'Halo 3' guns for $150 million

The revenue potential for "Halo 3" is constrained by its narrow fan base -- young males. Though Microsoft is trying to make the game more accessible to other types of players, Halo's audience is "hard-core geeks who are into mature content," said Jesse Alexander, executive producer for the "Alias" and "Heroes" TV series and a "Halo" aficionado. "It reaches a very specific market. And that's OK. But it's just not the same audience as the movie and TV business."

Where Master Chief will probably score a decisive hit is profit margin. Although "Spider-Man 3" will generate an estimated $628 million in pretax profit for a 46% margin, according to SNL Kagan, "Halo 3" is looking at a profit of more than half a billion dollars and a margin of upward of 90%.

"Video games are potentially very profitable," said Thomas Tull, chief executive of Legendary Pictures and a financial backer of Los Angeles video game publisher Brash Entertainment. So although the overall dollars are smaller for games, "on a percentage basis, they're pretty attractive."

For Microsoft, there are other benefits that are not easily quantifiable. The game, for example, is expected to spur people to buy its Xbox 360 console. It will also drive subscribers to the company's online game service, where Microsoft can sell additional game content such as new levels, weapons and maps.

"The total contribution to Microsoft is more than just the revenue from sales of packaged games," Sebastian said.

Bottom line: Although blockbuster games such as "Halo 3" don't always play in the same league as Hollywood hits, their relatively low costs mean they can still pack a powerful punch when it comes to profit.

--

alex.pham@latimes.com

josh.friedman@latimes.com

--

(BEGIN TEXT OF INFOBOX)

Master Chief versus Spider-Man

"Halo 3"

Maker: Microsoft Corp.

Cost: $60 million

Estimated revenue to company: $560 million

Estimated profit margin: 90%

--

"Spider-Man 3"

Maker: Sony Corp.

Cost: $400 million, plus $100 million for DVDs and more for other expenses

Estimated revenue to company: $1.366 billion

Estimated profit margin: 46%

Source: Times reporting

--

Keeping score

Though sales of video games have grown rapidly in recent years, the category is still relatively small compared with other forms of entertainment.

Projected sales in 2007, in billions:

*--* U.S. Worldwide Games $10.4 $37.5 Music 10.5 35.6 Cable TV 98.1 172.3 Movies 36.7 84.3 *--*

Source: PricewaterhouseCoopers Global Entertainment and Media Outlook 2007-2011