11/20/2013 12:30 AM ET|
Video games: The new blockbusters
The biggest titles are still cheaper to make than big-ticket movies, and the payoffs can reach sums that rival those of Hollywood's biggest hits.
Disney (DIS) spent $338 million on "Pirates of the Caribbean: At World’s End," the costliest movie ever produced. For that investment, the studio collected nearly $150 million at the box office on opening weekend, en route to a $963 million worldwide gross.
Sounds impressive. But believe it or not, video games can do better.
The budget for "Grand Theft Auto V" hit $265 million, but when it was released in September, the game quickly justified Take Two Interactive’s (TTWO) investment with an $800 million launch day.
After just three days on shelves, sales passed the $1 billion mark. That's faster than any other video game -- or any movie -- in history.
Video games are the new blockbusters.
Hollywood signing on
Movies have their red-carpet premieres, but video games are getting into the release hype business, too. Long lineups snaking outside of stores have become common at retailers like GameStop (GME) and Best Buy (BBY), which often open after regular hours for the release of highly anticipated games. Activision’s (ATVI) "Call of Duty: Ghosts" launch on Nov. 5 was one such blockbuster. Some 15,000 stores worldwide had more than $1 billion worth of copies of the game when they opened their doors at midnight for the release.
Hollywood actors are increasingly getting in on the action, lending their voices to video games. Among the A-listers you can find on your game console: Liam Neeson, Emma Stone, Christopher Walken and Martin Sheen. And while Mark Hamill may have rose to fame as Luke Skywalker in the original "Star Wars" movies, but his voice acting -- particularly his 19-year role as The Joker in various shows and games ending with 2011's "Batman: Arkham City" -- was widely lauded, too.
Many more hours of entertainment
Consumers are willing to fork over $60 for a video game because they can get tens or even hundreds of hours of entertainment out of it. The single-player mission of a typical game lasts 10 to 20 hours, and you can play much longer if you include side quests. Add in multiplayer capability, and that one $60 game can provides months of play, plus the opportunity to socialize virtually.
You can't say the same about your $10 movie ticket or $20 DVD.
The next generation of video game consoles will take realism, immersion and interactivity to new levels. Next-gen consoles out this Christmas season have roughly eight times the processing power of the current Xbox 360 and PS3. That means smarter artificial intelligence, more lifelike animation and the ability to render detail like lighting effects in an ultra-realistic fashion. Advanced cloud integration and online capabilities mean the potential for huge worlds to explore, populated by other players and advanced AI characters. (Editor's note: Microsoft, which makes Xbox, owns MSN Money.)
- Related at InvestorPlace: Your Guide to PS4 and Xbox One Console Exclusives
Microsoft is launching the Xbox One on Nov. 22, starting at $499. Sony’s PlayStation 4 just hit U.S. shelves Nov. 15 at $399.
Besides the rush to grab one of the powerful new boxes, expect the holiday season to kick off a flood of new blockbuster games. Launch titles should see big numbers as new console buyers stock up on games that take full advantage of their new systems, and publishers are salivating at the prospect of a whole new cycle of gamers rebuilding their libraries. Since its 2007 launch, 4,332 games have been released for the PS3 alone, and because those game discs aren’t compatible with the new console, PS4 owners will be starting their game collection from scratch.
Show me the coins
Despite growing expenditures, blockbuster video games continue to offer wider margins than their film counterparts.
The cost of developing a title has increased significantly from the days when a single programmer could churn out a video game. According to game publisher Ubisoft (UBSFY), the average title for the current generation PS3 or Xbox 360 costs in the $20 million to $30 million range to produce, and it expects that average cost to hit $60 million for the PS4 and Xbox One.
Movies remain significantly more expensive to make. The Motion Picture Assoc. Of America stopped releasing production stats in 2009, but even in 2007, it reported the average movie cost $107 million. You can see the math in action when you look at the record holders: Adjusted for inflation, the top five highest single-day grossing entertainment properties are video games; the top five most expensive productions are movies.
Movie studios will be looking forward to big releases over the holiday season, too. For example, "The Hobbit: The Desolation of Smaug" -- with a $250 million production budget -- is hoping to repeat the success of last year’s installment in the film series, which sold $85 million in tickets its opening weekend.
But the movie will be competing for entertainment dollars with recently released billion-dollar video game titles, along with launch titles for the new consoles such as "Killzone: Shadow Fall" for the PS4 and "Crimson Dragon" for the Xbox One.
When the numbers are finally tallied, it could be the video game industry that has the happier holiday.
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