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VOLUME 1, ISSUE 5; MARCH 19, 2004

Where Are the Games?

Scenes from an industry waiting for some- ously. This forward thinking is what makes of the few companies that can look at thing to happen…. great games, but we’re years away from the period between now and then without seeing those titles. What about now? excess anxiety—but it’s still 2004. Early “We’re doing OK, I guess,” says 2004. What will get people into the a regional manager for a videogame Why not ask someone from the one com- stores now? retail chain. pany that would be happy if the current situation lasted a long time: Electronic We asked the smartest people in the busi- He paused for a moment, then added: Arts? (It should be mentioned that the two ness, and they all told us the same thing: “We’d be doing better if we had some new current games generating teenage enthusi- great games and lower prices. The great games that people wanted to buy, though.” asm, NFL Street and games part will take care of itself in the Underground, are both from EA.) Warren second half of the year when many long- We spent a couple of weekend afternoons Jenson, EA’s EVP and chief financial and anticipated titles are scheduled to arrive. hanging out at videogame stores from New administrative officer, was delivering his Lower prices? As our man at puts it, Jersey to Maine and asked kids and adults usual spiel at a Smith Barney investors’ “Either or we have to pull the which games they were most excited about. conference recently when a question about trigger on that, sooner better than later. As They mentioned 2, 3, Half-Life the life span of existing consoles and games soon as one of us does it, the other one 2, Grand Theft Auto: San Andreas, and The snapped him to attention. “The last cycle will. We both have to do it. I don’t care Sims 2. They’re all interesting games, of ended far too quickly,” he acknowledged who goes first. But unless we want the next course, but they have one other attribute in readily. “We stopped developing for the quarter to be ugly, one of us has to. Now. common: None are out yet. PlayStation 1 way too early. We left hun- The games aren’t coming fast enough to dreds of millions of dollars on the table. I pull us through.” ■ The videogame industry’s core cus- promise you that is not going to happen tomers, the fans who go to specialty shops again. We will be talking about the PS2 rather than chains for their games, are and in 2010. The installed base is TABLE OF CONTENTS excited about games they haven’t even seen too high.” yet. As for what’s out now, we didn’t find OUR OWN MATRIX? much enthusiasm. During our hour at a Jenson went on to suggest that the cur- GameStop in a mall in southern Maine, a rent doldrums in videogame sales (for Warner Bros. opens a new division and tries store with the words “We Buy Used almost everyone else in the industry) would again Games” was covering one of its two large continue until Microsoft and Sony took PAGE 3 windows, and every transaction we saw some aggressive price action. “Console involved a reduced-price used game. With prices need to be $129 going into the holi- LOVE THE PLAYERS, NOT few exceptions (you should hear teenage days to make a difference for us so that we boys go on about NFL Street or Need for can expand the market.” Otherwise, he THE GAME Speed Underground), there’s little in stores maintained, the latter part of the current You can’t control online communities that’s getting fans excited right now. And if cycle would go down in the usual manner. PAGE 4 the XI preorders are any indication, there is no huge pent-up Jenson also warned that the key to mak- demand for a PS2 hard drive that we’ve ing the next console cycle bigger and longer PLAYING PLACEMENT been able to discern. than this one is innovation. “The next con- It seems like every pixel is for sale soles have to be Xbox 2 and not Xbox 1.5, PAGE 8 As we chat with game makers heading to PS3 and not PS2.5. That will ultimately San Jose, CA, next week for the annual drive our ability to innovate. And early Game Developers Conference, they’re talk- indications are that truly new consoles are TOO SOON TO VERIFY ing about new platforms and what they exactly what we’ll get.” The latest industry tips, unfiltered will be able to accomplish when they can PAGE 11 manipulate two zillion polygons simultane- That’s good for 2006—and EA is one GIN _05.tesogfmr.qxd2 3/15/04 11:29 AM Page 2

EDITOR-IN-CHIEF Go (Far) East, Jimmy Guterman Young Man [email protected] ZIFF DAVIS MEDIA Jason Bell and Turbine look across the Pacific and see the future of online gaming 500 UNICORN PARK DRIVE WOBURN, MA 01801 Last month, executive Jason Bell European and American markets. And when joined online game maker Turbine it comes to the number of people playing 781-938-2639 Entertainment as its executive vice president; their online games, they are dealing on a his new responsibilities include running the scale that dwarfs anything we’ve experi- company’s new studio in Santa Monica and enced in North America. Most important, ART DIRECTOR: Rob Schultz overseeing its Asian/Pacific business. Prior to they are competing on a service level, not working at Atari, he held production posi- just a product level. That’s the reason no tions at and . North American game company has suc- COPY DESK: Tom Edwards, Greg Ford, ceeded in a large-scale way in China or Susie Ochs, Maritza Refuerzo Turbine is best known for its Asheron’s Korea. North American companies have a Call online game and is currently devel- history of drastically underestimating the oping online games based on The Lord amount of localization needed to succeed in of the Rings (for Vivendi) and Dungeons those markets. PRODUCTION: Carlos Lugo, Michele & Dragons (for Atari). We spoke to Manousos, Anne Marie Miguel Bell shortly after he returned from a trip How did the failure of Online to China. change the online-gaming business? The expectations were so high, ridiculously CIRCULATION DIRECTOR: Chris Wilkes What does Turbine gain from a having a so, within Electronic Arts and outside. The West Coast presence? Sims Online had a lot in common with [email protected] Sometimes, it’s easier to get talent in Los many other online games: It launched pre- Angeles than in Boston [where Turbine’s maturely and there was not enough game- main office is located]. In my years at Atari play. The basic miscalculation was not real- ZIFF DAVIS GAME GROUP and elsewhere, I developed a great network izing that it’s not as fun to play as an ant SENIOR VICE PRESIDENT: Dale Strang of entertainment executives, so it’s good to as it is to watch ants play. Because of how be near them. And, of course, this puts did, you can see a pull- PUBLISHER: Lee Uniacke Turbine three hours closer to the biggest back from Microsoft, Electronic Arts, and EDITORIAL DIRECTOR: John Davison online-game markets in the world. Ubisoft in the online-gaming space. Ubi’s decision to pull out of The Matrix Online BUSINESS DIRECTOR: Cathy Bendoff You’re talking about Asia, of course. What is directly attributable to the failure of The can North American online-gaming execu- Sims Online. tives learn from their counterparts Copyright © 2004, Ziff Davis Media Inc. in Asia? You’ve been there for only a short time, but On one level, they’re different beasts. Retail how is Turbine’s development approach All rights reserved. No material in this gaming in Korea, China, and Taiwan is different from that of companies you’ve publication may be reproduced without extremely problematic because of wide- worked for? spread piracy, so online is the only space [CEO] Jeff Anderson and the key players in written permission. Bulk orders, reprints, game companies there can work in, for the Boston have done a wonderful job culling and site licenses are available. most part. That’s a complete flip-flop from lessons from Asheron’s Call 1 and 2. They’re not approaching it with the hubris I Subscriptions cost $995 per year. Visit saw at Electronic Arts and Kesmai. You CORRECTION http://www.gamingindustrynews.com for can’t just build a large continuous world In “Lock Your Assets” (February 20, and expect people to figure it out by them- our best subscription offer. Gaming page 4), we referred speculatively to an selves. The key is making it extremely sim- Industry News is a trademark of Ziff upcoming court decision in an unclear ple and extremely fun, which is extremely way that made it appear that the deci- difficult. The people here know that. And Davis Publishing Holdings Inc. sion had been made already. We regret that humility makes them different from the error. other online players. ■

