It’s official, games are bigger business than music. Well, it is if you look at retail revenues in the UK. For the very first time, 2007 saw games earn more retail revenue than music, and it’s set to continue. With the saturation of iPods stuffed onto every commuting train, how has this happened?
In 2006, music took £1,555m and games took £1,275m. However, in 2007 music took just £1,162m, whereas games took £1,517m. That’s a considerable change. Video still leads the way by taking £2,492m in 2006 and £2,450m in 2007.
So, why is this of note? Well, it’s the first time it’s ever happened and the 2008 forecasts look set to repeat 2007 figures. Is this because games are growing, because music is more easily pirated, because retail prices on music are being forced down through price wars, because everyone buys through iTunes, or because there are more new gamers than there are new music listeners? I think it’s a mixture of all of these and more.
If you start to compare total revenues through other sources then I expect music still wins over games as music earns revenue in other ways such as fees for being played on the radio, use on compilations albums, use in movies, and so on. Games,m however, has no other source apart from maybe getting a budget release - and the amount of second-hand games sales is reducing that too.
Similarly, on a global level, the games industry takes greater revenues than the cinema box office. However, the video industry has many more sources too - such as DVD sales, DVD rental, satellite broadcast, terrestrial broadcast, hotel broadcast, and more.
In part, this explains why games are comparibly expensive next to movies and music. All the investment needs to be recouped in the retail sales alone. For many of the current next-generation (Xbox 360 and PS3) games at the moment, this is $10 million and up and that’s just the cost of creating it let alone multi-million dollar marketing, the cost of goods themselves, taxation, retail margin, and so on.
In fact, these sort of statistics (games bigger than music) play down just how hard it can be to make money in the games industry. It’s great to see games are definitely a growing sector, pushing into the mass entertainment consciousness, but it’s not plain sailing for games just yet.
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Tive 19 Mar 2008
ReportReally interesting about the second hand games thing. How have gaming companies let this happen? You cannot walk into HMV and buy a second hand CD or DVD so why can you buy a second hand game in Game? After selling off my unplayed games, Im only paying marginally for new games especially if I buy them second hand. In effect I can recycle games. Does this trend show that gaming price points are too high?
Eisley 19 Mar 2008
ReportHow the games industry allowed this to happen is a very good question, and one the games industry is asking itself. I think you can’t legally stop people selling goods second-hand if they’re not licenced. Usually, second-hand doesn’t co-exit in the same store as new goods but, once non-games shops started it, games retail saw a great opportunity.
I think you can’t buy second-hand music in HMV because msuic can be copied very easily. However, console games are very hard to
copy as they need to be manufactured in the console owners’ factories in order to work. So, second-hand sales of games are the only
way not to pay the full price (ignoring pirate copies and the occasional, but less used, devices that can copy games).
All the revenue from second-hand sales goes straight back to the retailer. The developers and publishers of the games receieve no
revenue from second-hand sales. Like many other industries, publishers have little choice where else to sell their games. Digital distribution is something publishers could use but it’s not mature enough just yet.
Are games prices too high? In terms of running a business, if anything, they’re becoming too low. The cost of making a game is more than double now what it was a few years ago. Plus, big selling games are becoming fewer as games (like movies) continue to separate into either massive success or massive failure. Also, the total number of games consoles out there right now is quite low as the ones that are active are all relatively new. Add them all together and you don’t even get close to the 100 million PS2s out there for which few people buy games for now.
So right now, there are fewer console owners to sell games to, for the same price as years ago, for games that cost more than double to make, in a market where retailers make price cuts within a few weeks of release (publishers have to cover part of that reduction), and where second-hand sales are reducing the amount of sales of new games. It’s a difficult situation.
I remember a few games on the SNES which retailed for £74.99 back in the early 90’s and I wouldn’t want to go back to that. When I look at games prices now, I think £35-£45 is a lot of money, but it’s actually good value for what goes on behind it.