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Interactive gaming, console prices create Buzz at E3 - Retailing & Entertainment: Video Game Update - Electronics Entertainment Expo

Doug Desjardins

The roll out of online gaming and potential price cuts on game consoles will be part of the buzz at the Electronics Entertainment Expo (E3) May 13 to 16 in Los Angeles. The game industry's annual gathering at the Los Angeles Convention Center is expected draw another huge crowd to rival the 60,000 who turned out for the event in 2002.

As usual, the atmosphere at the show will be upbeat, as the video game industry continues to roll along at a record pace. According to The NPD Group, software sales increased 8% in 2002 to a record $6.9 billion compared to $6.35 billion in 2001. Sales for console games generated $5.4 billion, while computer games accounted for $1.4 billion.

Talk of more price cuts on video game consoles is in the air again this year as it was in May 2002, when Microsoft and Sony cut the price of Xbox and Playstation 2 by $100 to $199 and Nintendo brought its GameCube console down $50 to $149.

In April, Microsoft lowered the price of Xbox in Europe by 20% and could be mulling a similar reduction in the United States. Microsoft executives declined to discuss the matter in an April 16 conference call, but many analysts believe the price cut in Europe sends a clear signal.

"My guess is Microsoft will take the lead this year and that the others will follow," said Brian O'Rourke, senior analyst with In-Stat/MDR in Scottsdale, Ariz. "You may see a $30 or $40 price cut, but there's a chance they may disguise it by creating new kinds of bundling."

The practice of bundling--where manufacturers package consoles with games and accessories-has allowed companies to reduce prices in a subtle way and drive software sales. A good example is a new Nintendo bundle that sells a GameCube console and a game for $149, which essentially knocks $40 off the price of the console.

Online gaming should also be focal point at this year's show. The genre was an unproven commodity at this time last year, but the debuts of "Xbox Live" in November and Sony's $29 online adapter for Playstation 2 have made it a reality. So far, gamers have shown a keen interest in taking gaming to the next level.

"Microsoft has more than 350,000 subscribers for 'Xbox Live' and Sony has shipped more than a million adapters, so it's off to a pretty good start," said O'Rourke.

But those issues are peripheral to what people come to see at E3: a sneak preview of hundreds of new games due out later this year. More than 1,000 new games, products and accessories will be on the convention floor this year, including highly anticipated releases such as "Enter the Matrix" and the latest installment of the 'Lord of the Rings" series.

"Software was the focus of the show in 2002 and it will be the same this year," said Richard Ow, senior account executive at The NPD Group. The emphasis will once again be on action games, which accounted for 25% of total sales last year and included the No. 1 game of the year "Grand Theft Auto: Vice City." Military theme games are also gaining in popularity, with tides like "Medal of Honor: Frontline" vaulting into the Top 10 list in 2002.

One thing you're not likely to hear this year is talk of next-generation game consoles. There has been plenty of speculation about when a new wave of hardware will hit--with 2005 as the likely starting point--but the buzz probably won't surface until next year.

"You'll start hearing about that in 2004, but the focus this year will be on new games and the current generation of consoles," said Ow. "Nobody wants to distract attention from the here and now."



RANK/TITLE                      PLATFORM  PUBLISHER            DATE

2  GRAND THEFT AUTO III           PS2     ROCKSTAR GAMES       OCT '01
3  MADDEN NFL 2003                PS2     ELECTRONIC ARTS      AUG '02
7  SPIDER-MAN: THE MOVIE          PS2     ACTIVISION           APR '02
8  KINGDOM HEARTS                 PS2     SQUARE EA            SEP '02
9  HALO                           XBX     MICROSOFT            NOV '01

RANK/TITLE                       PRICE

2  GRAND THEFT AUTO III           $50
3  MADDEN NFL 2003                $49
4  SUPER MARIO ADVANCE 2          $29
5  GRAN TURISMO 3: A-SPEC         $24
7  SPIDER-MAN: THE MOVIE          $45
8  KINGDOM HEARTS                 $49
9  HALO                           $48
10 SUPER MARIO SUNSHINE           $49


RELATED ARTICLE: Synergies strengthen between video games and films.

