Aidan Joyce, a 20-year-old student at Georgia State, downloads "a lot of films" for free online. "Terabytes worth," he says. But he does pay for video games. Monday night, Joyce got in line at Edgewood Mall in Atlanta to pay $60 for Call of Duty: Modern Warfare 3 on the midnight of its release.
At a time when the music industry is Auto-Tuning its own eulogy and Hollywood has all but given up on DVDs, analysts estimate that the latest edition of Activision Blizzard's (ATVI) hit series sold between 5 million to 6 million copies on the first day. Others think that's low: Some have estimated first-day sales of 9.3 million copies.
Worldwide, 1.5 million people lined up at midnight events to score copies of the video game, CEO Eric Hirshberg told analysts on Activision Blizzard third quarter earnings call Tuesday afternoon. These are record numbers not only for a video game, but for any media property, and its total sales are predicted to rival those of a blockbuster film.
Modern Warfare 3 is expected to bring in between $1.5 billion and $1.6 billion, estimates Arvind Bhatia, managing director of Sterne Agee & Leach. For comparison, Harry Potter and the Deathly Hallows : Part 2 grossed $1.3 billion.
"The audience [for video games] is expanding and companies are doing a good job of exploiting big audiences," Bhatia says.
In the early '70s when video games were born, arcade games like Pong consisted only of a few black lines and a 2-D ball. Today, games like Modern Warfare 3, a first-person shooter that takes players through an interactive military narrative and allows for online multi-player gaming, are cinematic, with realistic graphics and high-budget video interludes.
"Video games are becoming more cinematic as technology catches up with user expectations. This is contributing to popularity," Bhatia says.
Meanwhile, the at-home movie industry is in flux, with Netflix (NFLX) losing customers due to price hikes and unpopular business moves, and services like Amazon Prime (AMZN) clutching at the remainder of consumers still willing to pay for rentals.
Call of Duty: Pirate Warfare
One reason games like Modern Warfare 3 have such huge sales figures is because companies like Activision Blizzard have more control over the distribution of their content than movie studios. In other words, they're hard to pirate.
While illegal copies of PC games are easy to find online, you can't play them on any old laptop: To run properly, modern games require special graphics-boosting hardware. Meanwhile, popular consoles like Microsoft's (MSFT) XBox 360 and Sony's (SNE) PlayStation 3 make it difficult to run pirated games. Even if someone were to burn a downloaded game onto an XBox disc -- which requires special software -- the Digital Rights Management technology and closed multi-player networks within the device would prevent any but most tech-savvy gamers from getting it to work.
On the first day of Call of Duty: Black Ops, the previous release in the game series, were 95% of sales were for the Xbox and Playstation versions, with the remaining 5% for PCs and Wii. It's worth noting: The PC version of Black Ops was the most pirated game of 2009.
In other words, unlike idle Netflix browsers, gamers are ready and willing to spend $60 on a newly released game, with features that can't be replicated anywhere else.
"Video games are interactive and provide more value for the buck compared to other forms of entertainment," Bhatia says.
3-D to the Rescue?
These days, the most successful movies are those that are more like video games, offering new, inimitable theater experiences that make people line up. Avatar, for example, was most pirated movie of all time but also the highest grossing, making $2.8 billion worldwide.
Director James Cameron called the movie Hollywood's response to piracy because of its length and visual 3-D component. According to the Motion Picture Association of America, the 3-D market made up 21% of box office sales in 2010, compared to 2% in 2008.
Meanwhile, in the same way that some traditional cinema goers complained that Avatar was too much like a video game, some hard-core gamers say that Modern Warfare 3 is too much like a movie.
"It's been an issue within gaming from the beginning," says Alexander Galloway, a professor of comparative literature at NYU and the author of In Gaming: Essays on Algorithmic Culture. "True hardcore gamers will always think [immersive, representational modes] are retarded and irrelevant." The idea is that "once cinema starts, interactivity ends," Galloway explains.
Joyce, who notes that he regularly pays to see movies in theaters, was unimpressed by Modern Warfare 3, which he thinks is popular because of its mass appeal. "There are explosions going off the time," he says. "It's sort of the video game equivalent of a Michael Bay film."
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