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VOLUME 1, ISSUE 4; FEBRUARY 20, 2004

Xbox on the Mind is scoring mind share, but it must make one more deal to have a shot at winning the console war

“People are acting like our desire to make to conferences, hand out fliers, talk to important it is for Microsoft to play well a profit on a product we sell is some sort influencers. There’s absolutely nothing with others in the console space than those of unforgivable sin.” organic about this.” in the PC space. Microsoft has bet heavily on online gaming as a strong selling point That’s a Microsoft executive whom But such PR campaigns are successful of the , and the company is making we’ve known since before Bill Gates made only if there’s an audience ready to accept steady progress in attracting subscribers, his first billion. He’s worked on all sorts of them. “People are throwing all sorts of but Xbox Live will not be sustainable until projects for Redmond since the 1980s, and money at our culture,” says Kevin Liles, Microsoft makes a deal to include the enor- he’s furious about the response to early who stepped down as president of hip-hop mously popular games on news about Xbox Next. “People don’t even stalwart Def Jam earlier this month as part the system. Online isn’t the only key, know what it’s going to be, and already of the Lyor Cohen/L.A. Reid shakeup. though. As any console player will tell you, we’re getting all this talk about how one “And sometimes that money is attached to exclusive content and low retail prices will potential feature or another is a betrayal. something we do like.” still make quarterly numbers go down Grow up. If the second Xbox has the same more easily. business model as the first, there’s never Adds an executive at Island Def Jam going to be a third. Believe me. Is that Music Group, “The cars in our culture are “Microsoft saw with and Half-Life what the hardcores want?” big. The clothes in our culture are big. Our how wonderful things can happen when game machine is going to be big, too.” you meet gamers’ needs,” says an executive Why is the reaction to rumored features who worked with Redmond on one of so vivid and intense? Because the Xbox has THE VIDEOGAME ESCALADE those games. “Especially with the sports captured the imagination of the gaming Indeed. In keeping with the Escalade analo- games, it’s inevitable that gamers are going public and is generating the sort of pop- gy, the physical size of the Xbox makes it to demand quality games with online play. culture references that the PS2 once attractive by making it look more substan- EA knows that and Microsoft knows that. enjoyed. You hear more and more sports tial. And since the Xbox’s controller is larg- Microsoft is in this arena to win. It’ll make stars and pop stars citing it, and every er than those for competing consoles, it fits whatever deal it needs to to win.” So being urban downtown area seems full of green big American hands better. Some observers cool and being the box with mind share X stickers. (Green is the favored hip-hop cited Xbox’s American origins—it’s the add up to a good start, but it only lasts so color nowadays, as both halves of OutKast only one of the Big Three consoles designed long if you don’t deliver what your audi- showed on Grammy night.) It’s even cool Stateside—as a reason for the Xbox’s ence wants. to modify the Xbox with an alternate oper- increasing “coolness.” Says one developer ating system or increased processor speed— who has worked on games for all major AND WHAT WAS THE it’s like customizing a favored vehicle. One platforms, “Say what you like about GOOD NEWS? colleague likens the ascension of the Xbox Microsoft, but even its first-generation to that of the Cadillac Escalade: “It’s Xbox has the best graphics on the market. “Twenty-three development studios another big, overweight, ugly box that hap- And since the big differentiator these days shut their doors in Europe in 2003, pens to be extremely capable.” seems to be having the most sophisticated graphics, Xbox looks more attractive. Just up from 14 in 2002 and a mere eight This hasn’t happened by itself, of course. compare Grand Theft Auto III on PS2 and in 2001. Although several new stu- Microsoft regularly brings “influentials” to Xbox. It’s no contest.” dios have sprung up from the ashes its Redmond campus, among them groups of DJs and performers. The company has We also heard from developers that the of those companies, the stark reality seeded these influentials with Xboxes. Xbox is particularly attractive to PC devel- in those facts is clear: This is a sec- Public relations veteran Richard Laermer, opers because it runs on a customized ver- tor in crisis, and no amount of sugar- author of Trendspotting, acknowledges, sion of Windows. The relatively easy tran- “There’s a huge PR machine behind the sition from PC game development to Xbox coating the figures can change that Xbox. When you have a machine like that, game development—and the opportunity fact.” you can feed the marketplace. You can go that offers—underlines how much more —Financial Times 001-12_GIN _04.te.qxd 2/18/04 11:39 AM Page 2

EDITOR-IN-CHIEF Crime Pays, Jimmy Guterman Persia Doesn’t [email protected] ZIFF DAVIS MEDIA

Except for Electronic Arts, which occupies “Activision was so smart. True Crime is a 500 UNICORN PARK DRIVE its own rarefied space, the two game compa- good game, maybe not as good as Prince of WOBURN, MA 01801 nies entering the holiday season with the Persia or Beyond Good & Evil, but the big highest hopes were Activision and Ubisoft. difference was that Activision understood 781-938-2639 “Both were extremely well positioned with a the market. They held off on games that collection of really good games,” notes the didn’t follow trends and worked hard to CEO of a competing publisher. “There was make sure the Grand Theft Auto fans ART DIRECTOR: Jason Babler only one difference: Activision had really knew that True Crime was right up their good games that people wanted to buy.” alley. They picked the right title at the right time, and they executed. I’m glad there COPY DESK: Tom Edwards, Greg Ford, “Both companies emphasized quality aren’t more companies like that!” Susie Ochs, Maritza Refuerzo over quantity, which is a very good thing,” says Simon Price, an industry consultant in An editor at a (non-Ziff Davis) consumer England. “Activision, in particular, cranked game magazine says he’s disappointed: quality to 11.” He contends that despite “I’m glad Activision broke through with PRODUCTION: Carlos Lugo, Michele the critical raves awarded to Beyond Good True Crime, but we absolutely loved those Manousos, Anne Marie Miguel & Evil and especially Prince of Persia, two Ubisoft games. I guess these days hav- “Those games are not where the gamer is ing a great game isn’t enough. You have to anymore. They had beautiful design but have the right game at the right time. And CIRCULATION DIRECTOR: Chris Wilkes not what gamers were looking for.” more people want to go to L.A. [the loca- tion of True Crime] right now than ancient [email protected] An executive at Electronic Arts says: Persia.”