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Saving the Game- Movie Marriage Warner Bros. Interactive wants a Hollywood ending By Jason Chervokas

For two decades, Hollywood and the game format. The numbers are almost as strong EA’s big nut. Still, that’s the alchemy that business have carried on a flamboyant, for . When Warner Bros.’ bean charms the media guys: turning $1 of con- tempestuous international affair. counters sit down to settle the accounts, the tent into $69.50 of sales. Hollywood ached for games’ revenue fees paid by Electronic Arts for game rights growth and huge gross margins; games to Potter and LOTR are going to look like Job number one for Jason Hall at WBIE yearned for the kind of cultural approval rounding errors. will be to capture a bigger piece of the total that happens only when Hollywood makes net sales of every game based on Warner a movie about you. That wouldn’t matter if Electronic Arts Bros. content. That means not only Rings weren’t making so much money for every and Potter, but also , , But the flirtation has resulted in a string dollar it has invested in licenses. But to the Looney Toons, and Scooby-Doo, just to of atrocious flicks of little financial conse- guys in the cash-strapped, debt-burdened name a handful. quence—Freddie Prinze Jr. in Wing media business, Electronic Arts must look Commander—and has discarded game divi- like a company of alchemists. But how WB decides to pursue that sions like Fox Interactive. But people will money is the question. So far, it has been pay to see Angelina Jolie in a skintight Neither side in the romance between business as usual. In February, the company bodysuit, at least once. Is this a marriage games and movies kisses and tells, so we cut a licensing deal with EA for its upcom- worth saving? may never be able to officially report how ing Catwoman movie. No terms were much a game company paid for a specific announced, but it was the same kind of It’s an interesting question in the wake of media property. But EA does report its roy- licensing deal that Warner and EA have the latest Hollywood scramble to get into alty guarantees in a lump sum. The figure negotiated before. the game business, touched off when includes licensing fees, developer payments, Warner Bros. hired Jason Hall, who was and guaranteed royalties. It includes money Then, late in February, Ubisoft dropped working for Monolith, to head up its new owed to each of its licensors—not only out of its deal to copublish Warner Bros.’ Warner Bros. Interactive Entertainment Warner Bros., but also everybody from Enter the Matrix massively multiplayer division. If Warner Bros. can make millions NASCAR and the NFL to Def Jam—as online game. That may be a harbinger of without lifting a finger or paying a dime in well as outside programmers. The figure things to come. Warner Bros. is now the development costs by licensing franchises allows for a calculation—rough, to be sure, game’s sole publisher, with Hall’s former like Harry Potter or The Matrix, why but telling—of how much money EA gener- company completing development. While would the company want to get into game ates in net sales for every dollar it spends Warner Bros. would be foolish not to con- publishing or, worse still, the ever-escalat- on outside content and outside develop- tinue to rely on EA’s ability to produce qual- ing costs of game development? ment. (Because so many of EA’s franchises ity console games on schedule for multiple involve licensed properties, EA is a good platforms, the realm of online games The truth is that Warner Bros. left so proxy for the industry as a whole.) For its remains wide open. There is no reason the much money on the table in licensing game last fiscal year, which ended March 2003, company can’t roll out its own game. It can rights to Harry Potter and The Lord of the EA spent a little more than $35.5 million in also play a bigger role in console-game pub- Rings that it had to do something. license fees and royalty guarantees. It lishing without much sweat. Warner Bros. reported net sales of almost $2.5 billion. already has distribution, retail, and manu- In the wake of the phenomenal of That means for every dollar EA spent in facturing relationships for selling DVD- The Lord of the Rings movies, the $20 mil- licensing, it took in an eye-popping $69.50 based passive entertainment (i.e., movies), lion (or whatever high-teens rumor you in net sales. so the manufacturing and sale of DVD- prefer) EA paid for Rings and Potter just based interactive entertainment present no ain’t what it used to be. Heck, each of the To be sure, nonlicensed games are big production or distribution challenge. last two Rings installments banked more contributors to EA’s sales. And license fees than that on their opening days alone. The eat into EA’s gross margins. In some years The challenge for WBIE will be the shad- Rings trilogy has grossed more than $3 bil- when the fees were particularly high (like ow cast by Harry Potter and The Lord of lion worldwide in ticket sales already. The 2001), EA’s sales-to-guarantees ratio was the Rings. These franchises may be to the two Rings DVDs released to date are the more like $28.50 per dollar committed. top-selling products in the history of the And the cost of development still represents CONTINUED ON NEXT PAGE

