Video Games Redefine the Media Universe

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Video Games Redefine the Media Universe

The gaming market is growing so rapidly that is has nearly eclipsed the theatrical film industry. PricewaterhouseCoopers estimates the 2006 video game software market at $31.1 billion worldwide. By comparison, the box office revenues from movie theaters are $33.6 billion.

According to an industry analysis called “Video Games in the Media Landscape” by the Soleil Media Team, in the past five years, the compound annual growth rate for the gaming industry has been 8.6 percent, while movie theater ticket sales have grown by a mere 1.5 percent.1 Why is video gaming becoming so popular at the expense of other media, such as films and television? History shows that each major new advance in communications technology replaces the previous generation. For example, the oral tradition of storytelling gave way to books with the invention of the printing press in the 15th century. The invention of radio diminished the impact of books, and films and then television supplanted radio as the dominant medium by the mid-20th century.

Now the next stage in the evolution is starting, as video gaming becomes more sophisticated. The newest generation of games boasts special effects that rival those of any big-budget movie. They also contain compelling characters, life-like landscapes, and a strong plot. In fact, game developers are so conscious of the need to create gripping stories that Electronic Arts recently hired film director Steven Spielberg to create and produce three new game franchises.

But what really sets games apart from movies is that they are interactive rather than passive. Instead of sitting back and watching a story unfold, players control the action and influence the outcome of the story. The most successful on-line games captivate the attention of millions of users. For example, Blizzard Entertainment’s World of Warcraft is a subscription-based massively multi-player on-line role-playing game. Players can take on the role of warriors, elves, or other characters. Thousands of them can play against each other at the same time, and groups can band together to accomplish objectives such as searching for treasure or slaying a dragon. To understand the profit potential of a game like World of Warcraft, consider this: More than 8 million people around the world, each paying $15 a month, now play the game regularly. According to Red Herring,2 World of Warcraft generated an estimated $1 billion in revenue in 2006 alone.

For this reason, venture capitalists are throwing money at game developers, hoping to invest in the next World of Warcraft...

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