ZIFF DAVIS GAME GROUP WHAT CONSOLE TABLE OF CONTENTS GAMERS ARE PLAYING, SENIOR VICE PRESIDENT: Dale Strang ACCORDING TO A PUBLISHER: Lee Uniacke TRADE GROUP EXIT INTERVIEW EDITORIAL DIRECTOR: John Davison We’re not so sure these are useful differ- Ed Fries opens up to John Davison about his entiations. Grand Theft Auto could fit into 18 years at Microsoft BUSINESS DIRECTOR: Cathy Bendoff every category here except sports. Maybe PAGE 6 it’s an attempt by an industry organiza- tion to minimize the popularity of one Copyright © 2004, Ziff Davis Media Inc. kind of genre: shooter. FEWER SMACKDOWNS, MORE CUDDLING All rights reserved. No material in this Romance comes to videogames publication may be reproduced without PAGE 8 Shooter 4.6% Action written permission. Bulk orders, reprints, 27.1% and site licenses are available. Role-playing 8.7% MOBILE MATTERS Sports Nokia’s N-Gage prepares for round two Subscriptions cost $995 per year. Visit 17.6% PAGE 10 http://www.gamingindustrynews.com for Racing 15.7% our best subscription offer. Gaming TOO SOON TO VERIFY : Entertainment Software Association Industry News is a trademark of Ziff The latest industry tips, unfiltered PAGE 11 Davis Publishing Holdings Inc.

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Seeing the Phantom Now people will stop wondering if Infinium’s much-rumored PC console is real. But is there a market for it? By Dean Takahashi

When Xbox cocreator Kevin Bachus market.” networking services company that went pub- became president and chief operating offi- lic in 2000 and has a market capitalization of cer of Infinium Labs, he knew he would Bachus says that Infinium Labs is misun- $325 million. The potential Infinium face skepticism. Infinium seemed like a no- derstood as being a hardware company investors, who are awaiting SEC approval, name start-up heading on a suicide mission when it really should be viewed as a service say that they’re aware of Roberts’ back- by launching a videogame console for PC company. He believes that it has a chance ground but believe that the timing is right for games. to establish a downloadable game service Infinium. that works better than anything else avail- In meetings with the media at last May’s able—including downloading onto a PC— “I view Infinium’s opportunity like the E3 convention, the company, based in because it is targeted to a single, stable introduction of the compact disc, when a Sarasota, FL, indicated it would launch its piece of hardware. Infinium wants to make whole new channel for distribution opened Phantom console for PC games in August a whole library of PC games available for up,” said Shelly Singhal, managing director 2003. Didn’t happen. In September, the download, and its hardware exists to carry of SBI USA. website HardOCP wrote a story that made out that mission, much like DirecTV sells it seem like Infinium Labs was a sham. its satellite boxes so that it can make Bachus has the credibility to get the money off of its satellite TV service. If the industry’s attention. Downloadable games Then Bachus joined last month, reviving Phantom works, Infinium will create an are available from vendors like interest in the company because of his high easy way to buy, rent, and install games. RealNetworks, but they haven’t made a profile in the gaming industry. dent in traditional retail. Bachus says that’s “PC games are facing barriers, with chal- because the vendors have to deal with the “I was shocked that Kevin went there,” lenges for people who don’t want to go to problem of downloading games onto a says a former colleague of Bachus. CompUSA, sift through the products, pay wide variety of hardware configurations. their $50, and load the games,” Bachus The challenges a start-up faces by taking says. “They want things to be more simple. Bachus acknowledges that there is a lot on Nintendo, Sony, and Microsoft are That’s what Infinium Labs has tried to of work to be done. Infinium will have to huge. David Cole, an analyst at DFC address.” spend a great deal of energy counteracting Intelligence, says Infinium won’t have its own public relations mistakes, Cole enough Phantom-exclusive games, won’t Much of the misunderstanding is says. Bachus says the company is doing have the money to advertise, and may have Infinium’s own fault. The HardOCP article another marketing survey to figure out no clear idea which gamers will gravitate to noted that CEO Roberts hasn’t been suc- exactly who its customers will be and what its unique solution. cessful in a number of previous ventures. kind of hardware they want. (This is some- Roberts confesses to being a serial entrepre- thing the company should have done long But Bachus, who helped sign up 200 neur who’s been involved with nine compa- before Bachus arrived.) At the same time, developers for Xbox in the console’s early nies, including some that haven’t survived. Infinium has to launch its box this year. days, says the challenge reminded him of But he notes that he has conducted his That way, it can exploit a small hardware creating Xbox. He has $15 million in fund- business honestly and that he has never advantage over the aging consoles and ing commitments from two investment been involved in litigation at his prior com- avoid getting lost in the marketing hype companies, SBI USA in Irvine, CA, and Los panies. He says that some of the compa- when the new consoles start launching in Angeles–based Trilogy Capital Partners. nies, such as Broadband Infrastructure 2005. Tim Roberts, the CEO who founded Group and Digital Broadcast Network, Infinium in December 2002, says that he’s went belly up as the fortunes of the dot- Bachus says this is more like a course given Bachus a mandate to revamp the coms soured—victims of overzealous busi- correction, not an overhaul. “Everyone has company’s operations and marketing from ness plans, not fraud. Says Rich Skoba, been looking for signs this was a hoax top to bottom. Infinium Labs’ executive vice president and company,” he contends. “There was a a partner in one of Roberts’ former ven- vision. It wasn’t articulated well. They SELLING HARDWARE OR SERVICES? tures, “You can name 15 other companies needed help from folks in the game indus- “I started talking to the Infinium Labs guys with credible management teams that didn’t try to refine the message.” a couple of months ago, and to say I was survive.” skeptical was an understatement,” Bachus says. “I had launched a console. I knew Not every company was a failure. In 1995, from that experience what it took to get to Roberts founded Savvis Communications, a CONTINUED ON NEXT PAGE

