June 10th at 3:21pm
Video Games Bigger than the Movies? Don't be so certain....
From GameSoundCon Blog
You’ve probably seen the headlines over the years in newspapers, blogs and in presentations and discussions.
It seems like every time you turn around, someone is reporting, announcing or blogging on how “Video games are bigger than the movies" It’s a statistic that’s been reported and re-reported so many times, few question its veracity. But is it really the case? Are “video games bigger than the movies?”
The answer it turns out is “not even close.”
They why, you may ask, has this been taken as gospel for a decade or more? And didn’t the video game GTA V take in a billion dollars in only three days?
The answer is fairly straightforward, and it all comes down to how you define the “video game industry” and how you define “movies.” And that’s the crux of the problem.
For the purposes of this article, I’m going to confine myself to the US market for both movies and games, because it’s easier to get reliable numbers about both of those industries. But there is no reason to believe there is a big discrepancy between the US and worldwide markets. (thought that certainly should be checked out)
You typically hear something like the following:
The video game industry is a made $22 billion last year! Movies made only $10 Billion. Video games are bigger than the movies! (For example: http://www.stratoserve.com/2011/06/entertainment-video-game-industry-three-times-music-and-double-movie-industry.html)
Popular statements like that are misleading at best, and are probably better described as “wrong.”
There are two major problems with the vast majority of these claims. (As previously noted, data will be from the US market only)
What does “market” mean?
The video game industry did indeed make close to $21.5 Billion in the US in 2013. And the domestic motion picture box office receipts for 2013 were around $10.9 Billion. So what’s the problem?
The problem is that the $21 billion number for “video games”, represents the entirety of the video game industry. It includes not only games themselves, but also gaming hardware: Xboxes, Playstations, Nintendo DS’s. It includes the sale of peripherals such as extra controllers, gaming headsets, keyboards and mice! Indeed, pretty much anything related at all to video games. In other words, all of these:
In contrast, the “movie” number typically represents “box office receipts”—theater ticket sales.
So the comparisons given make no sense. It’s not apples to apples. More like “apples to entire grocery store.” Numbers get pretty skewed when you compare a $500 XboxOne with a $9.50 movie ticket.
So what is a more accurate comparison?
If we really want to compare games to the movies, we shouldn’t be counting Xboxes and Controllers and mice and keyboards—We should be counting games—i.e the game content, not the hardware its delivered on. That’s why they don’t include BluRay or DVD players in the numbers for “movies.” Or movie theater projection systems for that matter. They count the movie content in the form of ticket sales.
So what does game content look like? As noted, according to the Entertainment Software Association (www.theesa.com), in 2013 the total consumer spend on the games industry was $21.53 Billion. For 2013, of that 21.5 Billion the amount spent on games themselves was $15.39 Billion. That $15.4 Billion represents all game content, experienced all ways, whether it’s a AAA Xbox One title or Angry Birds on your phone as well as subscriptions such as World of Warcraft or "fremium” games like Candy Crush Saga and League of Legends.
That brings us to our second big problem. We also have to take a closer look at the movie revenue. According to boxofficemojo (www.boxofficemojo.com), the US domestic box office sales in 2013 were in fact $10.9 Billion. However, the box office does not represent the entire domestic movie industry revenue. That’s only theater ticket sales. What that does not count is the rest of the money the movie industry makes on their content: BluRay & DVD sales, digital downloads, Broadcast, Cable and Streaming royalties, movie rentals. You get the idea.
According to the Wall Street Journal that revenue is significant. In fact, it far exceeds movie theater ticket sales. In 2013, US home entertainment spending, which includes disk & digital sales, broadcast and rentals totaled $18.2 Billion. Combine that with box office receipts and that puts the “movie industry” at $29.8 Billion.
So if you’re keeping score, the totals are:
Game content 2013 US Total Revenue: $15.4 Billion
Movie content 2013 US Total Revenue: $29.1 Billion
One other item of note: The game numbers listed above include every possible genre of game, from huge blockbusters to tiny indy games. For an even more accurate comparison of games to movies, we would need to include just about any kind of passive visual entertainment from big-budget blockbuster to YouTube content.
But even without doing that, movie content revenue still stands almost 2X game content revenue.
But wait—Didn’t GTA-V make almost a billion dollars in 3 days? Surely that makes “games bigger than movies.”
Let’s take a closer look at that. It is true that as far as revenue is concerned “opening weekend” for GTA-5 was HUGE. As in Gigantic–enormous and literally record breaking. The Guinness book of World Records reports that GTA-V had an ‘opening day” sales volume of 11.21 million units in its first 24 hours generating 815.7 Million in revenue. (note that this includes “pre-sale” units, which are games reserved and paid for before they actually are offered for sale). And in 3 days it generated over $1Billion in worldwide sales. [note: we are now talking world-wide numbers, not just US].
So how does that compare to a movie’s opening weekend?
“Harry Potter and the Deathly Hallows 2” (2012) currently holds the record for revenue generated on an opening weekend worldwide. it had an opening worldwide 3-day gross of $483,189,427. That’s not even half of the $1Billion made by GTA-V over a similar 3-day period.
However, what happens when we count people?
At an average price of $72 (many of the early purchases were more expensive ‘special edition versions’), that meant that almost 14 Million people bought GTA-V.
However, at an average ticket price of $9.50, over 50 million people bought tickets to “Harry Potter.”
Keeping score again:
People buying megahit game opening weekend: 14 Million
People seeing megahit movie opening weekend: 50 Million
One last bit of context. The two biggest grossing (Worldwide Box office) movies of all time are Avatar (2.7 Billion) and Titanic ($2.1 Billion). As of May, 2014, GTA-5 has sold 33 million units. At $60/unit (a conservative estimate), that is just shy of $2 Billion. Oh, and that Avatar number of $2.7 Billion? That’s only the box office. That doesn’t count DVD/BluRay, streaming, rentals, etc. and all the other income movies can make that games can’t.
So Video Games’ biggest game of all time is still far shy of the just the box office receipts of the motion picture industry’s biggest movie by any measure except “first 3 days revenue.”
Don’t get me wrong. Video games are big and they are growing. More people are playing them, and they are taking a significant chunk of people’s entertainment dollar. And yes, measured by “gross dollars of opening weekends,” games are indeed often “bigger than the movies.”
But the general “games are bigger than movies” claim is only true if you include a whole bunch of stuff in “video games” that you don’t in “movies”, ignore huge amounts of movie revenue, ignore huge numbers of people or otherwise skew the numbers.
For the record, if you want to compare “game content” with “motion picture box office” (and ignore movie disk, streaming & broadcast revenue) the year in which the U.S. domestic box office receipts were overtaken by video game content sales was 2009, when each had sales of approximately $10.5 billion.
In the end, let’s just agree that games are a huge recipient of consumer entertainment spending and stop trying to compare ourselves to a very different business.
GameSoundCon 2014: October 7-8, Los Angeles CA
Brian Schmidt is the Executive Director of GameSoundCon, www.GameSoundCon.com
Industry Data Sources:
[Edit: fixed typo of “815.7 Billion” to “817.5 Million” when referring to GTA-V’s 24-hour revenue]