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CONTINUED FROM PAGE 3 filmed entertainment business what Michael Jackson’s Thriller was to the Love the Players, recorded music business in the 1980s. Thriller has sold a reported 50 million Communities can make or break an online game. Just ask EA or Interplay units worldwide—an unprecedented and still-record global number. The album Online gaming communities that serve hun- manage the fans it had counted on to boost redefined the notion of success in the dreds of thousands of players are a natural the game. music business. Its impact was tied to the outgrowth of the speed of communication growth of a new medium, music video, afforded by the Internet and the ever-grow- Volumes have already been written about and new media formats, cassette and CD. ing desire of publishers to grab and hold the trouble stirred up for The Sims Online customers by any means necessary, whether after the game’s underperformance and At the time, it looked like Thriller for franchise repeats or monthly re-ups in a underbelly were given an extremely high was the big bang of a new era in music . Community development profile through the exile of now-infamous sales. But in retrospect, Thriller looks is widely credited in the MMORPG world Alphaville Herald operator and University of more like the pinnacle of music-business for keeping players engaged—and paid Michigan professor Peter Ludlow. The site sales, not the start of something big. up—after the allure of the game’s mechan- has only become a more effective chronicle Changing tastes, changing demograph- ics has faded. “When there are so many of the game’s unique foibles. “It’s almost ics, and changing technologies have players online, players will hang back and always a really bad idea to try to stomp out resulted in a continued erosion of music won’t quit the game. They will still be people discussing your game,” says Amy Jo sales ever since. around in the community, and their role Kim, principal of Socialdesigner.com, a Web will change,” says Ryan Findley, founder of community consultancy. Home-run-level success for WBIE may independent gaming site Stratics. well depend on the film-studio side of the Both of these missteps stem from the house developing more hugely successful Although gaming communities don’t same problem: Players did not say what film properties. Maybe Batman and serve all players, “Those are the most publishers expected or wanted to hear. Superman will fit the bill, but duplicating extreme, most dedicated fans that you Short of laying down basic rules of con- the success of LOTR will be all but have,” says Chip Lange, VP of marketing duct, it proves incredibly difficult to steer impossible, and more than one for EA’s Sports Nation communities. They any discussion among thousands of individ- Hollywood marriage has fallen apart in a are part branding exercise, part self-select- uals, even if they have a common interest in fight over money. ■ ing market-research forum, and part free- a game. “The player base determines the for-all. At their best, communities provide a tone of the player base,” says Findley. “The TAKE-TWO TAKES valuable place for gamers to reinforce their more you try to lock down what players ITS TIME interest in a title, as well as a direct look at do, the less fun they’re going to have.” what makes the vocal minority of players Take-Two Interactive, fresh from restat- tick. Taken for granted, mismanaged, or In Interplay’s case, “They were trying to ing its past three years of results, expected to act in anyone’s interests but leverage an existing fan base but didn’t announced a lousy first quarter this their own, communities can become embar- consider whether that fan base would be month: profits down 38 percent from the rassing liabilities. amenable to the ‘stretching’ of the brand,” same period a year ago and guidance for says Dan Magaha, associate producer at the second quarter lowered. But in a Recent dismal failures for publishers . prepayment scheme that the folks in both large and small illustrate the problem. various Grand Theft Auto localities Although it was lost in the noise that came “When you have a boring game mecha- would no doubt approve of, two days with the 3 cancellation, an arguably nism, people are going to get into trouble,” before stating its earnings, Take-Two worse PR disaster for Interplay was over says Kim of The Sims Online. She contends announced the October release of Grand Fallout: Brotherhood of Steel, the title that that the Alphaville Herald generated so Theft Auto: San Andreas in a note to did manage to reach the shelves. Eager for much buzz simply because it told people consumers on its mailing list, urging a surefire hit with a built-in customer base, how to have more fun with The Sims subscribers to “preorder now to avoid Interplay revived its dormant Fallout PC Online experience than they could with the disappointment.” That’s right, gamers franchise with the console title BOS and official game rules. can pay $50 right now and let Take-Two aimed prelaunch hype at eager Fallout vet- sit on the cash for eight months before erans. But the materials failed to amuse the Ludlow attributes the disorder that dis- shipping the game (assuming it ships on players, and the resulting torrent of criti- tresses EA to a shortage of both official time, unlike the Japanese version of cism overwhelmed Interplay’s largely volun- oversight and trust in the community to Vice City, which just got pushed back, teer community management staff. police itself. Setting things right “might one of the reasons the next quarter is Eventually, the company shut down all dis- require setting up institutions within the looking iffy). Well, that’s one way to keep cussion of BOS on its site—in effect, engi- game that gamers could use to resolve dis- the ship afloat until October. neering its own buzz kill because it failed to putes. It’s been done since the days of

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Not the Game By Jason Compton