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CONTINUED FROM PAGE 3 IT’S REAL, BUT WILL ANYONE Lock Your Assets BUY IT? The latest software makes backing up PC games easier than ever, but Defining the target audience will be cru- antipiracy systems are becoming tougher to crack—for now cial. Hardcore PC gamers aren’t likely to By Howard Wen part with their machines just so they can play PC games on a TV set, which is what It once took the skills of a hacker and the maker of an antipiracy scheme used by Infinium’s Phantom console proposes to patience of a saint to plow through the many game publishers. “Anything that is do. That’s because many PC games look confusing interface of buggy software in done by man, man can undo. Copy protec- lousy at analog TV resolutions, and very order to copy PC games protected with tion is not an exception to this. Banks use a few gamers have digital TV sets. Phantom proprietary antipiracy systems. Nowadays, long list of security measures, and burglars will also run only a subset of Windows XP, all it takes is a few mouse clicks. still break in. Is this a reason for banks to not the entire operating system. And with quit these measures and save costs? some hefty hardware specifications, it At CES in Las Vegas last month, 321 Software titles also need security to dimin- could cost as much as a full PC. That is Studios announced Games X Copy. 321 ish theft as much as possible.” not a promising value proposition. wants to do for PC games what it did for DVDs with its popular DVD X Copy by “The main mistake game producers Bachus notes that publishers won’t have providing consumers with a way to easily make is to focus on protection as a pure to do anything to their PC games to make make backup copies of their PC games. cost and then minimize this as with any them run on Phantom, so the box will (The company endured a lawsuit with other cost,” says Hans Pedersen, CEO of have many titles. On the other hand, Hollywood studios over DVD X Copy, Link Data Security, maker of the CD-Cops because of the looming launch date, it although it managed to emerge victorious.) antipiracy system. “But would you pick the won’t have any exclusive titles at the out- Unlike most competing applications, which cheapest lock for your front door at set. Without those exclusives, Infinium will attempt to copy all types of software, home?”(Commercial locks aren’t cheap: have to fall back on the pitch that its box Games X Copy is aimed specifically at PC Macrovision’s SafeDisc royalties can go as is cheaper and easier to use than a PC. games. high as 25 cents per disc.)

Ben Sawyer, an analyst at Digitalmill, Paul Pullen, general manager of Alcohol So, in general, how effective are the latest maintains that Infinium completely mis- Soft, which makes a backup program called protection schemes used on PC games these managed its public image in the beginning. Alcohol 120%, explains: “Our software days? Surprisingly, the backup-software But he says its best chance is to produce a does not promote piracy. It’s designed for developers admit it is becoming harder for box that creates an easy experience for the people to create a single backup of their the everyday PC user to make reliable user, an experience with an integrated expensive game discs before they become working copies of games. Marketing approach. A few hundred thousand sub- too damaged to run on a PC.” Manager Fabrice Meuwissen of VSO scribers might be enough for profitability Software, creator of backup software and might be realistic. “Infinium has got to It is legal, as courts have ruled. But soft- BlindWrite, observes that the latest protec- get past the rookie mistakes and start exe- ware piracy continues to be a vexing prob- tions are “better and better, and pretty cuting,” Sawyer says. lem for any game developer. The Entertainment Software Association esti- QUOTE OF THE MONTH There is still the question of how far the mates that the gaming industry loses about company’s promised $15 million will go. $3 billion to piracy every year. (This num- “In the past, videogames wanted to look The funding commitments aren’t locked in ber includes both PC and console games.) like TV. Now TV wants to look like stone and are contingent upon certain Thus, many companies have no choice but videogames.” terms being fulfilled, including the afore- to add an antipiracy lock to protect their –Greg Lassen, senior director of interac- mentioned SEC filing. Infinium has 29 peo- assets or to at least stem casual pirating. In tive and electronic licensing for the ple now; Bachus says he expects to turn, backup application developers try to National Basketball Association increase the staff to about 80 people. support the consumer’s right to make copies of legally purchased software for much impossible to back up correctly Bachus always shoots big. His last com- personal use. It’s an uneasy balance—a con- now.” pany, Capital Entertainment Group, tried stant back-and-forth between the latest and failed to turn game production on its antipiracy technology and the latest backup Patches and hacks designed for specific head. The very fact that he joined Infinium technology. game titles are becoming increasingly neces- Labs has given the company some credibil- sary to get copies made of these games to ity. But it has a long way to go. PUBLISHERS MUST ACT QUICKLY work, and even then it’s iffy that they will “No major game publisher expects the pro- work flawlessly. Robb Lewis, product man- “I understand what they’re doing now,” tection to last a long time. They’ll be happy ager for Macrovision’s SafeDisc antipiracy Cole says. “It’s going to be a lot of fun to with a few days,” says Ted Pestekides, sales system, claims the latest version of SafeDisc watch.” director of MLS LaserLock International, presently “is proving its worth, creating

