Video Games Are the New Blockbusters

Video games now have $200 million budgets and sell billions

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MSFT 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 compatible with 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), an 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. The MPAA stopped releasing production stats in 2009, but even back in 2007, it reported the average movie cost $107 million. Movies remain significantly more expensive to make than video games.

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.

EntertainmentKings Video Games Are the New Blockbusters
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Movie studios will be looking forward to big releases over the holiday season. 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, video game industry might have the happier holiday.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/2013/11/big-investment-big-gross-video-games-new-blockbusters/.

©2014 InvestorPlace Media, LLC

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