Hollywood vs. Games: Oh God Numbers

By Nick Breckon, Aug 31, 2007 9:08am PDT The source of it all can really be traced back to a single statistic: $125 million in 24 hours.

The year is 2004, and Halo 2 is making headlines. Long headlines with wild, catchy claims and assertions. Headlines that say things like, "It's boom time for an industry now even bigger than Hollywood." Headlines that stir a community into joyous celebration.

These headlines eventually trickle down into pools of collective knowledge, seeping into the porous sponge of the internet social consciousness, to the point where informed gamers repeat them without a thought. When the debate arises, there are usually a couple numbers tossed about, but few serious attempts at a comprehensive report. In some ways it's more attractive to think of video games as a serious challenger to movies, and any kind of investigation that could shatter that dream is an ugly one.

People love an underdog. We're only a few short years into the 21st century, and video games--only a decade prior thought of as childish toys on the level of LEGO--have eclipsed the movie industry as the dominant mode of entertainment in America. Movies had their time, but video games can now do everything a motion picture can--and sometimes they have multiplayer, too. Big-time filmmakers like Peter Jackson and Steven Spielberg are beginning to cross over and see the light. In the theater, you have to sit and listen to noisy animals on their cell phones. At home, you can tell them off over Xbox Live--and then hit the "mute" button. We have truly evolved.

But how accurate is that portrait? Has Silicon Valley actually surpassed Tinsel Town in hard numbers?

Two years post-Halo 2, games did record business. Despite coming to the end of a console cycle, strong sales from the stalwart PlayStation 2, the innovative Nintendo DS, and Microsoft's home-grown Xbox 360 helped the industry accumulate some $13.5 billion sales of hardware and software in North America. An impressive number to be sure, and one that did best Hollywood--from a certain point of view.

Film box office sales were also up in 2006, with over 60 movies grossing $50+ million in theaters. Even with this strong performance, the overall yearly ticket take was a mere $9.49 billion--$4 billion shy of gaming's total. This would appear to show a sizable gap in the two fields.

Of course, anybody who has a "friend" that owns the Special 6-disc Director's Cut Trilogy Edition of The Fast and the Furious Saga knows that DVDs are big business. Not only is home video a double dip into the audience pool, it's also incredibly profitable. That 300 DVD you just bought for $20 means anywhere between 50-60% pure profit for the big wigs at the movie studios. At last count, 1.6 billion DVDs were shipped to Americans in 2006, which added up to $16.6 billion in revenue. Subtracting television DVDs, which account for around $3 billion in sales, we're up to $21+ billion for Hollywood. And this is only in North America--we haven't even counted worldwide numbers yet.

Sure, DVDs are a big deal, but you have to take the bloated used games market into account, right? Not to mention rentals. Who actually buys games these days, anyway?

People still buy games these days, but on the next page I take a look at the resale market, rentals, and the financial future of games and movies. _PAGE_BREAK_

Game stores may be overflowing with used discs, but even the enticingly cheap copy of Kirby's Dream Course you bought at Funcoland can't beat out second-hand DVD sales. Used games accounted for $1.0 billion in sales in 2006, as compared to the movie industry's $1.2 billion. On the rental side of things, movies rang in at a massive $6.5 billion, with game rentals bringing a measly $559 million--quite a pathetic number in an article of billions. Movies still come out on top.

Not only do the numbers fail to compare in that respect, but we're also forgetting that the game industry's $13.5 billion figure also includes hardware sales. Even as DVD begins its slow journey toward the great bone-yard of obsolete electronics, over 32 million stand-alone players were sold last year. You do the math on that one.

Things get even worse for games when you consider that sales don't directly translate into saturation. Even though $13.5 billion is an impressive number, that sum was the result of adding up $30-60 pieces of software, with individual hardware sales in the hundreds.

Put another way, the top-selling game of 2006--Madden NFL 07--sold 2.8 million copies in North America. The top-grossing movie of 2006, Pirates of the Caribbean: Dead Man's Chest, did over $400 million in domestic box office. Even allowing for a generous $10 average ticket price, that amounts to 40 million ticket sales--40 million people who saw the most popular movie of the year, compared to 2.8 million who purchased the most popular game. If the two audiences went to war, it'd be like the entire South Korean population invading Kuwait. Those guys thought Saddam was bad--wait until they see the business end of a Zerg rush.

It would be unfair for me to entirely distract from gaming's recent achievements. Halo 2 did make $125 million in one day, beating out then-movie record holder Spider-man's three-day gross of $115 million. However, Halo 2 only sold around 10 million copies worldwide as of June 2006. If we consider an unrealistic, constant $50 price, that amounts to $500 million in sales. The highest grossing movie in history, 1997's Titanic, raked in $1.8 billion in worldwide sales--and that's not even taking its home video release into account.

Speaking of global numbers, we can't forget about Poland. Maybe video games do better there?

Wrong again. The games industry did $37.5 billion worldwide in 2006. Hollywood's box office alone hit $25.8 billion. Adding only American DVD sales to that number crushes gaming under a sea of Naruto import discs.

One common argument is that, like Communist China, games are on the rise, and movies are on their way out. This is true, in part--the NPD now projects $16-18 billion sales of video games for the year of 2007. Ubisoft CEO Yves Guillemot expects the market to grow 50% in four years. In-game advertising and the advent of casual, downloadable games will help to bump profits to all-time highs.

Games are also catching on in new, largely untapped regions, seeing significant growth in Asian markets. By 2011, Asian gamers will likely spend $18.8 billion on the industry, passing up the US in both sales and arthritis. By the same year, the ABI Research firm predicts game sales of $65 billion worldwide.

The half of the argument that falls flat is the perceived decline of the movie industry. After the lows of 2005, theatrical performance rebounded in 2006. Worldwide sales of movie-related entertainment were up some 6%, with revenue streams increasing across the board. Theaters are undergoing massive upgrades, installing digital projectors and adding support for cutting-edge 3D films. High definition formats and on-demand services are breathing new life into the home video market.

The video game industry has a lot of room to grow--this is undeniable. In the meantime however, it is categorically untrue to say that games have surpassed movies as the dominant screen-based pastime. $60 games add up to some impressive sales figures, but even that deceptively-large revenue isn't close to surpassing filmic sales--let alone near to passing movies in widespread popularity.

As the two art forms move closer together, perhaps a better question is, does any of this even matter? In the coming years, we'll see 3D films like James Cameron's Avatar competing with increasingly realistic 3D games like James Cameron's Avatar: The Game. As movies and games continue to feed off each other in their strange symbiotic relationship, they will both likely grow even more profitable. And with epic projects such as Joust: The Movie becoming a reality, there is really no need to compare. Everyone is guilty.

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  • This is an interesting article no doubt. And the premise is true, and enlightening.

    It remind me a bit how the liberal media often spin numbers. For example, that the 47 million uninsured we always hear about includes 10 million people who aren't even US citizens. Or, think Americans are drowning in credit card debt? Nope, that's another liberal media lie as shown here:

    http://articles.moneycentral.msn.com/Banking/CreditCardSmarts/TheBigLieAboutCreditCardDebt.aspx

    HOWEVER, I have a minor quibble or two. Mainly, that Hollywood is not declining is debatable. You see, you're using dollars for your year over year comparisons box office, which Hollywood usually does also, ignoring that there is a inflation component here, and the average ticket price keeps rising. For example, I dont remember the exact details, but even as 2007 is being hailed as a record box office year, it's actually only average when you measure by number of people who actually attended the movies. And even that metric is somewhar inflationary (though less so than dollars I presume) as the population of the United States doesn't stand still, but increase a bit every year. Even though 2007 may have been slightly less than 2002 in box office attendance (again not dollars grossed...) according to that article I read, There are surely I dunno, a few million more people floating around the US in 07. So that makes the percentage of the population that attended a movie in 2007 versus 2002 even lower.

    So yeah, good article overall, but you need to look a little deeper than box office grosses to see how Hollywood is doing as far as declining, though I'm sure it's in no danger of being overtaken by videogames anytime soon.