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Why It’s Time to Get in the Game

Why It’s Time to Get in the Game By CARLOS MARTINEZ Staff Reporter With new video game platforms like Xbox, PlayStation 2 and GameCube coming on the market, area game makers are gearing up for what could be their biggest holiday season ever. Calabasas-based THQ Inc., one of the largest video game software developers in the U.S., is leading the pack with 39 new games to take advantage of what is expected to be a rush by consumers to restock their game inventories for the new consoles. “It’s truly the ideal time to be in this industry,” said analyst Shawn Milne of SoundView Technologies. “You have new game platforms and people who can’t wait to buy the latest games.” Beginning with the introduction of Sony Corp.’s PlayStation 2 last year, video game console makers have developed a new generation of game platforms Microsoft Corp.’s Xbox and Nintendo Co.’s GameCube with lifelike graphics and faster speeds that mimic the quality of a feature film. Today, game makers are scrambling to get their products on shelves in time for the holidays, prompting what could be a 40-percent to 50-percent increase in game titles over last year’s holiday season, Milne said. With the earlier launch of PlayStation and this month’s debut of Xbox and GameCube, local game-makers THQ, Tremor Entertainment Inc., Vivendi Universal Games, and TDK Mediactive Inc., among them are betting that video game software sales could surpass $9 billion during the holiday season alone, nearly as much as was sold all of last year. “I know that people are just savoring what those Christmas numbers are going to be like,” said Tremor CEO Steve Oshinsky, whose own firm is currently developing 10 new games for the Xbox, to be released next year. The importance of the new platforms isn’t lost on THQ COO Jeff Lapin, who was instrumental in the company’s deal to acquire fellow game maker Rainbow Studios, a firm which makes games that mix live action with digital animation. Lapin said the acquisition bolsters THQ’s ability to develop games for these new platforms. Already, THQ has released “Dark Summit,” a game based on snowboarding, for Xbox, with others, like “WWF Raw,” slated to follow in time for the lucrative holiday period. Likewise, TDK Mediactive is banking on its new “Shrek” game for Xbox to be a big seller, with its sophisticated graphics and its realistic action scenes. “We’ve gotten a very good response for that game and, with this new platform, we think it will do well,” said Martin Paravato, TDK’s CFO. “Making games for Xbox is part of our overall strategy and we’re confident in that strategy,” he said. Universal Interactive, a unit of Vivendi Universal S.A., will miss this season’s Xbox and GameCube bonanza, but it is set to hitch its wagon to the new stars next year, when “The Thing,” a new game for Xbox, will be released, said Jim Wilson, Universal Interactive president. “These new platforms mean an investment in development and marketing, but in the long run, it’s a great opportunity,” Wilson said. For this holiday season, the company will be offering the latest version of its best-selling Crash Bandicoot game, dubbed “Crash Bandicoot: The Wrath of Cortex,” for PlayStation 2. The “Bandicoot” games have so far sold 10 million units in North America and 24 million worldwide, with plans for an Xbox version to be developed in the near future. Wilson said. Soundview Technology’s Shawn Milne said video game sales would at least eclipse last year’s industry-wide holiday tally of $6.5 billion. “It’s hard to say what will happen, but you’re probably looking at $8 billion to $9 billion,” he said. Crispin Boyer, features editor of “Electronic Gaming Monthly,” said Microsoft’s entry into the market with Xbox makes it an immediate serious player that could take a chunk of market share from Nintendo and Sony Corp.’s PlayStation 2, both of whom have had earlier versions of video game consoles on the market for years. “But it’s tough to tell because (Microsoft) only shipped 300,000 units, compared to 700,000 by Nintendo for GameCube,” Boyer said. But judging by last year’s PlayStation 2 platform, which sold $100 million worth of consoles, the prospects for Xbox and GameCube are hugely promising, Boyer said. When Microsoft began to develop Xbox in 1999, the company approached several software firms to develop games exclusively for the Xbox. Boyer said such deals are common for new platforms, to assure that games will be available when the new console comes out. Likewise, Nintendo’s GameCube lined up its own set of new games in time for its official kickoff. Some are unsure how Xbox will play with consumers, both here and abroad. “It’s big, bulky and the controls are bigger, so you have game makers in Japan complaining that it’s too big and that it won’t sell over there,” Boyer said But for those who know the gaming jargon, Xbox “kicks,” and not just because of its odd shape or technological advances. Microsoft acquired the rights to highly sought after games like “Dead or Alive 3” and “Halo,” generating so much buzz with enthusiasts they are willing to shell out the $299 price tag for the console and then some to stock it with games. Seamus Blackley, Microsoft technology officer for Xbox, said Xbox is especially user-friendly for Hollywood-based animators, allowing them to use media they’re familiar with, such as pixel shading, Dolby sound and high end surface definition. Such capabilities also mean game makers have to spend dearly in development costs for the software. “We’re looking at million-dollar development costs,” said TDK’s Paravato, whose own company spent $1.2 million for developing “Shrek.” Tremor Entertainment’s Steve Oshinsky said he’s sure the company has spent between $2 million to $3 million for one game alone. “Before, you would spend $100,000 or $200,000 for (developing) a game in six months. But now, it’s a two-year project that can cost upwards of $3 million,” he said. The payoff, though yet to come, is likely to be worth the cost, especially for those companies that can get their games on retail shelves for holiday shoppers. Top video game software maker, San Francisco-based Electronic Arts Inc., grossed $640 million during the quarter ending Dec. 30, 2000, or nearly half of its $1.3 billion in total sales last year. Likewise, THQ grossed $190.9 million during that same quarter, more than half of its $347 million in total revenue in 2000. The relatively new launch of PlayStation 2 along with Xbox and Nintendo’s GameCube, which hit stores in mid-November, is likely to stoke buying frenzy still further, said Wedbush Morgan analyst Michael Gardner of Wedbush Morgan Securities. “That’s why companies like TDK and THQ are going to have a great holiday season. You just don’t have two new platforms coming out with lots of different games,” he said. “The hype is also driving a lot of this.” Both GameCube and Xbox are miles ahead of past systems, by virtue of state-of-the-art electronics, says Electronic Gaming Monthly’s Crispin Boyer. “It’s as if you’re looking at a film, with just amazing detail,” he said of the two systems. TDK’s “Shrek” looks as lifelike as he was on the big screen, Boyer said. These advances are turning the video game industry into a business that may rival the movie industry, Gardner said. “A few years ago, no one thought video games would surpass Hollywood ticket sales, but its happening and it’s happening right now.”

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