According to some excellent analysis by Matt Matthews at Next-Gen, despite the drop in the number of M-rated titles in 2007, those titles made 64% more revenue than M-rated titles in 2006. Follow along as I break down the results:
Despite the tone of many news posts about these data, the fact is that E-rated games actually saw a bigger increase in revenue between 2006 and 2007:
Console software revenue grew more than 38% from 2006 to 2007. The greatest part of this increase came from E-rated software, followed by M-rated software and then T-rated software. Revenue in the E10+ category declined from 2006 to 2007.
When I was examining the ESRB ratings a few weeks ago, I was actually surprised that the E10+ category even existed, so I’m not at all shocked to see that revenues decreased for those titles. In all likelihood, developers were realizing the success they could experience while tapping into that potent casual games market. With the Wii dominating the console sales figures, there was ample incentive to crank out lower budget, E-rated games. This naturally leads to an increase in revenue. Given that the Wii doesn’t have many AAA titles out, many of its mid-tier games sold well, like Mario & Sonic at the Olympic Games. The AAA titles like Super Mario Galaxy did extremely well for single-console releases, selling over 5.19 million titles.
Matthews data really suggest that this console cycle is hitting a sweet spot across most of the ESRB categories. I believe that the boom in mature games revenue reflects the maturity of titles on the Xbox 360, with its hardcore demographic. Many mature games tend to be large budget affairs with a lot of lead time. For a game to be mature and taken seriously in the current market, it needs to take painstaking attention to graphics, which demands more time. In 2006, the Xbox 360 was too new to have enough AAA titles in the M-rating bracket. When Matthews looks at the source of the M-rated revenue, the facts bear out this statement:
Second, where is the revenue for M-rated console software coming from – especially when fewer M-rated games were released in 2007 than in 2006? Here, again, three games seem to be critical: Ubisoft’s Assassin’s Creed, Microsoft’s Halo 3 and Activision’s Call of Duty 4. These three M-rated games sold a combined 11.7 million software units in 2007 (across all platforms) and each retailed for a minimum of $60. Together they accounted for a minimum of $700 million in revenue for 2007. When we look back at 2006, there was only one M-rated game in the top 10 software chart for the year – Gears of War, ranked 7th. There simply weren’t many best-selling M-rated games in 2006 and the M-rated console revenue for 2006 reflects that.
As this console cycle hits its stride, we will be seeing more AAA titles that have mature content. I think it’s important to examine the thrust of Matthews’ argument. While Kotaku picked up the story as though it negated the ESRB’s news that fewer Mature titles were released in 2007, the fact is that only a few games account for a majority of those sales. The real story with Matthews’ research is the expansion of the E-rated games market:
Continued robust sales of Nintendo’s Wii and its software will add significantly to the revenue for E-rated games in 2008. Moreover, Microsoft has announced its intentions to win more casual gamers over to its system. Surely the E-rated Viva Piñata and its sequel are examples of lighter fare, but Scene It! for the Xbox 360, released in late 2007, is an even better example. While Scene It! carries a T rating, its promotional materials make it clear that the target audience is not hardcore gamers. Given these trends, it seems possible that E-rated software may near 40% of the console software market revenue in 2008, up from 36% in 2007.
As Microsoft and Sony continue to chase the casual and mass gaming markets, I’m certain that we will see an overall increase in the number of E-rated titles from year to year. Suddenly, the industry seems aware that there are other markets out there aside from the hardcore gaming geeks and sports game freaks, and it’s time to capitalize on that realization. Undoubtedly this year will still be a good year for M-rated games, especially with the multi-platform GTA IV coming out, but that’s not going to sustain the revenue growth of the mature market.
Over time, I think that the sales of mature games will reflect console cycles, meaning that there will be an ebb and flow of revenue for those games based on the life cycle of the current hardware generation. Since E-rated games don’t require nearly as much development time, generally speaking, and often outnumber the mature titles for consoles at launch, I believe that the E-rated market will experience a steadier, year-to-year growth without nearly as much fluctuation due to the hardware cycles.
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