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One thing is clear from the relatively disappointing showing of games at the Electronic Entertainment Expo (E3) video game trade show this year. If Grand Theft Auto V ships before the end of the year, it could be a so-so year for video game sales. If it doesn’t, then it will likely be a horrible year.
The industry and gamers are anxiously awaiting word from developer Rockstar Games about when the latest installment of the Grand Theft Auto series, which always features car combat and over-the-top shooting violence, will ship. If GTA ships, then it could add $700 million to the U.S. retail game industry’s sales, which have been weak at around $16 billion to $18 billion in recent years.
“I am not confident that it will be out this year, and even if it did, we would still likely see a modest decline in console software sales,” said Colin Sebastian, an analyst at Robert W. Baird & Co.
Michael Pachter, an analyst at Wedbush Securities, said that the release of GTA V could generate $700 million, but that’s less than 10 percent of the expected overall software sales this year. And the industry is trending down more than that, year to date.
Grand Theft Auto IV sold more than 3.7 milion copies in its first 24 hours and brought in more than $500 million in revenue in its first week in 2008. The game has sold more than 20 million copies to date. It would be great if Rockstar could do this every year, but GTA IV took more than $100 million and four years to develop. If it worked like clockwork, then GTA V should be shipping this year. But Take-Two executives have said they have no intention of annualizing their top franchises because they put such a premium on creativity.
“Given the current momentum of the market, I doubt any major releases, even one of GTA V’s size, would push the physical markets back into the positives,” said Jesse Divnich, an analyst at market researcher EEDAR. “The traditional gaming sector is under an enormous amount of downward pressure at the moment, and it will require a strong catalyst to shift that momentum.”
“I don’t think this is an issue of value but rather an issue of habit,” Divnich said. “Our entertainment consumption is habitual. After playing one great game, we instantly start looking for other games to play. The same goes for music and movies–hence why studios release back-to-back-to-back blockbuster titles in the summer. It is a form of unwritten collaboration.”
Divnich believes that Sony, Microsoft, and Nintendo have to do something to get consumers back into the stores. That usually means hardware price cuts, but they could also use more creative tactics to accomplish the same thing.
“For instance, they could just make one popular digital game free for a weekend,” Divnich said. “The cost would be relatively small if they could work out an agreement with the developer ahead of time. If you think about it, even a top rated triple-A digital title like Flower, Braid, Limbo, Castle Crashers, and such….these games at this point are doing less than $150,000 a weekend. I am sure any one of the developers would accept, say, a $400,000 payment in order to distribute the game for free for a limited time.”
Unfortunately, game development is more like an art form than an assembly line. Take-Two Interactive, the parent company of Rockstar, announced GTA V in October 2011, and it released a trailer for the game in November. The Rockstar North studio is working on the game, which features mission-based gameplay and online multiplayer in a reimagined Southern California, dubbed Los Santos.
But Take-Two and Rockstar have been mum about a release date. The trailer shows the game takes place in the fictional Los Santos in the state of San Andreas, which resembles modern-day Los Angeles. There’s hope that Rockstar may talk more about GTA V at the industry trade show Gamescom in Germany in August.
Take-Two has been moving to diversify its own product lineup, launching games such as Red Dead Redemption, L.A. Noire, and Max Payne 3 in recent years. But GTA V is its big money-maker, and the video game industry itself is still very dependent on the release of blockbusters like GTA V. Take-Two usually doubles its earnings for the year when it launches a GTA title.
But there is no white knight coming to save the traditional game industry. It’s time to figure out what to do in nontraditional games to pull the industry out of its slump.
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