Lucrative biz is big source of studio's licensing revs

HOLLYWOOD — Hollywood’s becoming a serious gamer.

That’s because after years of viewing vidgames as merely a quick and easy way to promote a product, along the lines of toys, clothes and fast food tie-ins, vidgames have become a big moneymaker for the studios.

The vidgame biz grew 14.9% last year to generate $9.4 billion in sales in North America, according to the Interactive Digital Software Assn. That number is expected to grow substantially over the next two years, as reduced prices of Sony, Nintendo and Microsoft gaming consoles are expected to benefit the industry.

While reliable numbers aren’t available on industrywide licensing revenues, entertainment execs estimate games dump $1 billion to $1.4 billion a year into the studio coffers — meaning games may be Hollywood’s biggest source of licensing revenue.

Those numbers may have changed some attitudes in Hollywood, but there were some stumbles on the way to this point.

Because they didn’t take vidgames seriously in the past, studios pumped out inferior product, which not only backfired in costly financial failures but turned off gamers who were fans of the films on which the games were based.

In the past, it was enough to write a check to a studio, slap a few visual details of the movie onto a simple game engine and put it on shelves for a quick, if artistically underwhelming, buck.

But that’s starting to change, fed by a growing realization that everyone can make more money with better games, especially games that expand the audience’s experience of the fictional world and characters they’ve watched in a film. And for properties that can be turned into ongoing franchises, such deals can bring big money to both Hollywood and the game business for years to come.

“Licenses are viewed as the single most important driver of a title’s success,” says Doug Lowenstein, head of the IDSA. “There’s absolutely no question a licensed title is viewed by many as a critical part of their business decisions. If you have a license, theoretically you come in with a built-in market. You don’t have to go out and create one.”

Screenwriter Danny Bilson, now intellectual property development VP at publisher Electronic Arts, says part of what has changed is the way games are developed.

“You used to develop the game mechanics and then put a story on it,” Bilson says. “Now, the story is more important.”

Bilson and Electronic Arts are behind games based on MGM’s James Bond film franchise, using the series’ characters, weapons and settings. But they create storylines that have little to do with any specific movie. When “Die Another Day” debuts on screens this fall, so will “James Bond 007: NightFire.” But the “NightFire” game has nothing to do with the movie other than its shared protagonist, Bilson says. The same was true for the last game: “James Bond 007: Agent Under Fire.”

“If we did ‘Die Another Day’ (as a game), we’d have to duplicate every set, every costume,” Bilson says. “It’s a slavish process.” Sometimes that’s necessary, as with EA’s hugely successful Harry Potter games, where even the color of trim on characters’ clothing had to be approved by author J.K. Rowling and Warner Bros.

But Bilson and other game execs argue the real opportunity these days lies in extending a movie property into new areas, as LucasArts has routinely done with its fleet of Star Wars games. For instance, one upcoming title, “Knights of the Old Republic,” goes back 4,000 years before the period shown in the movies, presenting a broad range of new narrative territory for fans and creators alike.

Licenses are lucrative for the studios, but they remain too lucrative to ignore for game publishers as well: THQ resuscitated itself from bankruptcy with licenses; now quite healthy, it owns game licenses to all of Nickelodeon’s properties for 6- to 14-year-olds, World Wrestling Entertainment, “Monsters, Inc.” and the next three Disney/Pixar toons, Marvel Entertainment and “Scooby-Doo.” THQ also set up a joint development team with Nickelodeon and Paramount to find new game franchises that later could become TV or film properties.

Activision, the No. 2 independent publisher, also has invested heavily in licenses, with a roster this year that includes games based on “Spider-Man,” “Minority Report,” “XXX,” “Stuart Little 2,” “Star Trek” and “Star Wars.”

“We tell them, ‘Our business is really the natural extension of your business. We can add a dimension to your movie,’ ” says Activision CEO Robert Kotick. “Today, if you look at how much more reach games get, you realize this is a medium that can really help put value in an intellectual property.”

Activision’s licensing investments have paid off handsomely, with its most recent fiscal-year net income up 27%.

“The whole reason to do licensing in the first place is to get a proven, recognizable franchise you can depend on,” Kotick says. “The economics of this business don’t support big bets on unproven properties.”

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