Author Archives: Brit

Hollywood, Box Office Numbers, and Piracy

by | Business, Copyright, Piracy
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This article came up on Slashdot today.

“Claims by the MPAA that illegal downloads are killing the industry and causing billions in losses are once again being shredded. In 2009, the leading Hollywood studios made more films and generated more revenue than ever before, and for the first time in history the domestic box office grosses will surpass $10 billion. … [N]either the ever-increasing piracy rates nor the global recession could prevent Hollywood having its best year ever in 2009. With an estimated $10.6 billion in consumer spending at the US and Canadian box office, the movie industry will break the 2008 record by nearly a billion dollars.”

They reference a TorrentFreak article claiming that domestic box office numbers are higher than ever — and, therefore, movie piracy isn’t having any effect:

Claims by the MPAA that illegal downloads are killing the industry and causing billions in losses are once again being shredded. In 2009, the leading Hollywood studios made more films and generated more revenue than ever before, and for the first time in history the domestic box office grosses will surpass $10 billion.

Those despicable Hollywood liars. Additionally, these kinds of stories seem to be an annual occurrence (What piracy crisis? MPAA touts record box office for 2007, What piracy? Movie biz sees record box office in 2008).

But, I don’t consider TorrentFreak to be a reliable source, and expect a big dose of spin coming from them. Too bad they didn’t provide any statistics so that we could see the trends. That’s okay. I will. Shown on the right are the total domestic (US and Canada) box office numbers, according to BoxOfficeMojo. The dollar amounts are in millions. (Hollywood Box Office, the original source for the $10.6 billion estimate has adjusted their estimate downward to $10.5 billion.)

Okay, you might see some trends here. There’s some pretty strong growth from 1980 until around 2002. Then, after 2002, the box office revenues hover between $9 billion and $10 billion a year.

Let’s take a look at those numbers in chart form. Strong growth up until around 2002, then some leveling off. But, the movie industry is still growing, right?

Well, if you consider that inflation is around 4%, you start to wonder if the movie industry is keeping up with inflation. What happens if we take a look at these same numbers and adjust for inflation using the Inflation Calculator?

This chart shows the inflation adjustment in the third column and the Inflation-Adjusted (2008) domestic Box Office numbers in column four. Once you take the inflation adjustments into account, you can see that 2009 wasn’t the best year ever. The best year ever for the movie industry was 2002. If box office revenue reaches $10.5 billion this year, after adjusting for inflation, it will be the fifth highest year, behind years 2001-2004. Here’s a chart of these numbers:

Once inflation is taken into account, the 2009 box office numbers are about 9% lower (or $0.8 billion) than 2002 numbers. (Hm, that’s a few years after music industry revenues also peaked*.) On average, movie box office revenue increased by $177 million/year between 1980 and 2002. Then, on average between 2002 and 2009, it has declined by $114 million/year. Yes, this could be a short term dip in revenue (like the slump in the early 1990s), but had revenue grown at the same rate between 2002-2009 as it had between 1980-2002, revenues would be $2.0 billion (20%) higher in 2009.

If we wanted to go one step further, we could also point out that the US and Canadian populations have grown from 227 million and 24.5 million in 1980 to 305.5 million and 33.9 million in 2009, an increase of 35%. Based on that, we can see that the movie industry’s growth in the past 30 years has been based on population growth. Per-capita spending has fluctuated a bit, and has declined by 14% since 2002.

Per-capita inflation-adjusted domestic box office:

It’s not a horrible downturn, and it is similar to the decline seen in the early 1990s, but it’s also not an argument that piracy isn’t hurting the movie industry, nor is it “shredding” the claims that movie piracy is “causing billions in losses”.

I should also point out another interesting bit of spin. The Ars Technica article linked at the top says: What piracy? Movie biz sees record box office in 2008. Looking at that headline, it looks all wonderful for the movie business, doesn’t it? But, once you look at the inflation-adjusted numbers, you can see that 2008 numbers ($9.63 billion) were the worst numbers since 2000, and per-capita spending was the worst since 1997. Funny the tricks you can play when you don’t adjust for inflation.

