video game business overview (2008)
DESCRIPTION
I gave this presentation March 4, 2008 to a group of investors in San Francisco. It is a SHORT overview of the business at the time.TRANSCRIPT
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A Quick Overview of the Video Game Business Mark DeLoura - VP TechnologyMarch 4, 2008
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Games Then
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Games Now
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Delivery Platforms Then
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Delivery Platforms Now
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Genre Spread
Then: Simple sports games.
Now: action, adventure, fighting, platform, shooter, role-playing, simulation, strategy, sports, racing, flying, music-based, puzzle, party, and massively multiplayer games.
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Style Spread
Then: Just games.
Now: Core games. Casual games. Serious games.
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Culturally Relevant
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Worldwide
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Well, almost worldwide...
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Source: NPD Group, www.npd.com
A Big Business
2007 Market Stats US Retail Sales: $18.85 billion▪ Hardware: $7.04 billion▪ Non-PC Software: $8.64 billion▪ PC Software: $910.7 million▪ Accessories: $2.26 billion
Box Office: $9.7 billion DVD: $23.5 billion Rentals: $7.5 billion
Retail SalesHardwarePC Soft-wareNon-PC SoftwareAc-ces-sories
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Source: NPD Group (www.npd.com) and vgchartz.com
Hardware Sales (LTD)
Global Wii: 21.97 million Xbox360: 17.27 million PS3: 10.52 million
U.S. Wii: 7.38 million Xbox360: 9.15 million PS3: 3.25 million
Global
WiiXbox360PS3
U.S.
WiiXbox360PS3
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Source: NPD Group (www.npd.com) and vgchartz.com
Handheld Sales (LTD)
Global NintendoDS: 67.71 million Sony PSP: 31.49 million
U.S. NintendoDS: 17.65 million Sony PSP: 10.47 million
Global
DSPSP
U.S.
DSPSP
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Source: Vgchartz.com
Software Sales
2007 Top Titles Halo 3 – 4.82M Wii Play – 4.12M Call of Duty 4 – 3.04M Guitar Hero III – 2.72M Super Mario Galaxy – 2.52M Pokemon Diamond – 2.48M Madden NFL 08 – 1.9M Guitar Hero II – 1.89M Assassins Creed – 1.87M Mario Party 8 – 1.82M
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Source: mmogchart.com
The Juggernaut
World of Warcraft (Blizzard Entertainment) Released December 2004 Expansion pack January 2007▪ Fastest selling PC title of all time: 2.4M WW in
24 hours 10 million subscribers worldwide▪ USD 14.95/month
2007 revenues: $1.1 billion
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Source: www.activisionblizzard.com, www.eatake2.com
Mergers and Acquisitions
Activision / Blizzard (Vivendi) merger Proposed December 2007 Activision market cap: $8.01 billion Vivendi Game valuation: $8.1 billion
Electronic Arts / Take-Two acquisition Proposed February 2008 Electronic Arts market cap: $15.12 billion Take-Two valuation: $2.0 billion
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The Industry Structure
Platform Manufacturers Publishers Developers Service Providers
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Platform Manufacturers
Nintendo Wii, GameBoy Advance, NintendoDS
Sony PlayStation3, PSP
Microsoft Xbox360
Produces the hardware, and software development kits
Controls flow of software onto the platform Manufactures the software for a per-unit royalty
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Publishers
Electronic Arts, Activision, Ubisoft, THQ, Take-Two, Sega, SCi, Square Enix, Namco Bandai, Vivendi, Capcom, Konami, NCSoft, Disney, Atlus, LucasArts, Midway, ...
Manage and fund creation of games by developer studios
Work with platform manufacturers Conduct sales, marketing
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Developers
Thousands of studios Most well-known: Epic Games, Id
Software, Valve Corporation, Blizzard Entertainment
Invent and produce games
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Service Providers
Art providers Middleware tools Motion capture houses Music providers Testing houses
Used to reduce costs, reduce time, manage headcount more efficiently
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How a Game is Developed
Developer creates game concept Game idea is pitched to many
publishers A publisher funds the game through
to completion Publisher works with platform
manufacturer to produce Publisher conducts sales, marketing Finished product distributed to
retailers Developer receives royalties...
Hopefully!
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Development costs
Handhelds cheapest DS: $250K - $500K PSP: $500K - $1.5M
Consoles more expensive Wii: $4M - $8M Xbox360/PS3: $8M - $15M
PC variable depending on quality, genre Casual: $100k-$500K High-end AAA: $8M - $15M MMO: $50M+
Multi-platform development License costs
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Example cost scenario
PS3/Xbox360/PC AAA title, North America + Europe (EFIGS) Development: $20M Marketing: $10M Title MSRP $50, to retailers at $35 Platform manufacturing and royalty: $10 = $25/unit to publisher
$30M outlay, $25/unit requires 1.2M unit sell-through
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Industry forces
Each advance in technology increases development costs PS1: $2M - $5M PS2: $5M - $10M PS3: $8M - $15M
With each new generation, must sell more copies per game, or sell for a higher price
Multi-platform, multi-territory titles More outsourcing Less innovation