Game industry girds for battle

By David Becker, CNET News, 14 May, 2002 13:23

NEWS

Sony, Microsoft and Nintendo will launch new campaigns in the game console wars next week, with the main weapons this time involving online gaming and possible price cuts. The Electronic Entertainment Expo, the game industry's main trade show, kicks off May 22 in Los Angeles. Games are the premier attraction at E3, with publishers showing off every title they plan to release during the coming year. Highlights this year range from previews of potential blockbusters such as "Doom III" to a video jigsaw puzzle featuring Penthouse's Miss April. But hardware manufacturers will make their dent before the show starts, with several days of press events intended to set up business strategies for the coming year. Besides the possibility of rumoured price cuts for game consoles, the main competition will be around plans for putting consoles online, with Microsoft taking the biggest gamble. The company is building a subscription-only broadband network to allow Xbox owners to play against one another online, using the Xbox's built-in Ethernet adapter. Prices and availability for the service, which will include live voice chat, are scheduled to be announced at E3. While Microsoft is pitching the service as the future of gaming, initial expectations are modest. David Cole, president of research firm DFC Inteligence, said he'd be surprised if Microsoft can get 10 percent of Xbox owners to sign up for the online service in the first year. "I think their expectations are that it's going to be a very slow build," Cole said. "They're making a long-term investment, getting way ahead of the market." Brian Farrell, chief executive of game publisher THQ, added that Microsoft's broadband-only service may further limit adoption, partly because DSL subscribers are likely to be reluctant to set up a home network to extend broadband to their living room. "We've all talked about online console gaming the last six or eight years," Farrell said. "It's a little closer, but it's not here yet. We don't have the bandwidth yet as an industry, and when we do have the bandwidth, it's probably not in the right place. You've got your PC in one room and the TV in another -- that's going to be a problem." Sony and Nintendo appear to be listening to the sceptics. Both companies have announced plans to back in to the online gaming arena by selling online accessories for their consoles and encouraging game makers to add online features to titles. The latter is likely to be a hard sell, said Farrell, as publishers will need compelling business reasons to bear the costs of setting up an online gaming infrastructure. "I think people are going to experiment a lot with the business model and the technology model until we figure out what works for us and what works for the customer," Farrell said. "Universally, it's been fairly hard for businesses to charge consumers for stuff online." But that's exactly what some of the biggest names in the game business are hoping to do from the PC side. E3 is expected to include previews of some of the leading titles publishers hope will push online gaming toward the masses. Those include "The Sims Online," a multiplayer version of Electronic Arts' popular PC game; "Star Wars Galaxies," Sony Online Entertainment's roleplaying game based on the "Star Wars" universe; and "EverQuest II," Sony's planned sequel to its popular fantasy game. Other big titles likely to be shown at the trade show include new versions of "Tomb Raider," "Unreal" and "SimCity," plus movie tie-ins covering everything from "Scooby Doo!" to "Minority Report." Game players may even end up with some extra money for software, if console makers come through with rumoured price cuts in the US. The leading theories so far have either Microsoft or Sony slashing the price of its $299 machine by $100, with the other company following suit almost immediately. Both consoles have already seen dramatic price cuts in the UK and Europe. Farrell said there's no business reason to cut prices now, given historically slow game console sales during summer, but it could be a good public relations move for Microsoft. "It's about who wants to take the leadership position; it is seen as a position of weakness to wait for the other guy to move," Farrell said. "My guess is that Microsoft will make the first move. E3 is a great time to get publicity going." Gartner research director P.J. McNealy thinks Sony will act first at E3 -- where the company has made major price cuts several times in the past -- with a more conservative $50 price cut. "The thing is, Sony is still selling well," McNealy said. "There's no need for them to cut the price dramatically. It's easier for Microsoft and Nintendo to react than be proactive. Microsoft will try to remain competitive in the US -- we've already seen they're willing to eat the cash." Or maybe nothing will happen. DFC's Cole believes the hardware makers will wait until September, when preparations for the holiday season kick in. "They'll want to give themselves a little time to assess where they are after E3," Cole said. "I don't think they gain any advantage from cutting prices in the off-season."

What's going on in games? For all the latest see GameSpot UK. For the latest on everything from DVD standards and MP3s to your rights online, see the Personal Technology News Section. Have your say instantly, and see what others have said. Go to the ZDNet news forum. Let the editors know what you think in the Mailroom.

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