angry birds

And we haven’t even begun to talk merchandising. Pixar’s Cars series made over $8 billion in global retail sales before they released the sequel. In comparison, Rovio’s Angry Birds, one of the hottest brands in video games today, earned $195 million in merchandising in 2012.

And of course there is the perception of value:

  • A movie costs around $9 at the theater, and a video game costs $60 to buy.
  • A movie is two hours of your time, when a video game could be days of playtime. GTA V claims to have 100 hours of gameplay (although some people online claim to have completed the game 100% in almost half that quote).
  • So while you pay $9 for a movie ticket, you’re getting $4.5/hour of entertainment. GTA V at 60 hours for $60 is $1/hour of entertainment.
  • But then again, if you apply this to a collector’s edition blu-ray purchase, the numbers are further skewed. I remember the first time I bought Fight Club on DVD, I watched the movie and then immediately watched the movie 4 more times with each of the various audio commentaries and ate up every bit of supplemental material. But again, you’re probably still getting more hours of entertainment for your money with a video game.

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I often times see blogs and sometimes newspapers bragging about the numbers of the video game industry. The number you see thrown around most recently is that video game sales in 2012 amounted to a whopping $63 billion. You’ll see some outlets comparing that figure to the movie industry, which has a global box office total of $34.7 billion in 2012. I’ve even seen an article claiming that GTA 5 made more than the music industry alone. Of course, these numbers aren’t as simple as they look.

Here are a few things you don’t normally think about when you see the numbers:

  • The video game industry number includes hardware (aka console sales) and accessories (aka controllers..etc) while the global box office figure doesn’t include doesn’t include sales of hardware to play movies (DVD/Blu-ray players) or even money earned outside of movie theaters (home video, VOD, tv licensing).
  • The global box office number is deceiving. Its a number of money paid for tickets — thats before movie theaters exhibitors take their cut - a percentage which scales depending on how long the movie has been in theaters, with the movie theater getting more the longer a film plays. For bigger films, this usually ends up with 70% distributor, 30% exhibitor) and smaller films usually ending with 50% deals. And this doesn’t even touch on the complicated split that Hollywood takes from international box office. We’ve recently read a lot about how much films are making in China. But the truth is the Chinese only pay foreign film studios 25 percent of their box-office revenue. So while Pacific Rim made $112 million in China, Warner Bros will only see one fourth of that.

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Much like how film companies only receive a percentage of of the various box office, video game companies only get a cut of that $60 game. The infographic above from Feedvibe shows almost 50% of that msrp goes to the developer & publisher after the split with retailers, console makers and marketing costs.

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So at the end of the day, which is bigger — the film industry or the video game business?

Which had more sales? We’ve already seen that more people see a big movie in theaters than purchase the biggest video game release of all time, and many more end up watching movies at home. Movie watching is passive while gaming is interactive, so it seems likely there will always be more people watching films than playing games.

Which made more money? Market research firm IBISWorld claims the movie industry generated revenue of $126.8 billion in 2012. Meanwhile Newzoo, another market research firm, claims the global game market made $66.3 billion in 2012 — about half that of the film industry.

I’m not sure where either of these firms are getting their money figures as they seem extremely high, but they are all we have to go on when looking at the industries from a birds eye view. You can also see in the above chart that the global games market is getting bigger, and is expected to grow to $86.1 billion in 2016, still not even close to this year’s film number (which is also growing, but at a slower rate). But who knows, maybe someday the game industry will surpass the film industry in revenue.

The bottom line is that the movie and video game industries are very different in a many number of ways, including business monetization. Its almost like comparing apples to cheese — yes, people eat both but they are completely different in every other way. So why does the media continue to try to force comparisons to try to prove that one is bigger or better than the other? Why do we care if one medium is bigger or better than another medium?  Are we trying to justify the importance of the entertainment we are receiving from these industries?

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