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chaos on the crack download sites that host back and forth. “Adding expensive copy incomplete cracks.” protections only encourages hackers and Editor’s crackers to find a way to circumnavigate “In a lot of cases, it’s more a question of them,” he points out. “It’s like waving a red the hardware that you use to create a back- flag at a bull.” Note up,” says Pullen, explaining why antipiracy At last, a website system makers now hold the advantage. But Next month, we’ll examine the state of he doubts this will last long—the pendulum console-game copying and the strange By the time you read this, we’ll have between these two forces tends to swing world of mod chips. launched a website only for you, our sub- scribers. We’ve had a public site at gamingindustrynews.com that introduces KNOW YOUR COPY PROTECTION readers to the newsletter and the people who produce it, but now we also have a site to expedite what’s already been hap- These are the most commonly used pro- alphanumeric key. Since a disc containing pening via e-mails and phone calls: the prietary antipiracy systems in the PC a backup or illegal copy of the game will transfer of information between Gaming gaming industry. How do they fare against have physical parameters that are natu- Industry News readers and contributors. backup programs? rally different from the original CD’s, the The site won’t waste your time. It has a key will recognize this and prevent the sparse look and no graphics except for our SafeDisc (Macrovision) game from running. Earlier versions of logo. (You can upload a picture to enhance SafeDisc is the most popular antipiracy StarForce Professional can be defeated your profile; however, you don’t have to system used by game publishers, but its with most backup programs, but no way fill out a public profile if you don’t want original version also became known as one has been found to defeat the latest ver- to.) The idea is that you’ll be able to get to of the easiest to circumvent. The second sion. At least, not yet. business quickly. You can comment on our version, unlike the original, uses a pat- http://www.star-force.com/ news and analysis. We also have a Rumor terning system of “weak sectors” on the Mill section, which you can contribute to disc surface to confirm a legit copy. Early- SecuROM (Sony) anonymously. (Anonymously contributed model PC CD-R/RW drives cannot burn SecuROM is one of the oldest protection entries will be vetted by the editors here these sectors, but many of the latest ones schemes on the market and one of the before they are posted. If you post under can. The result: Version 2 started out as first to be cracked. Its latest incarnation your own name and are willing to stand by tough to crack until CD-writer-drive tech- incorporates two layers of protection—one your words, there won’t be a delay.) We’ve nology caught up. Macrovision hopes that physical and the other involving “code worked to make the site useful even if you the third time will be the charm: While degradation.” A spiral track burned onto don’t want to visit it. You can get Rumor version 3, released in September 2003, the original disc during replication at the Mill stories sent to you via e-mail or you can be similarly defeated, it has added manufacturing plant causes the drive to can have your RSS reader pull down news protections and features similar to those take either more or less time than usual headlines. of Sony’s SecuROM. to read a sector, which creates a unique http://www.macrovision.com/ reading-speed pattern. A backup copy We look forward to seeing you there. won’t be allowed to run, since this spiral LaserLock (MLS LaserLock International) track cannot be duplicated by a typical AND THE LOSER, ER, This scheme creates a locking parameter CD-R/RW drive. Some commercial backup WINNER IS…THE on the CD by burning marks onto the sur- utilities can still create a duplicate of the VIDEOGAME INDUSTRY! face of the CD with a special laser and game’s entire disc image, mount it onto adding encryption during the mastering the user’s hard drive, and emulate the Every January, Wired News process. These unreadable errors make it peculiar actions of this protection system. (www.wired.com) announces its Vaporware virtually impossible to copy the CD under This is where the second feature of Awards, “celebrating” those products standard methods. But there are patches SecuROM, called Trigger Functions, can be promised during the previous year that available on the Internet that will bypass implemented by the developer. If at any never got released. Its top 10 runs the this scheme entirely. time the disc is verified as not legitimate, gamut across all tech products, but its http://www.laserlock.com/ the game code can be altered so that, for top four are all game related: example, model textures or sound effects StarForce Professional don’t load—or the whole game crashes. A 1. Half-Life 2 (Protection Technology) copied image of the game disc mounted 2. (abandoned when Interplay StarForce analyzes the physical parame- onto a hard drive may not be able to reli- dissolved Black Isle) ters of the original CD during the master- ably fake its way through the multiple lev- 3. Phantom gaming system (see our view, ing process. Based on this information, els of security checks of the Trigger page 3) this antipiracy system then generates an Functions. http://www.securom.com/ 4. Team Fortress 2 (in 1998, Valve said it would be released “shortly”)

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Exit Interview Ed Fries on 18 Years at Microsoft By John Davison

After 18 years, capped by a stint as vice as fast as we could. that the handheld market is taking? Is the president of games publishing for Microsoft future in specialized devices like Nintendo Game Studios, Ed Fries has left Redmond. Q: Are games going “mainstream”? Is the DS or “one for all” ones like PSP? Ziff Davis Game Group Editorial Director future of interactive entertainment in games I don’t want to walk around with three or John Davison spoke to Fries about his time that anyone can understand, like karaoke four different devices in my pockets, but at shepherding Xbox, his future, and the games? the same time, there are things I won’t industry’s future. Not karaoke games, no. For games to compromise on with my portable gaming become mainstream, they need to become device: It needs to have good control, a Q: Why leave Microsoft? Why now? much more accessible and they need to be good screen, good battery life. So can all of There is never a good time to leave. As far even more ambitious from a content point these things be integrated? Probably, but as bad times go, this is probably the best. of view. We need to reach out and grab not yet. The original Xbox project is winding our audience at least as well as a block- down, and it’s time for everyone on the buster movie does, and we need to make Q: What do you think Nintendo needs to project to decide if they are going to sign our designs so simple that anyone can do to get back in the game, at least in up for another five-plus years of very hard pick up the controller and immediately be terms of consumer perceptions? work. For me, I was willing to stay, but successful. It’s hard for them because Miyamoto is so only if there were some changes to the way brilliant, but at the same time, he tends to the group works today. [Chief Xbox Q: Is technology outpacing the speed at make a certain kind of game—or at least a Officer] Robbie [Bach] and I spent a lot of which developers can effectively make use game with a certain kind of look. That time trying to find a solution that would of it? look has always been popular with younger work for both of us, but we weren’t suc- Technology is becoming less and less kids, but it seems to have moved more and cessful. I’m incredibly grateful for all of the important. There is a huge difference in more out of tune with what mainstream opportunities I’ve been given by Microsoft power between the current generation of older gamers want these days. over the years, and I will continue to sup- consoles, but how many real gamers (not port them however I can in the future. game reviewers or game developers) Q: Sony’s strategy of consolidating enter- actually notice? The number-one-selling tainment devices has a lot in common with Q: What’s next? console today is the weakest. In the next Microsoft’s Media Center. Is this the field I’m going to continue to do what I love to generation, all the machines will be so for the next battle? do. I’m going to work with the world’s best powerful that power will matter even less. I’m more interested in how things are developers and publishers and help them The future of this business is in content. It’s becoming distributed rather than how they take interactive entertainment forward. I’m not in technology. are converging. In other words, the idea of just going to do it at a pace that’s more in having all your media in one central place, my control and more compatible with my Q: Which trends in the gaming industry but then being able to access it on screens family and friends. bother you? distributed around the home, is more excit- I’m not a big fan of cel shading. It perpetu- ing to me than the idea of throwing lots of Q: What were your biggest achievements ates the myth that videogames are only for different functions into a single very expen- with Xbox? children. sive box that can sit at only one TV. My biggest achievement was making Microsoft a respectable name in the gam- Q: What’s the hottest trend in games right Q: How can the Xbox and Windows ing business. now? gaming teams at Microsoft work better The best games today have incredibly high together? Q: If you could go back and do anything production values, great marketing, and are Dean Lester is in charge of DirectX now, so differently, what would it be? in tune with what’s cool with their audi- gamers should be excited about the future. There are a million things! Games we ence. It’s pretty easy to say, but it’s very dif- He has a long history in this business and passed on that went on to be big hits with ficult to do all of those things well. really knows his stuff. Look for big other publishers, deals we got outbid on. advances in the next major release of Probably the hardest things to do were to Q: Which trend has peaked? Windows. take the group from being a PC game pub- Hopefully it’s becoming clear that games lisher to being a publisher, don’t sell simply because they are violent or Q: Doom or Quake? and then going from there to becoming a crude; they actually have to be well- Neither. true first-party console game publisher. In designed and fun to play. hindsight, that process could have hap- Q: Half-Life 2 or ? pened more quickly, but I think we moved Q: What do you think of the direction(s) Both!