MUDs and ,” he says. thing to be controlled. They will want to be the community gives the game a longer in your good graces if they love your game, shelf life,” says Caryl Shaw, manager of Communities are exactly what the name and they will want to keep getting that Web development for . “People who implies—a large, loose collection of individ- flow of exclusive information,” says Kim. are passionate, the fans, are going to write uals who can’t be counted on to have more content beyond anything we’re going to than a few things in common. The good Some companies have developed such a create. You hope they’ll go out and propa- news is that just understanding that fact is trusted inner circle of fansites that they can gate the message.” a huge step toward making community forgo their own operations. “We don’t run management both feasible and rewarding. our own sites because we don’t want to Ultimately, the community is an invest- compete with fansites for users, and ment. “It’s not altruism,” says Kim. “Setting Make no mistake—community sites are frankly, they do a better job of it than we up an online community is a tactic used to often chaotic and noise filled, and the costs could,” says Magaha. achieve a goal, and it can turn on you.” ■ of digesting and responding to each and every word uttered by your gamers in It remains to be seen what the American cyberspace would be staggering. But there game-publishing market will learn from the UP/DOWN is also a growing realization that communi- Korean experience. “We haven’t started to ty management actually requires some gen- leverage fansite operators as strongly as PC Up: Domain name uine skill, not only in communication, but room operators have in Seoul,” says prices in conflict resolution as well. “You’re basi- Staehlin. NCsoft in Korea conducts face-to- Atari unloaded Games.com cally in the business of being a high-school face training and outreach sessions with PC to Games Inc. for $1.125 counselor,” says Ludlow. room operators since it relies on them to million. Dot-com bubble act as the first line of support in the field— pricing is back! Navigate those conflicts, however, and it just as many fansites are the court of first becomes possible to identify how individu- resort for American gamers. “It’s economi- Down: Console als and groups will move in and out of a cally quite infeasible in the U.S.,” she says, prices community and make their buying deci- “but we can leverage that same mentality As the current cycle gets sions. “By recognizing that all gamers will through online media.” deeper into its second half, eventually come to the end of their experi- the only way Microsoft and ence with your game, and by making some Gaming communities are not guaranteed Sony will moves boxes is to cut, cut, cut. predictions about when that is likely to to be self-maintaining grassroots marketing knows this already, although occur, you arm yourself with the ability to machines. But given the right nudges and its $149 to $99 GameCube drop was so provide new content...or even to identify a the right oversight, they can be revenue dramatic that it may have nowhere point to introduce that customer to a dif- positive. “We have found that promoting lower to go as PS2 and Xbox prices fall. ferent game entirely at important moments in that player’s life cycle,” says Carly Staehlin, lead designer at NCsoft Austin. LETTERS

Staehlin compares managing a gaming I read with interest your article “Fewer Smackdowns, More Cuddling” in the community to a lawyer preparing for trial: February issue. “You should never ask a question you don’t know the answer to.” When David Freeman states, “No one suspected it would appeal to so many women, because there was no precedent for gaming having that kind of feminine draw,” he is Independent gaming communities repre- wrong. The VZones MMPOG virtual worlds have been around for five years or more and sent an entirely different sort of challenge are well documented as being 60 percent to 70 percent female in their player base. because there are no direct tools to guide discussion or sanction misbehaving This is, in fact, still true, and in one world, there continues to be an increase in the ratio patrons. Many publishers will embrace cer- of its female population—specifically in Seducity, the adult world. tain fansites run in a levelheaded, respectable manner and often employ a car- DAVID ANDREWS rot-and-stick approach with advance con- Stratagem Corporation, Operators of the VZones and Seducity tent and access to developers. “Think of http://www.vzones.com http://www.seducity.com them as part of your ecosystem, not some-

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Diesel and Woo Jump to Videogames If the game business is going to look more like Hollywood, it will start with companies like these By John Gaudiosi

In Hollywood, it’s all about relationships. Butcher Bay first-person shooter with future deals for directors and creators. Who you know can go a long way toward Vivendi Universal Games. The studio John’s deal provides unique access to pub- getting a TV or movie pitch to the correct enlisted Swedish developer Starbreeze, lishers who might not be receptive to pitch- ears. The videogame industry isn’t struc- maker of Enclave, to create the game. es from Hollywood at large.” Boesky says tured quite that way, at least not yet, but the reason Woo got into games was to there are new avenues opening up for game Tigon is funding the creation of its launch original IP. companies to gain immediate Hollywood games through external developers. In access to original content. Two recent addition to signing an $11 million contract Tiger Hill president Foxhoven says the videogame companies created by A-level to star in Universal’s Chronicles of Riddick company’s first game with will be Hollywood names are forging ahead, and movie, Diesel signed a separate deal with announced around , but also that a sec- each is developing several games. If suc- Vivendi Universal Games for the Butcher ond game with a separate publisher will be cessful, these companies could lay the Bay game. Cos Lazouras, who was a pro- announced before the annual game trade groundwork for a new type of Hollywood ducer of Fox Interactive’s Planet of the show. Tiger Hill is serving as a producer on game publisher and open up the door for Apes and Buffy the Vampire Slayer, is CEO the games, and the funding will come from game publishers and developers to get A- of Tigon. the publishers, while the games will be list talent without having to go through developed by said publishers through inter- Hollywood agencies. “There are a lot of similarities between nal or external development teams. producing a videogame and a movie,” While actors such as Jet Li and Jean Diesel adds. “The trick in either medium is While the first game from the studio is Reno have become involved in original to enroll the most talented people you can still under wraps, it’s likely to be one of the videogames, Tigon Studios, the videogame find. I think that gamers are demanding a three premises outlined on the company’s publisher founded by actor Vin Diesel, and more cinematic-like experience. I also website: “Sinner,” which features an assas- Tiger Hill Games, the brainchild of film believe that the talent that exists in sin murdered on his last job who’s offered director John Woo, are taking the relation- Hollywood will be the chief resource to fill the chance to avenge his death on Earth if ship to the next level: game companies these 20-some hours of gameplay.” he can escape from 18 levels of hell; established by Hollywood A-listers. The “Burglar,” in which an estranged son impact of these studios’ first games on the Tigon is also developing additional becomes a in order to avenge his mass market and hardcore gaming con- games, including original game titles that father’s murder; and “Stranglehold,” in sumers could fuel additional start-up are not tied to movies. Next up for the which two men on opposite sides of the efforts involving Hollywood talent. company is Perrone, the working title law see their worlds join forces when the given to a Grand Theft Auto–style game son of a cop is murdered. There’s a large contingent of Hollywood set in the ’70s that follows a cop who’s producers, writers, actors, and directors also involved with the Mafia. Tigon is “As for the three concepts listed on our that has grown up playing videogames. The expected to work with a different copub- website, we are committed in our efforts to next logical step for some of these celebrity lishing partner with this Mature-rated title. make them into games,” says Foxhoven, gamers is to become involved in the game- Again, Diesel’s likeness and voice will who hopes to have the first game out by creation process. Woo and Diesel decided appear prominently. the end of 2005. to get into game development for different reasons. Woo watched as numerous games Woo’s Tiger Hill is taking a different “With games, I am not restricted by a used his trademark film action sequences approach, having signed a multiyear first- budget that would limit multiple sets or (including the hero diving in slow motion look deal with Sega to copublish original huge action sequences, as I may be on a with duel pistols blazing) and decided to games and work on existing properties. film,” Woo says. “Ultimately, it’s a new get a piece of the action. Diesel wanted to Co-founders Woo and Terence Chang serve way for me to tell stories that allow for create more of the kind of games that he as co-CEOs of the game publisher, Brad interaction and open up multiple ways on enjoys playing. Foxhoven is president, and Lori Tilkin is how a story can progress and resolve. It’s vice president of the company. all quite exciting.” Tigon will be first out of the gate with the sci-fi Chronicles of Riddick: Escape “We put a lot of thought and effort into Tiger Hill co-CEO Chang says the idea is From Butcher Bay, a prequel to both the structure of John Woo’s deal,” says to create games with the hopes of turning 2000’s Pitch Black and this June’s Keith Boesky, who set it up before becom- them into movies. The company will also Chronicles of Riddick movie from ing International Creative Management’s Universal. Tigon will copublish the videogame agent. “It is a great model for CONTINUED ON NEXT PAGE

