Like most industries, the gaming industry is bound by the conventional economic wisdom that you must spend money to make money. Historically, that’s meant taking a loss on every game system sold (with the notable exception being most Nintendo consoles) in order to tap into selling game after game to console owners. This measure of success is known as the “attachment rate” or “tie ratio.” A somewhat (November 2008) dated Gamasutra chart shows that the Xbox was in the lead, with 6.6 games/system sold, followed by the Wii at 5.5 and the PS3 at 5.3.
This statistic has historically been a powerful metric for measuring market penetration and overall success for a console. After all, what’s the point of selling a console if you can’t sell game after game? But as with many things in today’s integrated media world, the lines have blurred and traditional metrics don’t necessarily tell the whole story.
This generation of consoles has produced systems that have significant secondary revenue streams contributing to the bottom lines of developers and console manufacturers alike. All of the big three boast online services that offer (for a price) downloadable content and games. Xbox has an extensive, wide ranging arcade, Wii has Nintendo’s massive library of old-school games, and the Playstation has access to extensive Sony media that Sony has refused to properly monetize. While some downloadable games are simple board games that run $5, others are 10 hour RPGs that sell for $20, such as the Penny Arcade RPG.
We’re also seeing media cross-overs like Netflix coming to the Xbox (the fact that Microsoft pre-empted a company like Sony to capturing a movie revenue stream shows how clannish Sony’s media departments are) or the fact that Rock Band has sold over 30 million paid tracks, a substantial portion of the revenues of which have gone to the distribution services of Xbox, PS3 and now, the Wii. Further complicating the issue is that game prices represented in the attachment rate vary dramatically in this generation of consoles. Xbox and PS3 gouge customers for $60 a game, and Wii game prices range wildly from $30 to $50, depending if you’re buying “Cooking Mama: Express Fast Food Stupid Game” or “Cooking Mama Wolfgang Puck Deluxe Edition.”
The bottom line is that an attachment rate is no longer a fair representation of a console’s success. It does present some of the picture, but at the end of the day, the most important metric is bottom line dollar revenues. Halo 3 may sell millions of copies, but the investment to make a Halo 3 is incredibly deep with an incredibly long development cycle. Rebranding a movie for distribution across Netflix, or recoding Megaman for the Wii may ultimately be equally lucrative, particularly when you’re talking about 1,000 movies or 100 Megamans (megamen?). Now of course, a console is ultimately only as strong as its game base. You need the Fallouts, Halos, and Mario games in order to build a loyal following. But one can easily forsee a world where 20%-40% of revenues are from secondary streams–DLC for games, cross branded media, downloadable games.
What I want to start seeing is a metric called “Monetization after Console Sale” or MACS, because everyone loves acronyms and Steve Jobs is too sick to come after me right now:
Physical Game Sales
DLC for Physical Game Sales
Stand-Alone DLC Sales
The metric would average total top line (that’s revenues, not profits) for each category divided by the number of systems sold. As is done with the attachment rate, it could be separated by first party and third party sales. Since it’s a dollar average, it accounts for the discrepancy in pricing–ultimately, if you charge more successfully, your numbers will show it. It also lets us see who is capturing what markets. Logically, one would think Sony would be dominating media sales, considering they are a media company. In reality, we know that the Microsoft/Netflix relationship is devouring market share that should favor Sony, given Sony’s extensive media portfolio.
Times are a-changing, and both companies and the industry media need to adjust their evaluation metrics accordingly. Console makers are no longer just selling games–they’re selling entertainment and need to be judged accordingly and by 21st century metrics. We are still using an abacus to measure the radiation of quasars.