Video games based on popular films helped drive the game market to record heights in 2002 and that trend will continue this year. Game publishers will be rolling out new movie-based titles at E3 with groundbreaking graphics that recreate the movie experience.

"This is a year when you're going to see a lot of sequels come out based on franchises like you did last year with 'The Lord of the Rings' and 'Harry Potter,'" said David Cole, president of DFC Intelligence in San Diego.

"The Lord of the Rings: The Two Towers" was one of the best selling games of 2002 and its third installment "The Lord of the Rings: The Return of the King" will arrive later this year in advance of the film. While "The Two Towers" game used models and scenes from the movie, "The Return of the King" will feature characters whose movements are digitally transferred from the film.

Movie-based games are recreating the in-theater experience thanks to plenty of help from film producers. That's the case with "Enter the Matrix," which publisher Infogrames will release May 15 the same day the sequel "The Matrix Reloaded" hits theaters. The creators of "The Matrix" wrote a separate script for the game and filmed additional scenes during "The Matrix Reloaded" specifically for the video game.

"We're going to see a real cinematic resemblance in the graphics of games this year starting with 'Enter the Matrix,"' said Richard Ow, senior account executive with The NPD Group. "There's a lot of synergy going on with film producers and game developers and that's a good thing for the industry."

Vivendi Universal will get into the act next month when it releases the video game version of "The Hulk" on June 3 prior to the film's release in theaters June 20. The publisher has created a plot for the video game that takes place after the events in the film.

Industry giant Activision will be promoting new games based on the sequels "Spider Man 2" and "Shrek 2" and Infogrames will unveil a new "Terminator" title based on the new film "Terminator 3: Rise of the Machines" due in theaters in July. Buena Vista Games will showcase new games based on the upcoming films "Pirates of the Caribbean" and "Spy Kids 3."

Publishers will also be promoting plenty of new games with military themes to capitalize on the growing popularity of titles such as Nova Logic's "Delta Force: Black Hawk Down" and "Medal of Honor: Frontline." Activision will introduce a new military-theme series called "Call of Duty" based on battles in World War II.

Online gaming gets off to a quick start

The market for online console gaming is only about six months old, but the early results indicate it has a bright future.

Microsoft, which designed its Xbox console as a portal for online gaming, has already attracted more than 350,000 subscribers to its Xbox Live network, more than double what it had expected at this point. And Sony announced that it has shipped more than one million online adapters for its Playstation 2.

As the number of players continues to grow, game publishers are getting more interested in re-creating the worlds they've made for console games on the Internet.

"Now that there's a foothold Out there you're going to see some of the more successful console games move online ," said Richard Ow, senior account executive for the NPD Group. "I think you're going to see action games and sports games become the most popular genres, and online gaming will eventually become a separate animal."

Jupiter Research expects the online console gaming community to double this year. By the end of 2003, it projects that 2.1 million homes will have game consoles connected to the Internet and that 14% of all homes will be hooked in by 2007. Analyst David Cole estimates 23 million people will be playing online through consoles by 2006.

Just how garners will play and pay is still being ironed out. Microsoft charges players $50 for a starter kit for Xbox Live that includes a headset and one year of free access to any Xbox-enabled game they buy. Sony gives PS2 fans the means to access online gaming with its adapter, but allows game publishers and Internet service providers to decide how players pay.

But, as with any emerging technology on the Internet, success is no sure thing and there are stumbling blocks to getting garners online. "The most significant problem is that you need a broadband connection for online gaming and most homes don't have that connection in the same room where video game consoles are used," said Brian O'Rourke, senior analyst with In-Stat/MDR in Scottsdale, Ariz. "Most broadband connections are hooked to personal computers."

Even PC-based games with a huge following aren't guaranteed to replicate their success on the Internet. An online version of the popular PC game "The Sims" launched earlier this year but attracted only 100,000 subscribers in its first few months, far fewer than expected.

COPYRIGHT 2003 Reproduced with permission of the copyright holder. Further reproduction or distribution is prohibited without permission.
COPYRIGHT 2003 Gale Group

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