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The Next Starbucks? Both enthusiasts and entrepreneurs are banking that the Korean PC Baang model can travel to the United States By Dean Takahashi

Visit the Rivalution Network Center for in a social setting and they’re playing NINTENDO HAD SECOND LAN gaming in Milpitas, CA, on any given against someone in the same room.” THOUGHTS BEFORE weekday afternoon, and you’ll find stand- ing room only as crowds of high-school These centers are popping up despite With all the speculation about Nintendo students gather to play shoot-em-up games the fact that the excitement about Internet DS, the double-screen handheld player on the center’s 36 high-end PCs. gaming in Asian countries failed to spread due later this year, we’ve seen only a to the United States more than five years handful of notes acknowledging that Reminiscent of the arcades of the 1970s, ago. In South Korea, there are tens of Nintendo did this once before, with its LAN centers are billing themselves as the thousands of PC Baang gaming centers apparently forgotten (except by histori- cool place to hang out with friends and that emerged to serve gamers who played ans) MultiScreen Game & Watch device. blast away at each other in games. They StarCraft, Lineage, and a host of other Since the Advance SP resem- also hold tournaments and events that keep first-generation Internet games. That bles nothing so much as an original kids coming back, even though they could country was unique in its adoption of Game Boy folded in half, those looking be playing in the comfort of their own gaming, in part because of its cold cli- for a possible hint of the upcoming homes. At night, Rivalution draws an older mate, heavy urban clusters of youths, and device’s design should view images of its set of mostly male customers who pay $3 love for technology. apparent precedent at http://www.game- an hour to play networked games such as andwatch.com/screen/multiscreen/index. Counter-Strike and . There When Internet cyber cafés and gaming html. (Thanks to Game Girl Advance for are four gaming centers in Milpitas alone centers opened in the United States, they the tip.) and as many as 50 in the San Francisco fizzled out at first. The U.S. is more spread Bay Area. out, and the same forces that conspired estimates there are 1,000 gaming centers against arcades—the rise of the consoles across the United States. IGames.org serves “We think that the time has come for a and home PC Internet gaming, and the as the industry’s trade association and says gaming lifestyle and a place to support it,” then-high cost of providing connectivity— it has more than 500 member centers in says Will Huynh, cofounder of the doomed the initial centers. North America, as well as 400 internation- Rivalution chain, based in San Jose. “Sure, ally. That membership has doubled in the you can play at home. But you can see the But LAN centers may finally be catching excitement on someone’s face when they’re on in the U.S. Graphics chip maker Nvidia CONTINUED ON NEXT PAGE

Diesel and Woo CONTINUED FROM PREVIOUS PAGE be launching comic books and toy lines in Technology Research, says companies like major game publishers. the near future. With all of the internation- Tigon ensure a better bottom line for al box office success that Woo has had, he Diesel, but that in the game industry, With both of these companies developing does not own the rights to any of his where most Hollywood-licensed games are games, the verdict will soon be in. For Hollywood movie IP, and games give him failures, it’s the quality of the game that Tigon, the first true test will come from the opportunity to own and build on origi- makes sales. Diesel will certainly bring Perrone, which won’t have a Hollywood nal properties. attention to original IP, which is the cur- movie license to ride a marketing wave. rent reason game publishers cast games Tiger Hill and Tigon are taking things a “We appreciate and understand the way such as DRIV3R and True Crime with step further than Jet Li’s involvement with that videogames are made, and we don’t Hollywood talent. Sony’s Rise to Honor by actually owning want to force-feed a Hollywood style of the IP they’re creating. The fact that Tigon production into games,” Chang says. “I’m not sure that having Hollywood and companies like it will work with multi- “Instead, we want to utilize the Hollywood stars attached will necessarily make a dif- ple publishers also opens the door for a infrastructure of talent available and add to ference either way to the game’s quality, game company to lock in a Hollywood- the game-playing experience where possi- but with the right stars attached, it will style first-look deal with this talent, as Sega ble, including hiring Hollywood writers certainly boost visibility for the product has done with Tiger Hill. If these projects and voice actors for the game.” and help gain all-important distribution at turn out to be profitable, the videogame retail,” says Simon Price, a UK-based industry is going to start looking a lot P.J. McNealy, senior analyst at American videogame analyst who works with all the more like the movie industry very soon. ■

