Hollywood vs. The Video Game Industry

I've always said that Hollywood has no chance against the video game industry.  Games are more entertaining and interactive.  Why would you watch entertainment when you can be part of it?  Now, the video game industry has a long way to go before creating artistic movies, I mentioned that here before.  But I don't consider Woody Allen, or Wes Anderson Hollywood anyway.    Hollywood to me is feel-good, wholesome entertainment.

I want to give you some statistics about one fo the most popular massively multiplayer role playing games, World of Warcraft.  I found out that they have 5M subscribers each paying $15/mo to play in this virtual world.  New York Times wrote about how bad people want to advance in this game here.  So this game generates about $900m dollars of revenue per year.  That's per year.  Compare that to the highest grossing movies of all time.

1.  Titanic $601M

2. Star Wars (1977,1997 releases combined) $461M

3. Star Wars Episode I: $431M

4. E.T: $400

5. Jurassic Parck: $357M

6. Forrest Gump: $330M

7. Lion King: $313M

8. Star Wars, Return of the Jedi: $309M

9. Independence Day: $306M

10. The Sixth Sense: $293M

As you can see none of them can touch the success World of Warcraft has achieved.  If WoW goes on like this, without growth for 3 years, they'll make more than the top 5 all time highest grossing movies.  And the cost to make the game is a mere fraction of what those movies cost. 

I think the people have spoken on what they prefer for entertainment.  It's just a matter of time before the world realizes it.

Comments

[Susana Rodriguez]

Is this an elaborate and twisted plan to justify your love for computer games?

[baris]

No. I don't need justficiation.

[Van Kwok]

The box office take understates the total dollars generated by feature-length films by a significant margin. From the contractual dollars generated by the studios for premium cable, DVD release, and broadcast royalties, the lifetime value of a feature film can be 3-5X+ what its ticket sales generate. Also, are your WoW sub numbers US only or world-wide, since they've licensed the game to several international operators, including The9, who runs WoW in China. I highly doubt anyone in China pays $15 per month. Churn in the sub base (which is pretty high) also make it difficult to take a straight multiplication of the per-month fees times the average subs to calculate annual revenue.

Hit MMOGs are cash machines when they are successful, but the on-going investment in sub acquisition, retention and servicing are all expensive costs that studios largely don't have to incur for movies. There has also been significant price pressure in the Asian MMOG world that I suspect will become more prevalent in the US and push the per-month fees down as well. Tell me about the last time the price of a movie ticket decreased. (^_^)

I'm not disagreeing with your overall sentiment that gaming is becoming a significant force in entertainment to rival feature-length films, but I'm not sure that a fair comparison of the total cashflow generated by each content medium would conclude gaming is a clear-cut winner at this point.

[baris]

Very good points. Shows my argument is coarse, which it is. I've gone astray without your analytical rigor to keep me in check :-)

We heard from the company that owns WoW (don't remember the name) that the overall numbers are indeed near $1B/year. So maybe there more subs than we thought that pay less than $15 globally. What is the price people pay in China for such a subscription by the way?

Content owners do make a lot from DVD sales etc, that's very true, so yes, perhaps Wow is not there yet in terms of topping Titanic yet. Star Wars probably made billions in merchandising too (all those action figures). It's a social phenomenon that influenced the lifestyle of two generations. I doubt a game will do that for years to come.

Maybe we'll have to wait a few years to make the statement more rigorously, but we agree the trend is pointing in that direction. We shall see.

[Susana Rodriguez]

And don't forget the massive revenue generated by virtual commerce in MMOGs.
The retail industry is also beginning to pay attention to the success of gaming and we're starting to see apparel featuring these games. Leroy Jenkins is on many many t-shits these days!

[Tolunay Orkun]

Hi Baris,

As for Star Wars, Lucas is taking in revenue generated through Star Wars games as well.

Tolunay

[baris]

Tolunay,
Nice to hear from you!
Yes, George Lucas is a smart guy isn't he?

[Trevor Stafford]

I have followed up on your idea with an article that talks about the startup-like challenges faced by Blizzard and WoW, and how they overcame them. Oh yeah and it does mention the fact that WoW is at the billion-dollar revenue per year stage given its 8 million subscribers (with China's likely profit factored in).

http://www.redcanary.ca/show_article.jsp?s_id=4

I'd like to respond to the person who talked about total cashflow of movies vs online games. I'd like to point out that, for WoW at least, there are spinoffs that are very lucas-like. Including:
Clothing (mentioned above)
Costs incurred from character transfers and similar fees
Figurine sales
Playing card sales
Licensing agreements for books, the WoW CCG (collectible card game), DVDs and more
Oh and of course CD (china) and retail sales (rest of world) for new subs.

I'm not an apologist for WoW, I don't even play it, but I follow the industry.

[Roman]

I want to say - thank you for this!
;)

[r4 kartes]

Hi,

Video game industry practices are similar to those of other entertainment industries (e.g. the music recording industry), but the video game industry in particular has been accused of treating its development talent poorly. This promotes independent development, as developers leave to form new companies and projects. In some notable cases, these new companies grow large and impersonal, having adopted the business practices of their forebears, and ultimately perpetuate the cycle.