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Five Big Questions Kevin Bachus may be running Infinium now, but the Phantom’s not the first console he has helped prepare for market By Dean Takahashi

Kevin Bachus, cocreator of Xbox, left players that were slugging it out. Xbox has PCS? YES. CHEAP the team in the spring of 2001 before the been successful at elevating the importance ? NO. console’s launch. After a grueling battle to of games in the public’s mind. It has kept get the box off the ground, Bachus said at the other guys honest, and so it’s doing What are gamers planning to buy over the the time of the fall launch that it felt like good things for the publishers. Competition next six months? his baby was going out into the world. A is a good thing. New PC or PC upgrade few years later, he has bounced around a for better gaming ...... 23.6% couple of different jobs and is now trying Q: If Xbox didn’t meet the wildest expecta- to launch another new console (Phantom) tions, where did it fall short? Online service subscription (e.g., Xbox Live)...... 12.5% as president and chief operating officer of I would like to have seen more exclusive Infinium Labs. He took a moment to content from third parties. I would like to PS2 ...... 12% reflect on Xbox. have seen more effort on Microsoft’s part Xbox ...... 12% to make that happen. I have a sneaking Q: How well did Xbox turn out, given the fear that the plan for Xbox 2 is that they GameCube...... 10.8% skepticism about it at the beginning? want it to be profitable above all else. If Internet-enabled Xbox has handily exceeded my expecta- they can just get to market on time, their mobile phone for gaming ...... 10.6% tions. There was tremendous skepticism at thinking goes, they can beat Sony. The Handheld (e.g., Game Boy) ...... 10.5% the beginning about whether the product problem is that the Sega tried would even ship. The fact that it delivered that approach. They beat Sony to market Source: e-Poll/Gigex report Today’s Gamer, sales on par with Nintendo’s offering is a and lost out to a better brand and better www.epoll.com tremendous achievement. Anyone looking content. My hope is that with Xbox 2 we for Microsoft to displace Sony as the leader can see a much stronger portfolio of exclu- huge Windows division. The decision to was clearly not paying attention. This is sive content. invest appropriately in assuring a competi- not the Highlander syndrome, where there tive retail price and competitive marketing can be only one survivor. Is this a sustain- Q: What does the Xbox still have to budget. And the acquisition of titles like able business that third-party publishers accomplish in this generation? Halo and focus on the box as a gaming can make money on? The answer is yes. This generation will play out on pricing. device. I can’t tell you how many times People inside the game industry always The market share is established now. Halo Microsoft executives asked what the silver thought there would be just one winner. 2 will launch, but nothing will change. I bullet would be. We said it would have the But if you look back, that has never been would focus on Xbox 2 now. Take advan- best games that were out there. the case. There were always a couple of tage of all the opportunities available for Maintaining focus on games was incredibly the next generation. They will sell Xbox important when everybody had ideas to for another couple of years. But the focus make the box into something else. UP/DOWN should be where they can do things better.

Up: Becoming a Jedi Q: What did Sony do right? As part of its multipronged Locking up exclusive content. Marketing UP/DOWN attempt to deal with churn in the crap out of the box. Focusing on the the massively multiplayer right online strategy. Up: EA’s next year online game, Sony is making it easier for Expect huge games from all Galaxies players to go from Q: What were the most crucial decisions its big franchises. And deals shining others’ lightsabers to wielding for Xbox? with Marvel, Free Radical, their own. The decision to build from strengths, start- Criterion, and WB offer ing with the Win32 [Windows platform] healthy diversification. Down: Uru dead applications programming interface, the Ubisoft cancelled Uru Live, hard drive, the x86 architecture. Those Down: EA’s next the online part of the latest were critical decisions. The specs on the quarter Myst game, due to lower- Xbox were critical. The decision to run it In its conference call, EA than-expected subscriptions. as an initiative of the Home and Retail adjusted guidance lower due Turns out that people like to wander division, where it was the biggest part of to product delays, most austere landscapes alone. revenues, instead of making it a part of the important among them The Sims 2.

