The Business of Gaming

IN a week when we move into autumn along with the cheery message that there is a 1 in 6 chance of a double dip recession one media moves into its biggest profit generating season.

You might be forgiven if you think that the most profitable media in the world is television with its ad revenues or film with its takings and merchandise, in fact, its gaming.

Consoles such as the Nintendo Wii moved gaming from the bedroom of the teenage boy to the family lounge.

Gaming has moved into a more mainstream environment but the names of the big autumn releases: Gears of War 3, Modern Warfare 3, Battlefield 3 give the game away, so to speak, of where the real money lies.

Let’s take the most anticipated game release of this year, Modern Warfare 3, part of the Call of Duty series. This will mean nothing to most of you however the last game in the series, Call of Duty Black Ops, sold 5.6 million copies on the first day of release last November in the UK and US alone.

Since then it has gone on to sell over 25 million copies worldwide in just 10 months with a launch price on average of �40.

The Call of Duty titles are created and owned by publisher Activision Blizzard. This one games publisher in 2010 posted revenues of $4.8 billion with a 29% operating margin.

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It had $1.4 billion operating cash flow with a total of $3.5 billion of cash and investments and no debt. The Call of Duty games alone brought Activision $1.2 billion in 2010.

They also made $1.7 billion in digital revenues from online subscriptions to web based games such as World of Warcraft and also map packs for games.

These allow gamers who play others online to buy new digital worlds to shoot each other in and with 20m worldwide sold of a Black Ops extension pack at an average of $10-$15 per sale you can see how it ads up.

They are not alone. Electronic Arts which publishes the Battlefield series and the Sims among others, reported $3.8 billion in revenues for the year ending March 2011.

These are just two of the bigger publishers and this does not account for the revenues gained for Sony, Microsoft and Nintendo for their multiple console sales.

It is now, undeniably, a massive industry but how has it moved from teenage boy’s bedrooms to one of the worlds most profitable industries?

Gaming recently enjoyed its own series on BBC Four and therein lies the clue. I first played with a Spectrum 48k when I was in high school.

Many a Saturday afternoon was lost playing such classics as Manic Miner or Sabre Wulf. That generation, who were brought up on the Spectrum and Commodore 64, grew up and graduated to the Playstation and the X Box.

Then, games were bought by saving pocket money. Those 1980s teenagers are now in their 30’s and 40’s and can now afford the �40 cost of a new game, albeit wincing when paying.

The gaming industry has been accused of many things, but with enviable revenues and profits and a growing market a double dip recession is not a concern for those involved.

- Tim Youngman is head of digital marketing for Archant. Follow him on Twitter @timyoungman