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Video Games "Play" Into Hollywood's Picture

The businesses of movie making and video game making are tighter than ever. Today, they're rubbing shoulders at the Hollywood and Games Summit. These are two industries that need each other more than ever. Movie studios count on the reliable licensing fees that come from selling 5 million video games. And the video game makers like the fact that by paying a licensing fee they can tap into a guaranteed fan base, and all those marketing dollars the studios have spent. Virtually every big summer movie is also a video game: "Pirates," "Spiderman," "Shreck," and coming up "Ratatouille," "Transformers," and "Harry Potter."

Wii Cars Video Game
Wii Cars Video Game

Video game makers tell me that Pixar movies lend themselves particularly well to video games because of the type of animation -- which is one reason why Wedbusy Morgan analyst Michael Pachter told me that Disney is best poised to take advantage of this market. On the video game side, Pacther says that THQ --which has a deal to make Disney's games--is the winner. Interesting to note that THQI is up nearly 50% over the past year. While THQ might have the largest percentage of its revenue devoted to movie-based games, in absolute terms Electronic Arts has benefitted the most from this niche. UBS analyst Ben Schachter says the stock he's watching in this field is Activision , which has three big movie-based games coming out this summer: "Shrek 3," "Spider-Man 3," and "Transformers, The Game."

Now a whole industry has popped up solely devoted to turning movies into video games and video games into movies.Brash Entertainment is already working on a dozen movie-based games, working with all five studios, with multigame deals with several of them. At the beginning of June, Brash announced it raised $400 million from private equity players including New York Life Capital Partners, Northwestern Mutual Life Insurance, and ABRY Partners. Brash's co-founders include Thomas Tull, CEO of Legendary Pictures, the private-equity backed production house with a first-look deal with Warner Bros.

It looks like Tull's Legendary is also focused on that video game revenue stream. Just yesterday, Legendary announced it rasied $1 billion in financing to finance some 45 movies over the next 5 years. Legendary struck gold at the box office with "300", which is excatly the kind of film that does well in game form. No surprise then, that Legendary's slate includes an adaptation of another dark comic book, "The Losers," a movie based on the multiplayer online game "World of Warcraft" and a movie version of TV series "Kung Fu." And Legendary's production of "Where the Wild Things Are" will appeal to the younger gamer audience.

As gamemaker Ubisoft builds its own in-house movie studio and movie studios including Disney talk about investing hundreds of millions in internal game development, there's no question that the line between game and moviemaking is blurring. And just ask the folks at Sony or Microsoft . They'll tell you that pretty soon you'll be doing both at the same time--on your PlayStation3 or XBox 360. After all, they both can play high-def DVDs.

Questions? Comments? MediaMoney@cnbc.com

  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.