What business are we describing here?

Huge upfront initial investment for production of product.  Egos of stars like Steven Spielberg or Keith David.  Then a huge push for Prints & Advertising (sort of) to get people to buy the product at distribution outlets.  An initial buzz to sell product through multiple channels at a huge margin while keeping the incremental costs nearly zero.

Hollywood?  Sure sounds like it.  Guess again?  We're talking about the video game industry here.  Shouldn't this business model be broken because of the zero distribution costs that the Internet has opened up for digital media?  After all, its changing Hollywood and has already changed the music industry.  Well, believe it or not, the video game industry is thriving.  People are buying proprietary boxes that only play one type of game which act as their own DRM mechanism.  Then publishers spend a lot of money making Grand Theft Auto, press game discs, have a huge marketing push and there you go - a $30 billion dollar industry.

People complain about $12 movie tickets.  What about $50 games?  What is it about games that people just don't seem to care shelling out for?

In a word: Engagement (or interactivity - ok so that's three).

A movie is always a movie is always a movie.  A game could be a movie, if you sit back and watch someone play Zelda, but its also more of an experience.  An interactive experience that engages beyond the run time.  I think GTA was something like 4 hours of rendered film footage, so that kind of justifies the price:  $50 ( which is 4 x the cost of an NYC movie ticket).

So again, why is the video game market thriving and the recorded media market shrinking?  Games on the Wii allow your Mii (a graphical representation of YOU) to actually be the protagonist.  It also brings together the hottest concepts of Web 2.0 - the social aspect with casual gaming (the Wii-Mote has two buttons so anyone can play).  You can also be in the shoes of your favorite athletes, actors, or heros and make decisions for them. 

Shows like American Idol and Lost are slowly getting it.  In American Idol, YOU can make the decision on who is the next big pop star.  And in a show like Lost, YOU are just as lost as the passengers on Oceanic Flight 815 and trying to figure out what is going on.

Whether you are making the decision for your Mii or are playing a part in influencing Simon Cowell, you're still making the decision, you're still engaged, and you feel invested.  So is engagement important?  In today's environment, it will separate the hits from the bombs.