Are Big Budget Video Games Dead?

By Tim Parker | August 15, 2012 AAA
Are Big Budget Video Games Dead?

Most consumers know that making a top quality movie takes a lot of money. The last of the Batman series, "The Dark Knight Rises" had a budget of $250 million and "Toy Story 3" cost $200 million to make. People rarely think about the costs of video games, but the budgets of some games can rival those of certain Hollywood blockbusters.

Video Games Vs. Movies
The most expensive video game to produce came in at $100 million. "Grand Theft Auto IV" (GTA IV) took over 1,000 people more than three years to produce and has enough content to keep the average gamer busy for at least 100 hours. Adding to that price tag is more than 100 soundtracks and hours of video taken from New York City streets.

Compared to the $300 million price tag of one of the most expensive movies ever made, "Pirates of the Caribbean: At World's End," $100 million doesn't seem very expensive. "GTA IV" had worldwide revenue of $500 million and "At World's End" brought in $960 million, proving that the video game industry can create investment returns on par or in excess of some feature movies (unless you start comparing video games to some of the top-earning superhero movies).

SEE: Why Movies Cost So Much To Make

A Changing Landscape
"Grand Theft Auto IV" wasn't the only big budget game released in 2008. "Gran Turismo 5" also came out that year and cost $80 million to produce, making it the second most expensive game of all-time after GTA IV. However, the fact that few games have had comparable budgets since 2008 shows that a lot has changed in the video game world.

Competitors like Zynga are making games at a fraction of the cost. The LA Times reports that games like Zynga's wildly popular "Farmville" costs between $100,000 and $300,000 to produce. Instead of consumers making a one-time purchase of the game and maybe paying a monthly fee to be part of the multiplayer community, games like "Farmville" allow players to pay to purchase items in the game with virtual money or earn virtual funds by viewing ads, another revenue stream for Zynga.

Business Insider reports that Zynga made over $250 million in revenue in 2009 from an investment of less than $500,000, after adding other company costs indirectly related to the creation of their games.

SEE: 5 Top-Earning Video Game Characters

But Will It Last?
A 2011 study found that using Facebook as a gaming platform has dropped 50%. If stock prices are any indication, the Facebook game craze may be short-lived. Zynga's stock is down more than 80% since March, and Facebook's stock recently hit an all-time low.

Video game retailers are feeling the pinch of declining sales too. Gamestop has seen declines since last year, despite forecasts of more than $67 billion in video game revenues in 2012.

Joe Gorman, vice president of GameStop's mobile business unit, thinks that tablets are the future of gaming, as they are accessible to a wider audience, continue to drop in price and are becoming as powerful as some computers.

The Bottom Line
Big budget games like Halo 4 are set to hit the streets in 2012, but with tablets and social media sites now offering lower cost platforms for the production of video games, companies may choose to use a model similar to Zynga and spend less on design but find more ways to create means of ongoing monetization.

In the past, video games have largely followed the path of the movie industry by spending an increased amount of resources for a more vivid user experience. With a variety of platforms, including the rumored Apple TV, and a recently leaked version of the new Xbox, some movie studios may follow the lead of video game creators by attempting to create a more interactive experience at a lower cost.

SEE: The Best-Selling Video Games Of All Time

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