March 19, 2004 gaming industry news 7 GIN _05.tesogfmr.qxd2 3/15/04 11:29 AM Page 8

Playing the Place Expect to see paid-for products everywhere By John Gaudiosi

For decades, Hollywood movies and TV That blame has actually helped the dedicated videogame arm of advertising shows have received solid revenue streams videogame industry finally begin to estab- agency Starcom MediaVest Group, says from companies for product placement. lish itself as the ultimate product-placement that McDonald’s and three other high- Videogames, which have a captive stop for major brands and companies. profile clients are working on new ways engaged in interactive entertainment with to integrate products into gaming. SMG no fear of channel surfing or “blink and Some top-tier brands, such as Coca-Cola Play also has a half-dozen additional pro- you missed it” product placement, are an and Nike, are still vying for dollars from jects that it’s working on from an invest- ideal medium for this. game companies by arguing that their brand ment standpoint. brings more value to a game property than In the current age of TiVo, 500-channel vice versa. But according to Jane Chen, VP “When I saw all the press that was gen- cable and satellite services, and Netflix, of strategy at L.A.-based videogame integra- erated from McDonald’s and Intel being in advertising agencies and product-placement tion shop YaYa, there are big names paying The Sims Online game, I thought it was companies are having a harder time reach- to get into the game. McDonald’s, which has ridiculous that people weren’t doing more ing the elusive young male viewer with dis- worked with Electronic Arts for The Sims than one-offs,” says Harris. posable income. Movie ticket sales continue Online and NBA Live 2004 and to fall each year, TV networks were hit for Tony Hawk’s Underground, has some “The majority of things that have been with record drops in male viewership last new gameplay up its sleeve. done in games so far, including signs in a fall (as much as 12 percent during prime stadium or a vending machine with a drink time), and videogames are being blamed. Tim Harris, VP and partner at Play, the brand on it, are just scratching the surface

The Next Starbucks CONTINUED FROM PAGE 7 last two years. student at Cal Poly, San Luis Obispo. He shows up in a concentrated physical space. had visited gaming centers in the Nvidia sponsors more than 200 centers, up “In 1997, we tracked only 45 centers,” Koreatown section of Los Angeles, which from 70 a year ago. says Frank Cabanski, events director at had imported the PC Baang concept from iGames. Most of the centers are individual- South Korea. Many had folding tables and “The game centers have a big influence ly owned. The centers don’t cost that much chairs and were crammed with computers. on the hardcore gamers,” Cabanski says. to create. The average size is 2,000 square Huynh wanted his centers to be nicer “That’s why the sponsors go to them.” feet, and the average number of computers places where people could gather for a is about 25, in addition to two heavy-duty social experience, much like a nightclub for Of course, there are dangers in starting servers that manage the network traffic. teens or an arcade. this kind of business. Every year or so, the They typically share a T1 line that pro- centers have to incur the big capital vides a broadband connection at a speed Huynh and his friend Thuan Lee raised expense of upgrading their computers so of 1.5 megabits a second. The typical cost money from family and friends to open that gamers won’t be frustrated with the is somewhere around $150,000. their first Rivalution gaming center in San experience. And there are chances that if Jose, CA, in 2001. They then opened a no good games come out to fuel LAN gam- Other centers have a much different feel. second company-owned store and began ing on a regular basis, the fad could very The Liberty Corner Café in Basking Ridge, franchising the concept—the clubs resem- well burn out. NJ, has a day job as a children’s education ble a nightclub, with purple interiors and center and becomes a LAN center for an rock videos playing throughout the venue. Huynh is betting on next-generation older crowd at night. The center, housed in The centers offer snacks and drinks but games such as and Half-Life 2 to a two-story home, has 16 computers that no restaurant. Huynh is recruiting owner- provide plenty of grist for the centers for the older crowd claims at night for managers to Rivalution’s team so that it years to come. Isaacs says, “Naysayers Counter-Strike and Call of Duty. can start franchising across the country. predicted that once homes got broadband, the centers would go out of business. But Rivalution’s Huynh, a 25-year-old gamer Companies like Nvidia like the centers we’re enduring and passing that test now. who plays about six hours a day, got the because it helps them market their wares to People have broadband, but the growth is idea for starting the center while he was a the enthusiast gamer market, which rarely still happening.” ■

