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The power of the gaming sequel

How gaming is putting Hollywood to shame Variety.com
Dec 6 2007

A summer full of sequels (Spider-Man, Pirates et al) helped propel the film business to a tidy five per cent jump in revenue so far this year. That's not bad, but it's nothing compared to the 49 per cent revenue growth for gaming, which has soared to $10.5 billion.

Even excluding the hefty coin from console hardware (which has no equivalent in the film world), games sales alone are up 27 per cent from the same period in 2006, to $5 billion, according to the NPD Group.

When it comes to sequel-itis, the film business is clearly in the shadow of video games. Five of the top ten movies this year are sequels – but in vidgames, it's nine of the top ten, and 17 of the top 20.

So does that mean three of those bestsellers are based on fresh ideas? Not really. Cars and Transformers are based on hit movies and the success of the third, Wii Play, is widely attributed to the fact it comes with an extra controller for Nintendo's bestselling console.

"The video game industry is very sequel-reliant," notes NPD analyst Anita Frazier. "It's easier to forecast revenue and allocate resources toward franchises with a proven history and then use that umbrella of properties to support any new ventures."

Aside from the spectacular stats, the video game sequels have one more huge advantage over their film counterparts – their budgets don't balloon from the predecessor editions.

Year-to-year box office increases are at least partly attributed to higher ticket prices. That's not the case with video games. Pure unit sales are up 10 per cent year-to-year – thanks in part to the release of new consoles and partly to the vagaries of any media business.

It's not just the publishers that rely on franchises. They're particularly important to the three major console manufacturers – Microsoft, Nintendo and Sony – which count on their self-published franchises to help drive console sales.

By investing heavily in Gears of War or Mass Effect, the theory goes, Microsoft can better convince gamers to buy an Xbox 360 so that they will be able to play the inevitable follow-ups.

While video game sequels overwhelmingly outperform originals, it's not simply a matter of popularity. It's just that very few top-tier original titles are released each year – much fewer than in movies and TV.

Only a handful of new video game properties, including Bioshock, Crackdown and Lost Planet, have been solid successes thus far in 2007, though none is a chart topper. Several recent originals, like Rock Band, Mass Effect and Assassin's Creed, could turn out to be hits before the year is done.

It's worth noting, however, that all of those games are designed to spawn sequels if they're successful. Unlike Hollywood, virtually every new video game is designed to spawn sequels. The idea of a Beowulf or 300 – big movies with no chance of turning into a franchise – is unheard of in gaming.

"In videogames, unlike movies, the expectation is that almost everything we put into development will make it to production and should have a good shot at being a commercial success," says Philip Holt, general manager at EA's Tiburon Studio, home of the Madden NFL franchise.

"That forces us to gravitate toward games that have, or could have, a fan base that clamors for more and more."

Among video game publishers, in other words, the action is all in the franchises. And the results show on their bottom lines:

* Activision recently upped its guidance and saw a 14% jump in its stock last week based almost exclusively on boffo sales for Guitar Hero 3 and Call of Duty 4.

* Microsoft turned Halo 3 into one of the biggest entertainment launches of the year, earning more than $170 million on its first day, primarily from gamers who reserved copies ahead of time. The game has thus far sold 5 million units worldwide and is the bestselling title this year in the U.S., even though it's only available on one console.

* Red-hot Nintendo has built its business in large part on three franchises, each more than 20 years old: Mario, Zelda, and Metroid. Super Mario Galaxy, the latest of more than 50 games that have prominently featured the tubby little plumber in one form or another, sold more than 500,000 units in its first week on sale in the US.

* Electronic Arts has two video games in the US top ten, both of which share a very similar title. Madden NFL '08, the 19th entry in Electronic Arts' perennial football powerhouse, is number two, while Madden NFL '07, released in August of last year, is number ten.

* Many observers have pointed out that one of the reasons Sony's PS3 has been selling poorly is that sequels to several of the franchises most associated with the Playstation brand, including Metal Gear Solid, Grand Theft Auto, and Killzone, aren't coming out again until 2008.

In any media business, execs like franchises because they provide predictability and opportunities for spinoffs, merchandising, and other ancillary revenue.

In films, however, costs tend to escalate rapidly. The first Spider-Man cost $140 million to produce, the second $200 million and Spider-Man 3 at $258 million, according to estimates.

In video games, that's not the case. Most major game franchises, in fact, are made at the same studio with largely the same team of developers year after year.

Yes, some game producers and designers get big bonuses and raises, while the developers have to keep raising the technological bar. But that's nothing compared to the ballooning effects that budgets and star salaries have on a summer tentpole.

"There are definitely economies of scale from using the same group of experienced people, the same engine, and repurposing some assets," explains Tracy Williams, marketing manager for THQ's successful WWE video games, which come out every November. "It takes a significant investment to start, but ultimately, (franchise sequels) can be a little cheaper than other games."

With the cost of top-tier games now often exceeding $20 million, video game publishers are more conservative than ever, which makes original properties even rarer.

But while that's coming true on the shelves of Best Buy, there's a countervailing force. Thanks to digital distribution, there are more opportunities for inexpensive, so-called "casual" games that can be downloaded to a PC, console, or mobile phone. Nintendo's low-powered Wii and DS are also significantly less expensive to develop for than the 360 and PS3, making it easier to take some risks.

"There will always be those big blockbusters, but the mobile phone and the Web and Wii are offering business models that aren't so daunting," says EA's Holt. "That may open up new opportunities for creative exploration."

This article originally appeared on Variety.com
Author: Ben Fritz/Pamela McClintock

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