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Fewer Smackdowns, More Cuddling A little romance might add some spice to game companies’ bottom lines By Jason Compton

The entertainment media tells love stories that it requires that the writer has skills UP/DOWN every day in countless novels, poems, equivalent to those evidenced by the best songs, plays, musicals, television shows, writers in film and television,” Freeman Up: Videogame/pop and films. What’s the gaming industry’s says. music convergence contribution? Well, there’s Leisure Suit Billboard, the trade newspa- Larry 6. TAKING A CHANCE ON ROMANCE per for (what’s left of) the The real hang-up comes from the devil on music business, has added a Granted, the RPG genre in particular has every publisher’s shoulder, which threatens Top Videogame Rentals chart. been tentatively weaving romantic involve- that taking a risk on a game meant to ment into games for years, and Max Payne evoke Valentine’s Day will instead conjure Down: 2 fancies itself a Bogart noir. One of last up April Fools’ Day. We heard several voic- Videogame/database year’s top-rated games, Star Wars: Knights es in the industry terrified of being burned convergence of the Old Republic, prominently features by a “chick flick” mentality that sends men Oracle’s enormous grid for two potential love stories. Yet “More to another aisle and still fails to rope in the The Sims Online turned out romance!” has not become a bullet point more casual female market. to be unnecessary and the company has on the backs of any boxes. Fears of the just signed a deal to help Atari “accurate- unknown and of backlash from the teen While Majesco’s upcoming Advent Rising ly predict and meet demand” across its male demographic have largely kept the includes subplots with the protagonist’s distribution network. Maybe if Atari can mushy stuff out of games. fiancée, “I’m not going to tell you we put anticipate demand, it’ll spare us another that there to woo women,” says Ken Gold, Terminator. The evidence is mounting that this think- marketing VP at Majesco. Gold says that ing is not simply outdated, but invalid as Majesco is choosing to stick with safer, bet- to convince a publisher that there are a lot well. Never mind that the testosterone- ter-charted territory to appeal to women, of people out there who would buy this,” heavy Xbox user base snapped up such as puzzle games for Game Boy says , co-CEO of . KOTOR. “Most of the 16-year-old guys I Advance. knew in high school cared more than a lit- Even with its time-tested experience of tle about receiving the admiration of Despite the hesitation, The Sims is a solid selling romance in its games, BioWare women,” says David Freeman, president of reminder of the potential to capture a won’t promise that more love equals more game consultancy The Freeman Group. female audience. “No one suspected it sales. ESA numbers put the female gaming would appeal to so many women, because population at 39 percent of the whole, but To some, that’s no secret. In Japan, dat- there was no precedent for a game having in the fantasy-RPG space BioWare plays in, ing sims have long done a brisk business that kind of feminine draw,” says Freeman. the company puts the numbers closer to 10 with a heavily male audience, and players And draw it has, pulling in legions of percent—and holding. “We’re aware for a wax poetic about the relationships in vari- women to play a game that is fundamental- portion of our player base that our ous Final Fantasy installments. KOTOR ly about building relationships. romances are really important, but I don’t studio BioWare has made romance a calling think it’s a selling feature,” says David card with the inclusion of strong romance Still, studios aren’t beating down publish- Gaider, senior writer at BioWare. threads in four other titles since 2000, and ers’ doors with romance subplots, mainly it plans to keep that trend rolling in because they’re not being asked. “It’s hard As romantic stories do creep in under the upcoming releases. radar, the industry will have to feel out the CALL PRICES GOING UP boundaries of acceptable content. Enough All the while, publishers fret that they games have featured strippers and prosti- haven’t done enough to expand their out- Those playing the massively multiplayer tutes to work out rating and retail sensibili- reach to female gamers. From feel-good to online game Asheron’s Call are about to ties for the seedier side of love, but no one hanky soaking, love stories attract women see the first real change since developer is entirely sure if Bentonville will stock a by the gross in other media. The gap Turbine Entertainment purchased the game that gets much more intimate than between games and emotional story lines game back from Microsoft. On March 1, The Sims: Hot Date, and Wal-Mart didn’t isn’t technology—titles that make a con- the monthly subscription rate will answer our hypothetical question. And scious effort to have an emotional impact increase from $9.95 to $12.95. It’s the don’t forget that earlier this month, the have been making players laugh and cry for first price increase since the game’s family entertainment of 22 men smashing more than 20 years. “One problem launch in 1999. Will the $12.95 price into one another was scandalously marred involved in pulling something like this off is point last five years, too? by the brief appearance of a nearly bare

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breast. The same moral sledgehammer relationship in a mainstream game. To to create close, personal relationships? Sex awaits a publisher who pushes the bound- date, most game romances have utilized a sells, but in the main, the gaming industry aries. “Who wants to unnecessarily exclude traditional hero-and-princess or male-hero- has steered clear of the cuddlier aspects of large groups of potential buyers by giving a and-female-sidekick model. While KOTOR sex and gone straight for the jiggle. “The higher rating to a game just for the sake of put a crack in that particular plate of glass jiggle has proved to sell much better,” says one or two moments?” Freeman says. and older titles such as Fear Effect 2 pro- Billy Pidgeon, senior analyst with the Zelos vided girl-girl interaction for a voyeuristic Group. “But not surprisingly, it’s the new, Given the negative press games have audience, once again the market seems original things that break out of the pack received for less-than-nurturing relation- willing to sit back and let EA scout and and become hit games.” When we called ships between men and women, a unique win new ground—The Sims 2 is very on one major publisher, two of its reps simply opportunity exists to establish a higher the record about enabling same-sex rela- swore up and down that it had no games in ground and a better example of games that tionships. its lineup with the barest shred of romance project more traditionally caring relation- and declined to elaborate. , ships. Just don’t expect any change to be How long will publishers consider director of design for BioWare, points out immediate. romance an occasional gimmick or a niche that there is no setting, no market, and no phenomenon, then sit back in amazement audience too rough-and-tumble to embrace Further down the road lies the prospect when another Sims installment pockets a little companionship. “Even Conan the of including a fully developed same-sex untold millions by further allowing players Barbarian has romantic interests.” Selected Revenue Results Microsoft may have gained acclaim for its & Evil, various Splinter Cell permutations now that the company has restated the past Xbox (see our story on page 1), but that helped Ubisoft increase revenues. It’s good five years. It releases results from its first hasn’t translated into a profitable console to have more than one or two games to get quarter under its “new methodology for business. And despite the high-profile tum- you through a quarter. The big question is recording price concession reserves” on bles of Prince of Persia and Beyond Good how Take-Two’s future results will look March 1.

