Are Video Games Really Bigger Than The Music Biz?

Lucas Jensen | November 5, 2008 11:45 am

I’m an avid gamer, and I’m tired of the idea that videogaming is some sort of niche media populated by pimply Internet trolls who haven’t seen the sun since World Of Warcraft came out. Sure, those guys actually exist, but Nintendo’s strategy toward more casual games like Wii Sports–not to mention the whole rise in popularity of music games–proves that gaming’s audience has a lot more room to grow. Nintendo’s Reggie Fils-Aime once asked this pertinent question:

Do you know anyone who has never watched TV, never seen a movie, never read a book? Of course not. Now, do you know someone, maybe even in your own family, who has never played a video game? I bet you do. If we want to consider ourselves a true mass media, if we want to grow as an industry, this has to change.

While gaming is mainstream for the first time since the release of the original Nintendo Entertainment System, there is still plenty of room to expand. Video games are also surprisingly recession-proof, racking up big sales while most other major media, such as network TV or the music biz, struggle with declining revenue. Consequently, we’ve been treated to a lot of “Gaming Is Bigger Than Hollywood/Music Biz” stories recently.

Just today, the BBC reports that games are on pace to outsell music and video in the UK. Let’s everybody take a deep breath.

I don’t need to link to any evidence that the music industry is in bad shape. That point is inarguable. Hollywood ticket receipts and DVD sales have been holding steady, but the growth isn’t there, and the stupid Blu-Ray/HD-DVD format war didn’t do anybody any favors. The problem here is this: the sales figures for video games always come with caveats and codicils.

Video games lack a truly credible independent sales reporting body like Soundscan, which is fairly reliable despite its flaws. Hollywood has long juked its box-office stats, and the gaming industry is really no different. Most sales information comes from the game publishers themselves, and it’s filled with all sorts of massaging. Game publishers often talk about sales in terms of “numbers shipped,” which just means how many copies stores decided to stock. That’s a lot different than numbers actually sold. Sometimes they talk of the number of players a game has instead of how many it has actually sold. These kind of stats are as reliable as, say, Alexa numbers.

According to one of those ephemeral “retail analysts” who haunt stories like this, gaming is expected to grow “42% to £4.64bn in 2008, with sales on music and video at £4.46bn.” Those figures are pretty astounding on the face of it and do show that videogaming is truly a surging retail force. But the article mentions later on that hardware sales are included in that figure–which is little unfair to the music and video industries. iPod and CD player sales aren’t ever lumped in with music sales, and DVD player or TV sales aren’t lumped in with DVD sales.

Also, most videogames-are-bigger-than-God stories–like this BBC piece–fail to mention the simple fact that videogames just cost quite a bit more than CDs or movie tickets or DVDs. If this story mentioned what the average price of a videogame was or how many actual units of software a year were sold, the headlines would be a lot more accurate, if boring to journalists who are looking for some sort of entertainment industry-related horse race to break out. My guess is that albums, singles, and digital downloads still move way more in terms of actual units, and the inflated price of videogames is the factor behind the gaudy profits.

• In 2007, US album sales, digital and physical, were around 500 million. That doesn’t even include digital track sales, which are pretty substantial. • Across all platforms, from PC to handhelds to consoles, the total number of games sold in the US in 2007 was approximately 267 million. That’s a huge number, to be sure, but it’s still half of album sales alone.

I have no reason to suspect that the UK isn’t proportionally similar. The average game price, factoring in the disparate prices of handheld, PC, and console games, is probably somewhere around $40-50. The average CD is what? $10? $15? You don’t have to be a mathemagician to see that video games win out in that scenario, even while increased production costs are eating into games’ profitability.

Oh, yeah, profitability! Making a big-time pop record is probably expensive, but it ain’t $10 million expensive, which was the estimated cost of the first Gears of War. Video games have slim profit margins–often as little as $1 a game–because productions take years and cost millions these days. The largest titles have to sell hundreds of thousands to turn a profit, and even then it’s meager. In this midst of this gaming boom, development houses are closing left and right because the costs are staggering. It could be argued that their profitability is worse than the music industry’s, and that’s saying something.

Gaming’s meteoric rise can’t be denied, and the mainstream media’s reticence to accept my favorite hobby as anything more than a toy or a trifle has made them look foolish, particularly when sites like Kotaku–which regularly posts images of video game-themed cakes–put up bigger numbers than indie kingmakers Pitchfork. The games-are-bigger-than-the-music-biz stories, however, should be viewed with some amount of skepticism given the way the numbers are presented. The music biz is down, but it’s not out for the count just yet.

Games ‘to outsell’ music, video [BBC]Album sales take a tumble in 2007 [Variety]Growth of gaming in 2007 far outpaces movies, music [Ars Technica]Are Games Bigger Than Movies? One Expert Analyzes… [Deadline Hollywood Daily]Why Gears Of War Costs $60 [Forbes]