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ment Game

of what can be done,” says P.J. MacGregor Sony Ericssons of the world. player is devoting to the game, it has noth- of SMG Play. ing to compare that to with the rest of the Activision and Electronic Arts are lead- industry. Advertisers currently use sales According to Keith Ferrazzi, CEO of ing the videogame companies in product data for games, but it’s not a large leap to YaYa, which has worked on product place- placement, thanks in large part to their multiply the 4 million copies of Madden ment in videogames for companies such as leading market shares and the consistent sold by an average of 100 hours that each BMW and Daimler Chrysler, it’s taken annual sales of stalwart franchises such as player will play to figure out how many some time for game makers to find ways to Madden, Tony Hawk, and The Sims. But times a single gamer will be exposed to a integrate products into games and not spoil according to Julie Shumaker, director of brand that’s integrated into the game. the gameplay. Ferrazzi says that game com- ad sales at Electronic Arts, the strides one Online consoles will give game publishers panies now see revenue potential in prod- game publisher makes with in-game prod- the ability to quantify impressions with real uct-placement deals, which can generate uct placement help every game company, data, something that’s relatively easy to do anywhere from $50,000 to $1 million, a especially when 70 percent of every with television and movies. fraction of the revenue a TV or movie deal marketer’s ad dollar goes to traditional can command. media buys. Dave Anderson, Activision’s senior direc- tor of business development, sees a real There’s a lot of activity in the games “I’m not competing with Activision or marriage between consumer products in space, both in the integration of products THQ for ad revenue, I’m competing with America and the videogame industry and brands into the gameplay and story TV or Olympic Games sponsorship,” says emerging over the next decade. “The key is line of games and in the unique positioning Shumaker. “When I talk to potential adver- to deeply integrate the product or brand of content with a brand. Electronic Arts tisers, I’m not selling EA, I’m selling gam- within the gameplay in a way that gets the worked with Target to provide an exclusive ing as the best way to reach a targeted brand messaging across while remaining golf course for consumers who purchased audience for an extended period of time.” authentic to the gameplay and the story Tiger Woods PGA Tour 2004 at that retail- line,” he says. er. Wal-Mart will give consumers who pur- One sector that definitely has seen the chase Midway Games’ NBA Ballers game a pendulum swing in favor of games is the For its best-selling True Crime: Streets of free soundtrack CD. racing genre. Car companies used to charge LA game, Activision brokered a deal with licensing fees to get their cars in a driving Puma to have several characters outfitted in Ubisoft cut a deal with Sony Ericsson to game, even though Hollywood has its pick Puma clothes and to have a crime occur at a feature a pair of new cell phones in the of the lot for movies that might feature Puma store, where thieves steal Puma clothes gameplay of its new Tom Clancy’s Splinter only a car for a few scenes. Today, accord- out of a Puma truck. This was above and Cell Pandora Tomorrow. The game’s hero, ing to Chen, car companies pay $3,000 to beyond the Puma-branded signs and bus Sam Fisher, will use one phone throughout $5,000 to cover the cost of digitization of wraps that were incorporated into the game. the game. Another will be featured on a assets to get their vehicle in a driving game level of the game, and Fisher will have to like a or Gran Game companies are also exploring find the phone and use a picture stored on Turismo 4. Those numbers increase when opportunities with advertisers to sponsor it to hunt down a bad guy. Bringing things the car is not part of a large field, but is hidden cheat codes and soundtracks to give full circle, GameLoft will ship a wireless singled out, like the Honda Element, which the players rewards for excelling at a version of Pandora Tomorrow that can be was integrated into EA’s SSX 3, or the Jeep videogame, which in turn keeps them com- played on the actual phone that Fisher uses Wrangler, which was used in Tony Hawk’s ing back for more. The key is to make the in the game. Pro Skater 3. marketer feel that his return on investment is worth the price of admission in the digi- “We don’t do blatant advertising within With the advent of PlayStation 3 and the tal arena. a game, because gamers want to enjoy the next Xbox, along with the online capabili- interactive story line,” says Jag Wood, ties that these consoles are expected to “An advertiser is looking to borrow senior promotions manager at Ubisoft. have out of the box, product placement equity from MTV or ESPN when it buys Wood says that in addition to integrating will grow in the next few years, but not an ad slot,” says MacGregor. “We believe products into gameplay, co-marketing without pitfalls. For examples, companies videogames offer great equity to the buyer. opportunities—especially online—are can’t track gameplay habits. While EA can It’s just a matter of time before everyone opened by working with the Palms and get an idea of how much time a Madden realizes this.” ■

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Number One With a In the age of Kazaa, videogames might be the best thing the record business has going for it

In part because your editor cut his teeth in It’s getting a lot more credit as people iden- pie. The trick is to know what to choose the music press, we’ve been closely watch- tify its value. and how to make the dollar work. ing how the music and game industries are colliding. Over the next several issues, we’ll Where is that value? The importance of Who makes the deals for existing material? explore several aspects of how the two music in selling videogames has certainly Record companies? Artist management? businesses are affecting each other. In this changed in recent years. Without DMX Typically, the game developer works with issue, we start at the top. Steve Schnur’s and Public Enemy and so on, Def Jam the licensing departments of record compa- title is Worldwide Executive of Music and Vendetta would have been merely a good nies and publishing companies. But we Audio for Electronic Arts, which means wrestling game. work with marketing and creative depart- he’s the most important man in the busi- That’s your opinion, not mine. The value is ments, too. If you deal only with the licens- ness of game music right now, and he’s everywhere in the game. When you play a ing department, you get music only after it’s heavily responsible for the move to use new game, you spend a lot of time in menus. If been developed. The key to a successful col- music by popular performers in games. As the songs being played during those menus laboration is starting early. On their last he puts it, “There are a bunch of cheesy are rotated properly, you can make a great record, very early on in the recording, when synthesizer guys lined up outside my office impact. And then the impact shows up on they were tracking just bass and drums, who want to kill me.” the music sales charts, too, for everyone Blink 182 was thinking about which song from Blink 182 to Twista. People listen to would work best in Madden. And when I How has the importance of music in the the songs in Madden, and when you talk to think of Madden 2003, I think of Good experience of playing a videogame changed them later about the songs, it sticks with Charlotte. They’d sold 300,000 albums. We in recent years? them that Madden is a good place to dis- were in the studio while they were cutting It has changed quite drastically. The cover new songs. People want to discover the record and picked one half-done track videogame industry has come to realize songs via games. that we thought would work. They tell that music is not something you just throw everyone how Madden made them a band into the background. It’s a key part of the How have these changes affected budgeting? that sold 3.5 million records. emotional content of the game. Right now, Believe it or not, music budgets haven’t we have games that scare you, but one day, changed that much. It’s just that the pie is Old-timers may think the current moment we may see a game that makes you cry. cut differently within the budget. It used to in joint music-games marketing feels like Games are like films in that the success of be that 95 percent of the budget was blown the music-movie soundtrack bubble in the the music has a lot to do with the emotion- on one big song that a developer heard on mid-’80s, which popped quickly. How is al participation it provides. the radio three years ago. There was very this different? little money spent on original production. For one thing, many times, you have songs How is music used differently in games now? Now we find 30 to 40 songs in that same written specifically for the games. They’re not existing hits used to promote some- thing new. Also—and this is the biggest dif- GAMECUBE SHORTAGE: SHORT ON EVIDENCE ference—people are discovering bands via games before they hear them on the radio. It’s been widely reported that Nintendo is running out of in the United States. All the convergence is coming from the According to a Reuters report that was picked up more or less everywhere, the console, game side. ■ which saw its list price tumble from $149 to $99 during the holiday season, enjoyed a huge jump in sales (this after a high-profile and embarrassing production stoppage last year), UP/DOWN and store shelves are almost bare—nearly 50 percent of retail stores are out of GameCubes already. As a result, Nintendo was said to be working furiously to increase production Up: PSP support capacity and divert GameCubes from other territories to the U.S. as quickly as possible. More and more big players, Now just a cotton-pickin’ minute, as Yosemite Sam used to say. The only source in from EA to Take-Two, are lin- these pieces has been someone on the Nintendo payroll, so we fished around. We called ing up to support Sony’s 37 stores in 14 states, both general and specialist retailers that sell GameCubes, and 36 upcoming handheld. said they had GameCubes in stock. (The 37th said, “I’m pretty sure we have ’em, but I can’t leave the register right now.”) We visited 11 stores and saw GameCubes at all of Down: Whining them. We called five buyers; none said that they were having trouble acquiring developers GameCubes. Then we checked a variety of online stores. Most, like Amazon (which fulfills Jason Rubin told DICE that for Toysrus.com), said the consoles were available for shipment within 24 hours. There celebrities get too much may be a shortage, but if there is, a lot of people who sell GameCubes haven’t heard attention. Shocking! about it yet.