WHAT IT DIFFERENCE DIFFERENCE COMPANY RELEASED NET REVENUE FROM LAST YEAR NET INCOME FROM LAST YEAR NOTES Activision Q3 $508.5 million +$129.8 million $77 million +$32.7 million Atari Q3 $190.6 million -$20 million $23 million -$7.1 million Electronic Arts Q3 $1.475 billion +$241 million $392 million +$141.8 million Hip Interactive Q3 $178.6 million +$31.9 million $8.1 million +$2.3 million Hollywood Q4 $473.6 million +$61.5 million $23 million -$119 million Game Crazy Entertainment segment had a quar- terly operating loss of $5 million

Konami Q3 $776 million +$39 million $75.8 million -$3.4 million Mad Catz Q3 $42 million +$1.9 million $1.6 million -$1 million Microsoft Q2 $1.27 billion -$60 million $1.55 billion -$320 million Home entertainment (home entertain- (entire division includes Xbox ment division company) only)

RealArcade Q3 $3.9 million +$1.9 million N/A N/A Game division of RealNetworks Sony Q3 $3.48 billion -$160 million $877.45 million -$241.55 million (game division only) (entire company) Take-Two Q4 (restated) $277.6 million +$60.3 million $26.3 million +$4.5 million Restated revenues were $801,000 less than originally report- ed; restated income went down $358,000

Ubisoft Q3 $285.3 million +$46.6 million N/A N/A Vivendi Universal Q4 $320.11 million -$47.83 million N/A N/A Full-year game (game division division revenues were only) $719.62 million, down 28 percent from 2002 Source: company releases February 20, 2004 gaming industry news 9 001-12_GIN _04.te.qxd 2/18/04 11:39 AM Page 10

A Market Too Big to Ignore Despite the failure of N-Gage, the number of mobile-phone gamers is heading straight up By John Gaudiosi

With the introduction of new mobile marketed gaming device competing head to ONE MOBILE ESTIMATE phones that support true 3D graphics and head with Sony’s PSP, there will be more online gameplay, videogame makers, game options in portable gaming than ever. While Europe and Asia are far ahead of publishers, handset manufacturers, and the U.S. market in terms of mobile-phone wireless providers continue to see the But the argument goes that while games and other consumer-focused media United States as a growing market. It’s portable game devices will flourish with a (due in part to far-superior wireless net- expected to grow even more next year growing audience, when it comes down to works), the number of mobile-phone-game when mobile phones that support 3D it, a mobile phone will always be taken on users in the United States is projected to games will fall to mass-market price points. trips to the supermarket and on vacations. grow from an estimated 13 million in One can live, after all, without a GBA in 2003 to 70 million by 2008, according to Although the United States currently his or her pocket. Many expect new multi- research published by International Data makes up just 10 percent of the worldwide function mobile phones to help broaden Corp. and DataMonitor. The estimated mobile-phone marketplace, 2003 saw the the market for better games. Current $350 million revenue from 2003 is deployment of new color handsets and a phones provide graphics on par with those expected to grow to about $4 billion in wireless infrastructure that is helping this of the old Game Boy Color, but new hand- revenue in the United States by 2008. burgeoning market catch up. Gaming in sets shipping this year will bring GBA the mobile-phone space has become a data- graphics to the table. The direction that traffic driver for operators and a revenue many mobile-phone companies are taking Nokia maintains that it will meet its generator for game publishers. is to offer phones that are utilitarian first sales goal of 6 million units worldwide by with gaming as a secondary option. October 2005 (we’ll be sure to follow “Games are one of the best ways for car- Nokia’s progress). The company has allot- riers and handset manufacturers to pro- NOKIA PREPARES FOR ROUND TWO ted a reported $100 million in marketing to mote the color screens, polyphonic sound The one exception to this rule is Nokia, promote the N-Gage brand. And sources chips, and additional memory that new which launched its first N-Gage videogame close to the company say that a second N- phones include,” says Amy Francetic, pro- phone in October 2003. The portable gam- Gage gaming device will ship this year. ducer for the trade show DEMOmobile. ing device, which can also be used as a “We have every intent on being in this “A large population of consumers will phone, initially retailed for $299, but it business for the long haul,” says Nada upgrade their handsets and service so that quickly dropped in price; game bundles Usina, general manager of entertainment they can download games, music, and e- and rebates brought the phone and three and media at Nokia. “Announcements such mail, with games being the biggest driver.” games down to $199 or (much) less. as our current reorganization and our Despite the price cut, U.S. sales have been acquisitions of Sega.com and Snap Francetic says that 2004 will see an poor. The Finnish manufacturer has Technology are all part of our longer-term increased focus on advertising new phones shipped 600,000 N-Gage units worldwide, strategy.” and services to a younger generation, males but analysts say that of the 200,000 to and females ages 16 to 25. It’s this demo- 400,000 devices sold so far, most were in Nokia has another fighter in its corner: graphic that has led mobile-phone adoption Europe. After horrible Christmas sales, speed. It has a history of bringing new in Japan for years, fueled by downloadable leading specialty videogame retailer phones to market far faster than its com- ring tones and games. GameSpot has stopped selling N-Gage petitors deliver handhelds (Sony, after all, devices in 450 of its 1,500 retail locations. hasn’t even released its first gaming hand- MOBILE GAMING NATION? held). And expect to see an attempt to “By the end of this year, almost everyone “The N-Gage may be able to compete hammer out some sort of wireless-gaming who owns a mobile phone will have played with other specialized lifestyle phones, standard at E3. a game on it,” says Doug Dyer, vice presi- which is to say it may sell a few hundred dent of Warner Bros. Online’s wireless divi- thousand units given another year, but an That dovetails with one thing N-Gage sion. “In five years, mobile gaming has the installed base of at least 5–10 million will certainly have going for it: the potential to be the biggest handheld gam- devices is a prerequisite to establishing a increased consumer awareness that the ing category.” dedicated game-publishing business that mobile phone has generated for gaming. can support the investment of third-party Television, print, and online ads for That’s a bold prediction given the domi- publishers,” says Billy Pidgeon, senior ana- mobile-phone gaming has increased as nance of Nintendo Game Boy devices, of lyst for the Zelos Group. “Bottom line, N- game companies such as THQ Wireless, which more than 155 million have been Gage and other phones with superior sup- Sega Wireless, and GameLoft get con- sold since 1989. And with this fall’s arrival port for games will not gain market share sumers used to paying for game down- of Nintendo DS, which will be a separately from dedicated handheld game devices.” loads. Sprint sold more than 5 million of

