Data Filter: The News You Need in Easy-to-Swallow Gel Cap Form

Electronic Gaming Business, April 7, 2004

News-O-Matic

Whassup?: A revealing interview with Sony Computer Entertainment Europe President David Reeves was posted and then quickly removed from the official Playstation Web site last week. In it Reeves reveals that Sony will releases a smaller version of the PS2 in order to move price points even lower for the later part of the console's life. Sony is also considering releasing the PS3 in several models with various levels of multimedia home theater capabilities. So What?: Both Microsoft and Sony are rightly worried that making use of their next gen hardware is going to drive game development costs sky high. MS is promoting its new cross-platform development kits as efficient ways to amortize investment, while Sony keeps arguing that even publishers who can't compete on next-gen hardware will have loads of opportunity on the PS2 in late adopter and emerging markets through 2010. The big question in this industry in the next few years is going to be whether the game economy really can sustain the budgets and production complexity required by the next level of hardware.

Whassup?: Atari On Demand ( http://www.atariondemand.com ) is the first attempt by a major game publisher to distribute its back catalog of titles via digital download for $14.95 a month. A couple of dozen of branded titles like Boggle and Putt Putt can be played online in less time than it takes to download a full game file, the company claims. It is powered by digital delivery service Exent, which Yahoo also uses, and who claims AOL and Comcast as major shareholders. So What?: A noble experiment that defies most of the laws of online content sales. Unless you are Consumer Reports or Wall Street Journal, single brands do not sell subs online. Aggregation of multiple brands (a la Yahoo On Demand) is a more likely model. The menu of games is severely limited for $14.95 a month, which is more than any one of the titles costs in bargain bins. This is the sort of business model that only dedicated game players would buy, yet the title selection is not aimed at them but rather at precisely the kind of audience that would not pay for online games.

Whassup?: Beleaguered and revenue-challenged Midway Games got a rare win with its recent release of The Suffering and the company followed it up by acquiring its developer Surreal Software for $540,317 in stock. Midway also raised its guidance quarter ending March 31 to $18 million revenue, up from $12 million. So What?: The foul-mouthed Mature-rated The Suffering is a good example of well-made B titles being able to capture console audiences with strong mood and storytelling. Much more compelling than Rockstar's gross exploitation slasher Manhunt, this game actually keeps you interested in the plot and character. If middle-tier publishers like Midway can produce original IP like this during the transition years, they might be able to take some thunder away from EA and Activision and their franchise/movie fetishes.

Whassup?: DFC Intelligence president David Cole echoes EGB's recent tirades in reporting in his latest brief that game brand clearly is trumping game quality. In the last holiday sales cycle, very well-reviewed and heavily promoted Prince of Persia sold only 330,000 PS2 units through Jan. 2004, while less well received Dragonball Z: Budokon II sold twice as well. Cole says the industry has become highly risk averse, and this tends to concentrate power and sales among major players, like EA.

So What?: Our worry is that publishers will respond to last holiday's failure of original IP (aside from Call of Duty and True Crime, which were original but devoutly derivative) by shrinking from interesting product. We say let them, and then let a smart middle tier publisher take up the mantel of innovative design. Companies like UbiSoft (POP and Beyond Good and Evil) should not retreat from innovation, because ultimately gaming will suffer the same cycles as Hollywood. Sequels and blockbusters eventually bore the crowd, which starts turning to offbeat and new experiences. Will EA and Activision be ready for that?

Whassup?: Activision CEO Barry Kottick crowed to investors at a recent Bear Stearns Media Conference that his company's new strategy of focusing development and marketing on a select line of AAA titles was a tremendous success in 2003, and he promises that Shrek 2, Doom 3, Spiderman 2 and other high profile Activision titles for 2004 bode well. Both Shrek 2 and Spiderman 2 will be among the biggest media launches ever, which will help take game titles out of the game ghetto at stores like Wal-Mart and put them next to the DVDs. So What?: Kottick also hinted that revived handheld development and PC titles will be the response to console transition. Kottick admits, "we exited the handheld market a little early," but is excited about the PSP. Not only are PC titles thriving (Call of Duty), but his subsidiary Cabela and its blue collar hunting games grew 400% last year, signaling a real opportunity way outside the core game market. In its battle with EA, Activision is hoping to move internationally, beyond the mere seven countries in which it now distributes.