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

DSN Retailing Today, May 5, 2003 by 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."

TOP 10 VIDEO GAMES

2002 RANKINGS BY TOTAL U.S. UNITS


                                                               RELEASE
RANK/TITLE                      PLATFORM  PUBLISHER            DATE

1  GRAND THEFT AUTO: VICE CITY    PS2     ROCKSTAR GAMES       OCT '02
2  GRAND THEFT AUTO III           PS2     ROCKSTAR GAMES       OCT '01
3  MADDEN NFL 2003                PS2     ELECTRONIC ARTS      AUG '02
4  SUPER MARIO ADVANCE 2          GBA     NINTENDO OF AMERICA  FEB '02
5  GRAN TURISMO 3: A-SPEC         PS2     SONY COMPUTER ENT.   JUL '01
6  MEDAL OF HONOR FRONTLINE       PS2     ELECTRONIC ARTS      MAY '02
7  SPIDER-MAN: THE MOVIE          PS2     ACTIVISION           APR '02
8  KINGDOM HEARTS                 PS2     SQUARE EA            SEP '02
9  HALO                           XBX     MICROSOFT            NOV '01
10 SUPER MARIO SUNSHINE           GCN     NINTENDO OF AMERICA  AUG '02

                                AVERAGE
                                RETAIL
RANK/TITLE                       PRICE

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

SOURCE: NPDFUNWORLD

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