Video games grow up

Published 12:00 am Tuesday, November 4, 2008

By Alex Pham
Los Angeles Times
California is the birthplace of such global pop-culture sensations as the Beach Boys and Mickey Mouse. But in the 21st century, it has become the driving force behind a new generation of entertainment heavyweights: The Sims, Guitar Hero and World of Warcraft.
In recent years, the state has witnessed an explosion of new jobs and global exports from the video game business, which is expected to deliver nearly $50 billion in sales this year despite the brutal economy.
Global financial woes have dragged down game makers’ stock prices and are dampening consumer spending heading into the holidays, when the industry typically generates 40 percent of its annual revenue. Still, analysts say that video games generally hold up well during economic slowdowns, and they expect 2008 sales to reach record highs.
So far, at least, game companies say they haven’t scaled back their hiring plans. The state that gave birth to Pong in 1972 has become home to more than 18,000 video game workers, nearly half of the industry’s domestic workforce. Tiny companies and giant corporations are braving high taxes and the soaring cost of living to tap into the state’s unique blend of engineers in the north and artists in the south.
The Los Angeles area is ever more essential to game development because of its collection of composers to score soundtracks, writers to script plots and dialogue, artists to bring characters and lush environments to life and actors to perform so their movements can be digitally captured.
“Southern California is built on the Hollywood dream factory, and games have become a part of that,” said Joseph Olin, president of the Los Angeles-based Academy of Interactive Arts and Sciences.
PricewaterhouseCoopers projects an annual growth rate of 9 percent for the next five years in global software sales for the video game industry, nearly double the rate that the consulting firm forecast for movies and theme parks, and about triple the rates projected for book and magazine publishing.The game industry has traditionally thrived, even when consumers are tightening their purse strings, because many players believe games provide more bang for the buck than other forms of entertainment, such as movies, sporting events and concerts. A $50 game can provide dozens if not hundreds of hours of amusement.
“We’re still going to spend the same amount of hours entertaining ourselves,” said Michael Pachter, an analyst with Wedbush Morgan Securities. “It’s just a matter of which entertainment we choose to buy, and games are still perceived to be a super value.”
Adam Noel is among the legion of consumers who drive game sales. The 28-year-old credit analyst says he doesn’t go to the movies as often as he might ó so he can spend more than $600 a year on video games.
“Games are obviously more expensive than movies,” the Los Angeles resident said. “But you spend so many more hours playing a game.”
As they pump out these games, Southern California companies such as Activision Blizzard Inc. and THQ Inc., along with Silicon Valley’s Electronic Arts Inc., claim most of the credit for having generated thousands of new jobs.
EA has hired about 2,500 people a year ó including some 300 new college grads ó for the last several years.
“We can’t get them into our studios fast enough,” said Cindy Nicola, vice president of talent acquisition for the game publisher, based in Silicon Valley’s Redwood City. “Making games is very hard. It takes a lot of people who have both technical and artistic skills.”
They include Chance Glasco, a willowy 27-year-old who is responsible for handcrafting hundreds of animations for Activision’s shoot-’em-up game franchise Call of Duty. His sole job is to animate the hands and arms of players as they pick up and fire weapons in the game. On a recent afternoon in the Los Angeles studio where the game is made, Glasco deftly manipulated a pair of disembodied arms around an AK-74 assault rifle on a computer screen with a few clicks of his mouse.”I decide what the hands will do and how they do it so they have personality,” he said. “I think of each finger as an individual actor.”
The attention that the animators lavish on such minute detail explains part of the franchise’s success. This year, analysts expect Activision to rack up $4.8 billion in revenue and nearly $800 million in profit.
Almost two decades ago, Robert Kotick’s big bet helped revive Activision’s fortunes and anchor it among Southern California’s entertainment leaders. He paid $440,000 for a 25 percent stake in the game publisher ó then in bankruptcy ó and moved it from Silicon Valley’s Menlo Park to Los Angeles in hopes that the proximity to the show business industry would help bring games into the mainstream.
Following a recent merger with the game division of French media conglomerate Vivendi, Activision has a market capitalization of about $17 billion and employs 7,700 people. That’s roughly the size of Warner Bros. Entertainment, which employs between 8,000 and 12,000 depending on the studio’s production schedule.
Other game companies are attracted by the engineering talent pool in Northern California. Ubisoft, the French company behind such titles as Tom Clancy’s Rainbow 6 Vegas, has a San Francisco office with 225 employees. Nintendo Co., the Japanese games giant, this spring relocated its entire U.S. sales and marketing staff to Redwood City from Redmond, Wash.
The industry has grown so big, so fast that government statisticians are having trouble keeping up. Unlike other entertainment mediums, the video game industry isn’t yet classified by the U.S. Bureau of Labor Statistics. Game developers are lumped in with database programmers under the category of Computer Systems Design and Related Services. Other game industry workers are grouped with toy makers and other professions.
As a result, government economists have no way to tell how many are employed by the game industry.
In contrast, the music industry, which last year pulled in less revenue globally than the game industry did from selling software, has five job categories.
The video game sector is “no longer an interesting little industry ó it’s serious money,” said Jack Kyser, chief economist at the Los Angeles County Economic Development Corp. “But to economists, it’s like a lost industry. No one tracks it.”
Business Media, which publishes Game Developer magazine and runs the annual Game Developer Conference in San Francisco.
In its first census of the industry last year, the magazine counted 39,764 workers, with nearly half in California (it has not yet released 2008 data). An additional 15,000 people work for companies that assist the game industry with software tools or services such as marketing or public relations.
Although that’s small relative to the music and movie industries ó each of which employs more than 300,000 people, according to the county economic development agency ó game companies are growing rapidly.Nearly all corners of entertainment now have a video game component, whether it’s a console game to go along with the release of a Harry Potter book, an online game coupled with a movie franchise such as “Pirates of the Caribbean” or a virtual world that draws in fans of television shows such as MTV’s “Pimp My Ride.”
Virtual worlds ó online environments that allow members to role-play, build and explore ó are particularly poised for growth, analysts say. Over the next 10 years, these online worlds will attract a billion users and generate some $8 billion in revenue from advertising, subscription fees and the sale of virtual items, according to research firm Strategy Analytics.
California is home to many of the companies building them, including Trilogy Studios in Los Angeles, Viacom Inc.’s NeoPets in Glendale and Linden Lab, the San Francisco-based creator of Second Life.