With ‘Defiance,’ Comcast’s Syfy Bets $100M On Convergence Of TV And Videogames
Jeff Bercovici, Forbes Staff
Forbes 11/26/2012 @ 10:01AM
On a sprawling soundstage on the outskirts of Toronto, Kevin Murphy is giving a tour of the alien world he’s helping bring to life. As silver-eyed humanoids stroll silently past, Murphy, the executive producer of the new Syfy channel series “Defiance,” points out terra-formed mountain ranges, gleaming energy weapons, gooey suspended-animation pods. “And this is… ,” Murphy begins, stopping in front of yet another exotic bit of production design. “I don’t know what the hell this is.”
You can’t blame him for getting disoriented. “Defiance,” which makes its debut next April, is an order of magnitude larger and more complex than anything Syfy — or any other basic cable channel — has ever attempted, involving scores of actors and writers, dozens of programmers and no fewer than seven alien languages. If it succeeds, it will also be vastly profitable for the network’s corporate parent, Comcast‘s NBCUniversal.
That’s because “Defiance” isn’t just a TV show. It’s also a massively multiplayer online videogame developed through a joint venture with San Francisco-based Trion Worlds. With their long product cycles and multiple revenue streams, MMOs, as they’re called, can be fantastically lucrative.
The most popular one, World of Warcraft, is estimated to generate more than $1 billion in revenues per year for its owner, Activision Blizzard. Another Activision title, Call of Duty: Modern Warfare 3, became the fastest-ever entertainment property to book $1 billion in sales when it was released in 2011, seizing a record previously held by the film “Avatar.”
But playing in this arena isn’t cheap. Trion spent $50 million developing Rift, the hit game it released in 2011. Defiance is an even bigger undertaking, with a budget said to reach $80 million, pushing the cost of the overall project well north of $100 million. “Games with that kind of big budget are not typical,” says Brian Blau, a gaming industry analyst at Gartner. “It’s a big risk. They’ll have to attract a lot of users.”
NBC Universal has wanted a piece of the videogame business for a long time. In 2007 then parent General Electric bought a small stake in Trion through the Peacock Equity Fund, an investment vehicle targeting businesses that had potential affinities with NBC’s entertainment properties.
At the time, Syfy President Dave Howe was looking for ways to move the channel beyond its core business, which, despite boasting high margins, is in some ways not a terribly attractive one. “‘Profitable’ is an interesting word when it comes to scripted drama in cable,” Howe says.
While the network will generate revenues of $734 million in 2012, according to SNL Kagan, contributing to the $8 billion in annual revenues for NBC Universal’s cable networks group, it virtually never makes money on its shows directly. High ratings allow Syfy to charge advertisers and distributors more, but the programs themselves “are loss leaders, for the most part, or a break-even proposition,” says Howe. Even “Warehouse 13,” its highest-rated series, doesn’t make money per se.