Sunday, November 22, 2009
The Twilight New Moon movie has posted $140.7 million for its opening weekend. The response, which was surprising, of tweens, teens, and their moms lining up, many a week in advance, for the movie, generated a lot of press coverage. Finally, the press and feminists celebrated, a movie that generated fangirl response on the lines of Star Wars and Star Trek enthusiasts. The hidden story, of course, is the phenomenal sales, unheralded, of the video game "Call of Duty: Modern Warfare 2." The game posted $310 million in sales its first day, and 4.7 million copies in its first 24 hours. Beating the "Grand Theft Auto IV" record of 3.6 million copies . The five day figures for "Call of Duty: Modern Warfare 2" were $550 million, again beating "Grand Theft Auto IV" which held the mark at $500 million.
The lesson is that while the attention may go to the fangirls, and the expensive legacy media of theatrical movies, the profits go to male-friendly videogames. Among the reasons: there isn't much competition. Moreover, it is likely movies and video-games will continue to diverge, one becoming a female-gay ghetto, and the other being "males only."
The first "Twilight" movie cost according to was $37 million. No current figures are available for the "New Moon" sequel, but the cost likely spiraled to around $60-75 million, given more effects, characters, rising salaries for actors, and so on. Marketing probably added another $30-40 million, making the film's total up-front cost of around $90 to $115 million or so. As Hollywood business writer and author of the "Big Picture," Edward Jay Epstein estimates, Studios net only about 18% or so of their revenues from theatrical / box office receipts. Fully 82% of revenue comes from Video on Demand, DVD, Pay-TV, and free TV rights (foreign and domestic). Further, studios only get 75% for the first weekend box office receipts, falling to about 50% thereafter. For foreign box office sales, percentages can drop even further while costs for dubbing, promotion/marketing, import fees, and so on can mount. It worth noting that piracy threatens both theatrical and DVD revenues. The LA Times notes that some studios have dropped profitable Korean and Spanish-language divisions, due to piracy. Eli Roth famously found that his loathsome "Hostel" movies were on sale on the street in Mexico City for the equivalent of twenty-five cents, American. Good quality pirated copies, too.
Of that $140.7 million that Twilight: New Moon pulled in, the studio will keep $105.5 million or so. That essentially covers its cost up-front and likely assures a tidy profit for the movie, assuming DVD sales track ticket sales and are not impacted by piracy.
Compared with the development costs, which were estimated to be $40-50 million and around $100 million total, the film "Twilight: New Moon" and the video game "Call of Duty: Modern Warfare 2" cost about the same.
But, the video game already pulled in about $310 million, or $210 million of net revenue, compared to a break-even figure for the film, through the first weekend (Fri-Sat-Sun) vs. the first two days (for the game). It is extremely unlikely that the five-day figure for the movie will match $550 million. Even more important, the game is more resistant to piracy than the movie. While pretty much any copy properly written to a DVD will play in most modern DVD players, making piracy technically easier for organized crime pirates, the same is not true for video games which generally have more robust copy protection. The games certainly can be pirated, but the expense generally prevents large-scale organized crime rings from participating, unlike movie DVD piracy. Moreover, online-game play is often a critical component, making purchasing of pirated discs a general non-starter, given that companies can and do require proof-of-purchase to participate in online play. These can be defeated, but again it is costly and most organized pirates do not bother.
Out of these trends several things are likely to emerge. First, that video games are ever-more bifurcated, either hit-driven like "Call of Duty" or cheap, and simple, like many of the IPhone games, which are troubled by piracy or in the case of Android low sales. Because of piracy and low-revenues for the Iphone style games, the barriers to entry into successful game development into "the next level" (profitability beyond a single developer) are likely to be high. Developers can still create simple games widely available (Apple's App Store tends to be better than Google's Android app store or Research in Motion/Blackberry's store) but widely pirated with low price points.
Hard to make enough money to move to the next level in that business. Increasingly, because of the high capital costs required to make a "hit" game, the video game business is resembling Hollywood of the 1920's through the 1940's, only with one big difference: unlike the studios the game companies have few female customers. But clearly, there is an order of magnitude or more, around two to five times as much money, hit film to hit game, available to video game makers. As game companies seek out (inevitably) cheaper labor, their costs will go down for everything but marketing, giving them a tremendous cost-advantage against Hollywood as well as making entertainment that men and boys desire.
Secondly, the success of Twilight and the sequel, are both good and bad for Hollywood. Good, in that they found a way to tap the fan-girl wallets of the folks below waiting in lines (some up to a week) for the premier [Click on images to enlarge]:
Looking at the pictures, a common thread appears for the fans of Twilight. They mostly do not find lots of male attention, let alone that of hunky, semi-gay, Alpha Male "sparkly vampires." They tend to be pre-pubescent, Moms, or overweight. Not all of course, but that accounts for most of them. Of course they want in fantasy what they don't get in real life. The comparison to the Star Wars geeks who lined up for that movie is of course, natural and apt.
For the purposes of fairness, the "Call of Duty: Modern Warfare 2" fans are shown below (fewer photos, because of less media interest).
Not much different, though a few are older. They seem to crave what they do not get in life, action/adventure (from the safe distance of the couch of course). Both the film and the game deliver to their respective audience.
But the danger for Hollywood is that the games can drive them out of business. Unlike the game companies, which can seek cheap programming labor in China or India, Hollywood is "stuck" using expensive actors, special effects, and location shots. The costs for the Call of Duty Franchise will only go down, over time, and sequels. While that of the Twilight series will only go up. Coupled with a tidal wave of predictable "sparkly vampire" bad-boy with superpowers fighting over teen girl projects, movies will become "gay" the way Broadway shows, reading/literature, and pop music (see Adam Lambert) have become. Many of Hollywood's key executives including Disney's Rich Ross are openly gay. While they have a keen eye for female-tween/teen appealing projects, they have failed and predictably will fail to generate much in the way of male-appealing projects. Movie after movie featuring a metrosexual vampire bad-boy that appeals to the fangirls is guaranteed to turn off guys from the theater. In favor of intermittent purchases of expensive video games. Call of Duty is listed at $60 at Amazon.com. That works out to about 5 movies, per person, or nearly 3 paired tickets at full prices. Given the pressure the recession has on wallets, sales for video games means less money men have to spend on movies. This is particularly so as movies inevitably, like TV, become a female-gay ghetto.
Hollywood is intent on replaying Detroit's strategy: create a negative view towards your product by much of the potential customer base. Depend on a small portion of the potential customers, on only a few particular profitable models. Create a negative view of your key workers and executives nationwide, and create a high labor cost. Lack any imagination or quality that were hallmarks of your products in the past. Cede key customers to rivals with lower costs and perceived higher quality.
It is likely they will end up the same, bankrupt, bailed out, and still failures.