disappear in favor of a mostly home market focused industry. Arcades provided a lot of revenue that then translated into those extra at home sales.

Sega still makes very good money in arcades and that’s a primary reason they can absorb the problems they’ve continued having in the home market.

–Dave

Finding a way to hedge risks won’t be easy for the video game business. While movie studios have a reputation for profligate spending, they have always had a cushion the video game business lacks - ancillary revenue. Home video rentals, DVD sales, broadcast rights for television, toy spinoffs and licensed video games all help movies that bomb at the box office eventually make profits.

Games have rentals, they just happen alongside the initial sales period, too. DVD sales? Well, there are gold/platinum/deluxe editions of games that get released that would be analogous to a DVD release with “extras”, broadcast rights for television are obviously not there, toy spinoffs – there are lots of dolls (er, action figures) based on videogame characters, along with lots of other merchandise. And instead of licensed videogames (durr), we have movies based on games, like Resident Evil and Tomb Raider.

Yeah, but gold/platinum game releases are almost always bargain-bin fodder. That’s not the same as a “Collector’s Super Duper Edition” DVD, which has extra crap on it and tends to go for more $ than the original. You do see special game releases like that big Half-Life 2 metal box, but those are very rare. How many of those things have ever been released? Off the top of my head, I can only think of two–the Jedi Knight II metal box with the original JK, Dark Forces, and a lightsabre keychain, and the HL2 thing. I’m sure there are more, but I can’t imagine more than one or two games per year warrant this sort of marketing treatment.

I agree, Brett. It’s not a huge revenue generator for games. I just thought the article was sloppy and overlooked some obvious ways that games can make extra revenue.

This is one of the ways the long-term major players emerge in a given segment of the entertainment industry, I think–by out-budgeting the competition. As the industry matures, I think we’ll see fewer and fewer groups pumping more and more money into make-or-break projects, as with feature films.