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the games purchased in 2003, and it’s not even the largest game carrier. Sprint’s library consists of 200 games from 20 Too Soon to Verify publishers. The hottest industry tips, unfiltered

Taking a page from Microsoft’s Xbox Live, Sprint has launched Game Lobby, a Throughout Gaming Industry News, we It’s too early to see where Sony is going place for Sprint customers to create a single endeavor to stick close to the facts and with PS3—it will likely be the last of the gamer tag and find friends instantly online make assertions based only on the evi- three companies to launch its next con- through their phones or PCs. The Lobby dence. But not here. Every month in this sole—but it isn’t too early to know how will have 50 to 75 games available by the space, we report the juiciest of stories— Microsoft and Nintendo will position end of 2004. those we’re pretty sure won’t get us themselves. Xbox Next will be about speed sued…or you fired. and power, while Nintendo says its “next- “By extending game functionality, includ- generation machine,” to be unveiled at E3 ing uploading high scores and the ability to Xbox rumors this month are all about 2005, will feature “new types of game- meet, chat with, and even taunt other looking backward. Xbox Next might not play.” So as our man at Sony suggests, gamers, gameplay becomes more interactive offer compatibility with original Xbox “Nintendo has ceded the technical high end and a community is built,” says Jason games and might not include a hard drive. to Microsoft and us.” Ford, general manager of games and enter- From what we hear, what’s more important tainment for Sprint. to Microsoft is including some TiVo/PVR Long before PS3 emerges, we’ll see functionality in the upcoming device. Two another war between Nintendo and Sony HOLLYWOOD HEARS THE CALL sources (one inside Microsoft) tell us that on the handheld front as Nintendo DS and Hollywood studios have also jumped on serious consideration was given to includ- Sony PSP are released this fall. PSP has what they see as a bandwagon. Rio ing those features in the existing Xbox, but some big guns signed up for launch (EA, Caraeff, vice president of wireless services those plans were dropped when research THQ), as does Nintendo (Konami, at Sony Pictures Digital Entertainment, says showed that the key selling feature of a Namco), but we’re hearing more and more that the company is integrating the market- PVR in a game box is the ability to record that LCD supplies are quite tight these ing and promotion of upcoming 3D- while playing a game. That is technically days, which, in the words of one corre- enabled mobile games with the worldwide possible, but it would tax the microproces- spondent, “will either push up the price or marketing of theatrical films. This sum- sor so much that games would run too cause delays, which is not what you want mer’s Spider-Man 2, which includes 3D slowly. With Xbox Next being stuffed with at launch, although I guess that didn’t hurt gameplay, should also help the market’s three 64-bit microprocessors (advanced the PS2 in the long run.” growth. versions of what now powers Apple’s G5 line), suddenly the PVR option looks much Every report tells us that people are One trend that’s likely to continue, more attractive to Redmond. moving from television to videogames, so it according to Mark Nagel, product manager shouldn’t surprise us to hear that at Cingular Wireless, is the simultaneous And what about this year’s model? ACNielsen, longtime chronicler of TV release of PC and mobile-phone games, like American Technology Research analyst PJ watching, is about to start collecting game- Ubisoft Entertainment and GameLoft did McNealy received much attention in the purchase information, putting it in compe- last fall with XIII and Prince of Persia: The mainstream press for asserting that Xbox’s tition with NPD. Sands of Time. More traditional game com- price could drop to $99 by Labor Day. panies are entering the mobile-phone gam- From what we’re hearing, if that happens, Who’s sniffing around Atari? Warner ing space, which has a much lower cost of it will be the second Xbox price cut of the Bros. just opened an online division, and entry than the portable game market—and year. Xbox may have the mind share (see three people tell us that Atari is a possible a much larger audience. page 1), but Nintendo’s $99 GameCube partner and takeover target. We’ve also price is hogging the low end of customers. heard that Electronic Arts has intentions. With improved graphics, lower-priced Microsoft, we’re told, needs to make a phones, and the introduction of wireless- move now. “Why is no one from Microsoft speaking gaming communities, the future looks at the Game Developers Conference in San bright for mobile-phone games. While func- Not that Nintendo will remain so com- Jose next month?” one correspondent asks. tionality such as communication and PDA petitive. We hear it’s cutting sales targets “We’re not an open-source convention, for storage capacity will always be important, for this quarter, and analysts from Pete’s sake.” With Ed Fries gone, who at games are a key factor in driving the Goldman Sachs and others have cut their Microsoft will take this role? younger demographic. For mobile-phone ratings on the company. “The price cut makers to continue to push new products, gave Nintendo a one-time boost,” says an Do you know who’ll take that role? Do they must attract the early adopters who electronics-chain console buyer. “It was what your colleagues are doing: Sign up for allow Sony to make PlayStation 3—these great while it lasted, but no one was count- an anonymous e-mail account and write to consumers will play a pivotal role in the ing for it to last after the first of the year.” me at [email protected]. We success of mobile-phone gaming. can’t do it without you.

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