How video games shot their way to the top - TechCentral

How video games shot their way to the top

By Craig Wilson

Gaming is the biggest entertainment industry in the world, bigger than even Hollywood. It’s the biggest in SA, too. It seems if you want to make money in entertainment, you’d be better off learning to code than trying your luck on Idols.

Though sales of CDs, cinema tickets and DVDs have declined in recent years, thanks in large part to the falling cost of Internet data, video gaming has felt no such pressure.

So, how exactly did gaming go from being a niche pursuit of nocturnal, pimply teenage boys to the most lucrative entertainment business on the planet, particularly as the average game costs considerably more than the likes of an album or movie, even those on the insanely overpriced Blu-ray format?

Firstly, when it comes to games consoles and handheld devices, piracy is far less of a concern than it is in other industries. Sure, you can hack a Wii or an Xbox, but it seems very few people bother to do so.

Game developer Activision said on Monday that in just 16 days it has sold more than US$1bn worth of copies of Modern Warfare 3, the latest instalment in the Call of Duty franchise.

To put that in perspective, revenue at the US box office dropped to $9,4bn this year, down 4% from 2010. So, in less than three weeks, one game generated as much 10% of the revenue the US box office takes in a year.

And that’s just one title. Considering how many of my peers have become hermits on account of the latest Elder Scrolls title, Skyrim, you can bet that figure would be far larger if we were looking at all games combined.

Ralph Spinks, product manager at Electronic Arts SA, says the company has enjoyed steady growth in recent years. The company’s best-selling titles are from the Fifa, The Sims, Battlefield and Need for Speed franchises and when a new version of one of these is released, sales are good across platforms. Where people were once loyal to bands, it seems brands are the new superstars.

Ster-Kinekor’s product and brand manager, Howard Lonstein, says there’s no doubt that the number one entertainment industry worldwide is now gaming. He says in the SA market the gaming industry moves more units than music and DVD sales combined.

He attributes this to a greater variety of content, games being more readily available, older games being sold at affordable prices, and the fact that, with products like the Wii and Xbox Kinect, gaming is no longer exclusive to hardcore gamers but has successfully crossed into the realm of mainstream entertainment.

“You also have to remember that console prices have dropped drastically while the tech in them has improved,” says Lonstein. He says it’s still a “tough business” from a profitability perspective.

“Gaming is an expensive business model based on volume,” he says. Exchange rate fluctuations also have a sizeable impact on the local market and can vastly impact a title’s profitability.

Still, there’s no denying that gaming is one of the few growth industries in the entertainment business, and particularly the sort of games that appeal to the casual gamer, as Rovio, the company behind Angry Birds, has discovered — and as Microsoft and Sony found to their horror when the Wii moved more units in its first year than either the Xbox 360 or the PlayStation 3.

Since then, Wii sales have faltered while Xbox’s motion-based Kinect continues to move millions of units. But that’s irrelevant: the industry continues to rake in the cash in a way other entertainment industries once did and are unlikely to again.

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