Once upon a time, people used to go to the movies as their primary form of entertainment. It was, and still is, a multi-billion dollar industry. However, more and more people are now spending their hard earned dollars in the interactive entertainment market.
Consumers spent almost 19 billion dollars on video games last year in the United States. Conversely, box office receipts for North America totaled 9.7 billion dollars. Given that the average movie ticket price is $12.00, and the average video game is priced at $60.00, the comparison is somewhat skewed. While data is not available on how many video games were purchased in fiscal 2007, 1.42 billion movie theatre tickets were sold.
Both industries have started out well in 2008. The first major movie release of the summer, Iron Man, took in over $200 million dollars in its first weekend. Conversely, Take-Two Interactive, the publisher behind Grand Theft Auto IV, reported sales of over $500 million dollars in the first week alone. Grand Theft Auto IV is the fastest selling video game in history, with many stores completely selling through their entire inventory on the first day.
Game development costs are also rapidly approaching, if not superseding the cost to film a major motion picture. The price tag on Grand Theft Auto IV was upwards of $100 million dollars. In 1983, Pac-Man cost Namco $100,000 to produce (if you adjust for inflation, the cost would be approximately $200,000). Today, the average video game costs $15 million dollars to produce, before any marketing is done. The average movie cost (for a major Hollywood release) is $60 million dollars, whereas a direct-to-video release costs approximately $20 million dollars.
The majority of video games are sold to males ages 18-34, a very tough market for advertisers to crack. As a result, more and more are you starting to see product placements throughout the virtual world of video games. Movie theater attendance is generally far more balanced, given that certain movies tend to attract a specific demographic, thus making product placement far easier. The cost of product placement can take many forms, from providing technical assistance and all the equipment free of charge (such as every car in the Transformers movie being a GM) or paying a royalty fee for your product to be in the movie or game.
Numbers aside, consumers are purchasing video games in record numbers due to their interactive nature, the improved quality, and greater availability. As little as five years ago, the best quality video games could only be found a personal computer. Consoles were prevalent, but they were still in their infancy given the limitation of the technology.
Nowadays, most video games that are released not only have a compelling single-player adventure, but they are multiplayer as well. This allows for an endless amount of gaming in terms of hours, which justifies the $60.00 price tag. The average movie is two hours in duration, and the cost is $12.00. Furthermore, with the release of Sony’s PlayStation 3, Microsoft’s X-Box 360, and the Nintendo WII, consumers can use their high definition televisions (or video projectors) to play these games. No longer are you relegated to using your computer monitor or 20” CRT television. The aforementioned consoles and the games both support 720p and 1080i (with the exception of the WII, which is 480p) and offer multiplayer via both the Internet and locally.
Many families have a certain budget allocated to entertainment. Movies will never die, but the studios could lose market share as the next generation of video games start to roll off the production lines. While interactive entertainment companies had previously targeted males from age 12-34, Nintendo, with their introduction of the WII, has begun to introduce video gaming to an entirely different audience that previously had no interest (such as the baby boomer generation).
The competition for your home entertainment dollars is creating choice, and as consumers we will all benefit because of it.