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Origin Systems R.I.P. By Greg Costikyan

Starting this month, we’re dedicating space as blowing $150 million or more on Kesmai was killed. in each issue for leading game-industry EA.com. It has a strategy that works, and thinkers to let loose. This month, we’ve it sticks to it; it develops or acquires IP that EA recently announced that it was mov- asked ace game designer Greg Costikyan, has a strong following, and it develops it ing most of Maxis’ staff to the Redwood chief creative officer of Unplugged and incrementally, releasing new versions and City facility. Wright and a skeleton crew member of The Themis Group board of line extensions over time. It develops large- will apparently stay where they are, which advisors, to consider Electronic Arts’ deci- ly in-house at enormous studios in I suspect is a bad move on Wright’s part. sion to close the Austin office of Redwood City, Los Angeles, and Essentially, other people are going to have Systems and offer employees there a chance Vancouver, throwing large amounts of more direct, day-to-day control of his to relocate to EA headquarters in Redwood money at each title to ensure that they look team, and he’s not going to be at the moth- City. You can find out more about at least as good, and preferably better than, ership to wrestle up political support. Costikyan at www.costik.com. The opin- competing titles aimed at the same well- ions expressed here are his alone. –Ed. understood game genres. And, of course, Origin will be closed. Supposedly, the staff is being offered posi- I recently spoke on a panel at which one What EA has never learned to do—and tions in .… But the institution of my copanelists was from Electronic Arts. doesn’t have to, I guess—is foster innova- will just become another part of the EA He spoke pretty passionately about the tion and success among the smaller, semi- machine. The last vestiges of Garriott’s lega- need for innovation in game design. independent studios it has acquired over cy are being erased. I think that’s a loss. ■ the years: Kesmai, Maxis, Origin. The But EA is about the last place I’d look Sims was almost killed several times before Do you want to defend EA—or would for it. EA is widely regarded as among the Will Wright got it through the system; you rather start a fire of your own? Either best-managed companies in the industry— founder was forced out way, write to us at Jimmy_Guterman and by and large it is, despite such idiocies after one rocky product launch; and @ziffdavis.com. Too Soon to Verify The latest industry tips, unfiltered

Most of the tips we’ve received in the past every time they push one out the door.” to have a little powder left in case they month have been Xbox related. Either the need to drop to $129 for the holidays.” release of the next console from Redmond Another sign that Xbox Whatever is The other: “The $149 will include a copy will be considerably earlier than the ones close: Software development kits have been of the much-delayed Halo sequel.” from Nintendo and Sony, or Microsofties sent out. We’re told these kits are prein- have looser lips than their comrades at stalled on systems running dual 64-bit IBM “I like your newsletter,” one source tells Nintendo and Sony. Or both. Power PC processors. Longtime Microsoft us. “But it does seem you jump to conclu- watchers will be amused to learn that those sions.” Us? Well, before you think we jump The disagreements we’re hearing about processors are running computers from to conclusions, let us remind you that the the new Xbox are over marketing minutae Apple. The machines run ATI R350 graph- Informa Media Group, in its report stating (will the next console be called Xbox 2 or ics, but as one letter writer tells us, what the videogame business will look like Xbox Next? Who cares?), while there is “They’ve made it pretty clear that the next in 2010, has predicted that PlayStation 3 consensus on several crucial issues. All our version will have the R420.” will decimate the next-generation Microsoft correspondents tell us that internal storage and Nintendo consoles. It doesn’t mention will be of the flash-memory variety. Why And what of the current Xbox? We’ve who’s going to win the off-year congres- no hard disk? Here’s what one person, who heard from two people in the know that a sional elections in 2010. wants to be identified as “a guy who price cut is close, although they disagree on knows, because I sell games that make the when it’s coming. One person believes it Do you have a crystal ball? Follow the Microsoft games platform a success,” tells will be before Memorial Day, and the other lead of your colleagues: Sign up for an us: “Having a box that’s cool is great. They says “if and when Halo 2 ever comes out.” anonymous e-mail account and write to us did that already. Now they want a box Both sources speculate that the reduced at [email protected]. We that’s cool—and that doesn’t lose money price will be $149. Says one: “They’ve got can’t do it without you. ■

March 19, 2004 gaming industry news 11 GIN _05.tesogfmr.qxd2 3/15/04 11:29 AM Page 12

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