* Graph of the music industry downturn since 1999:

Battlefield Heros Free-to-Play/Pay-to-Play

by | Business, Games
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I remembered hearing about Battlefield Heroes a while ago. It was an interesting idea: they were making a decent-looking first person shooter, and it was free to play. You could buy stuff in-game, but it was just avatar customization stuff that had no effect on the gameplay. The question I wondered back then was: would avatar customization make enough money for them to pay salaries? It seemed unlikely. One possibility is that they’d get millions of players, but keep their servers load lightweight (people would play peer-to-peer, which would cost them nothing). Then, even if a few percentage paid for avatar customization, they might do okay. But, it would require phenomenal success (in terms of the number of players). I thought I’d keep an eye on them, just to see what happened.

Well, recently, they announced some changes in their system. You can still play for free, but the changes make it harder to do well in the game unless you’re paying for in-game upgrades. The game has two ways to get upgraded weapons: Valor Points, which you earn by playing; and Battle Funds, which is what you get when you pay real-world money. The new update effectively reduces the value of Valor Points and increases the value of BattleFunds.

I’m going to give them the benefit of the doubt here, and say that they thought their business model would work, but after a while, decided they needed to boost their revenue. It didn’t really seem possible for them to survive on just avatar-customization alone. The whole “pay real-money for in-game upgrades” is quite a balancing act. On one extreme, players pay money for purely aesthetic changes (avatar customization). You get lots of players, people are happy, but the company is earning very little money per player. On the other extreme is a system where you can’t be an effective player in the game without paying money — the game is really a demo unless you pay some real-world money. You get fewer players, and people get more resentful over the bait-and-switch of “free to play, oh wait – you’re nerfed unless you pay” which harms the company/game reputation, but the company earns more money per player. Then there’s the balancing act of staying in the middle ground – trying to earn enough to survive and pay employees, but avoiding guilt and negative stigma of the bait-and-switch. I guess I’m not that surprised to see them shift towards a stronger pay-model, since their initial business-model seemed overly optimistic.

Link: EA restructures Battlefied: Heroes pricing; fans enraged

Penny Arcade TV?

by | Cool Stuff, Video
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I stumbled on this while reading Penny Arcade: they’re doing a video-blog/Reality Show*, but only for a limited time. Click the image below to see the videos.

* They’re calling it a “reality show”, but I don’t see any physical challenges, infighting, or any disgusting “eat this live snail/spider/scorpion” contests, so I think it’s more similar to a ‘day in the life’ documentary.

Modern Warfare 2 on Fox and Friends

by | Games, Society, Video
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“You bring a game into a house, nothing to stop an eight year-old kid from becoming a terrorist and shooting people.”

Obviously, John Christensen could’ve done a better job with the interview, although he probably isn’t put into too many television debates, so I can forgive him for that. It also looked to me like they might’ve been doing the interview early in the morning, and Christensen was not entirely awake. The other people were obviously better prepared for the attack. The “let’s have a fair and balanced debate” by the host was rather farcical. It seemed more like “let’s both beat up this novice and unprepared public speaker, and the fact that we give him a chance to speak will make us look like we’re providing balance”.

According to Ripten.com:

Fox contacted [Christensen] that same day with just a few hours notice. In addition to Jon never having been on television before, the segment was filmed at 3:30 AM his time, which meant he wasn’t exactly “well rested” before going on air.

Ultimately, though, game-companies are at a disadvantage because the media looks for things to talk about, wants to push people’s buttons, talk about controversy, and get credit for talking about it first. They will come after game companies because they want to drive-up viewer numbers. Playing on people’s preconceived notions is the easiest way to do it. At best, the only thing interviewees can do is hold them at bay – by providing a cogent defense of the industry. They’ll always be back, though.

Stephen Totilo, of Kotaku, does a better job of handling the press: