Video games go Hollywood
An article in the New York Times ("Video Game Makers Go Hollywood, Uh-Oh", 8/22/2004) traces the way in which the $11 billion video game makers is following in the wake of Hollywood, as the two industries begin to converge. In what was once a wide-open industry, the production and marketing of video games has settled down into an oligopoly, with only handful of players that dominate it all. It's ironic that as movies tend to look more and more like video games (and some, like the Tomb Raider movies, are based on video games), so too the video games look more and more like movies.
Those top companies get more cautious and less innovative as they grow, and they are getting narrower and narrower as they look for blockbusters. As the article states, "Seeking to establish the medium as a mass market form of entertainment instead of a niche technology, the game industry has taken the playbook industry."
Among the trends noted:
- A dependence on cinematic special effects
- Movie-quality sound and celebrity voiceovers
- A desire only to produce pre-branded materials such as sequels and movie-based games (Harry Potter, Spider-Man, Lord of the Rings)
- A disdain for small, steady sellers in favor of major blockbusters
- Developing "ancillary" products like novels, action figures, and videos
Selling product placements in the video games, just like movies do
- Big TV ad campaigns for new releases
The result has been a ballooning in budgets. Current games take $5 billion to produce, and $5 billion to market. That's three times what they cost even a few years ago. Releases now are either big successes or big disasters. The small guys are finding it ever harder to stay in the race.
This change in the market is a natural consequence of the concentration in other tiers of the industry. Sony, Microsoft, and Nintendo dominate the game console industry, and that's where the big software money is to be made. As these companies totally revamp their technologies every few years, so the game companies have to adapt, and they have to develop for all of the boxes as well as PCs. That's a hard task for a small company. Because the shelf life of the games has been reduced to a few months of popularity (just like other media including movies), the idea of developing for all platforms at the same time is a daunting one for a small company.
Then, there are the retailers like Wal-Mart, Best Buys, and others that stock more limited selections of titles and remainder quickly any that do not sell. Getting a game on their shelves is as critical as getting a book in Borders or Wal-Mart, and small players are at a big disadvantage/
The other tier of the industry is the smaller companies that develop the games and have them produced and distributed by the big companies. While they are true innovators, they are under the thumb of the few, and lessening, number of major publishing companies. Many have been snapped up by the game publishers.
Electronic Arts, which the #1 game studio with $3 billion in sales, recently acquired Criterion software, a company that has an extensive set of game 'middleware". This software is used to adapt games easily to the different game platforms. Sega, once a big player, has been acquired by Japanese Sammy Company, a maker of slot and pachinko machines. Time-Warner recently purchased Monolith Productions, a second-tier game maker.
We expect a number of further acquisitions as the little guys get squeezed out. And we imagine that the big companies in the computer and entertainment world will snatch up ever more companies in this industry. The future in this business is with the big.
Some top game publishers
| Company |
Annual rev. in millions (most recent) |
Sample titles |
| Electronic Arts |
$2,957 |
Madden NFL, Sim City, Need for Speed |
| Take-Two |
$1,033 |
Grand Theft Auto, Manhumt, Railroad Tycoon |
| Activision |
$947 |
Tony Hawk, Doom, Spider-Man |
| InfoGrames (Atari) |
$713 |
Mission Impossible, V-Ralleye, Duke Nukem |
| THQ |
$640 |
WWE Smackdown, Sponge-Bob, Power Rangers |
| Ubi Soft |
$489 |
Rayman, Prince of Persia, Tom Clancy |
1:21:40 PM 
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