A screen grab form Call of Duty: Black Ops
Video games aren't just interesting as entertainment. They are also fascinating investments, if you look at the companies that publish the games.
Activision Blizzard Inc. and Electronic Arts Inc. have been struggling during the economic recovery, with somewhat disappointing game sales. However, blockbuster video game titles are nontheless gaining an enormous attention for their sales numbers, and exert some pressure on the direction of game publisher stocks.
On Thursday, Activision announced that the worldwide sales for its Call of Duty: Black Ops surpassed an astounding $650-million (U.S.) during its first five days on store shelves, which the company says is the most successful entertainment property launch in history.
I spoke with Eric Hirshberg, Activision Publishing Inc.'s chief executive, about the business of gaming. Here is a slightly edited transcript of the conversation.
Are blockbuster titles increasingly important to game publishers these days?
Hirshberg: Absolutely. The trend over the past couple of years has been that the top 10 hits of any given year are taking a larger and larger percentage of the overall revenue generated by the industry. We're in a world of bigger, fewer hits.
Does that mean there is more discussion of potential hit games among analysts and investors?
Hirshberg: I think there is a tremendous amount of scrutiny and emphasis on this topic. It's a bit like there's a shrinking middle class in the games slate of any given year. There are usually a number of small hits and a handful of huge hits, but lacking are those medium-sized hits that the industry had for many years.
Does this change the way that game makers are developing titles?
Hirshberg: You want to create a lasting community surrounding your games. You want to create a franchise experience, and that's exactly what Call of Duty has done - and one of the things that's so phenomenal about it is that there are millions and millions of people engaging in this community online every day. Call of Duty [the franchise]has been growing for 10 years, and our job has become not just delivering great blockbuster releases, but delivering a constant stream of enhancements and digitally delivered content that constantly expand and amplify the experience.
What sort of lifespan does a blockbuster game typically have?
Hirshberg: To give you some context, the digital download content for Modern Warfare 2, if taken altogether, represents one of the top releases of the year. So just the additions to the game are in the top 10. I think that gives you an idea of how sticky a great online community surrounding a game can be...as long as you always keep it fresh.
There has been some debate over the economic sensitivity of the gaming industry. What does the success of Black Ops say about the health of the industry?
Hirshberg: We're cautiously optimistic. On one hand, we think there is tremendous appetite for great content. On the other hand, the fact that there are fewer, larger hits puts more pressure on each release to pierce that top strata of the industry.
Can you give some details on the making of a blockbuster game like Black Ops, in terms of costs and development time?
Hirshberg: I don't want to comment on the exact production costs, but I'll tell you that they are significant. It involves a couple of hundred people over a period of about two years. The process is in many ways like making a blockbuster movie or a blockbuster piece of software. There is a combination of those two worlds.