Sales down as E3 looms

The videogame industry has one mission in mind during next week’s Electronic Entertainment Expo: It needs to impress.

Sales are down across the board for hardware and software so far this year, with overall revenue for the games biz down more than $560 million over 2009, or 11%, according to NPD Group. Industry earned $20.2 billion last year.

The downturn is clearly a result of the recession, which has affected the bottomline of every industry.

“It’s the economy,” said Joseph Olin, president of the Academy of Interactive Arts and Sciences. “For us to think that games, which historically have been counting significant double-digit growth month after month, would be immune, we’d be kidding ourselves. This wasn’t just a little downturn; it’s been a significant global event that had far-reaching effects.”

But the interactive industry needs consumers to open their wallets again.

That’s because in addition to gamemakers who have a slew of titles they hope will turn into franchises, alongside the usual sequel releases, heavyweights like Nintendo, Microsoft and Sony are readying new devices like a revamped DS handheld that plays 3D games, and Wii rivals like the Natal and the Move. While the systems were unveiled last year, this year’s show will be used to prove that they’re ready to move into homes.

The companies are expected to unleash some of their largest marketing campaigns for the new hardware extensions since the launches of the Wii, Xbox 360 and PlayStation 3.

At the same time, the companies are looking to convince the gaming community that their consoles have many more years of life in them.

“Developers don’t want a console transition,” said Joe Minton, prexy of videogame talent agency Digital Development Management. “It’s disruptive.”

More sequels typically are made as consoles age, but a longer lifespan of the current consoles means that more original fare is expected to be released.

This year will still be sequel heavy, with new installments of hit franchises like “Halo,” “Medal of Honor,” “The Legend of Zelda,” “Gears of War,” “Crysis” and “Call of Duty” pushed at the show.

Either way, E3 is ground zero: Event kicks off with a series of press conferences on Monday and opens the doors to a show floor of game demos at the Los Angeles Convention Center Tuesday. Show runs through Thursday.

The good news is that the number of gamers continue to grow.

“There are more people playing today than ever before and consumer demand is higher than ever,” Olin said. “Now gamemakers are trying to suss out which games will have the widest appeal.”

With as many as 45,000 gaming industry insiders attending, E3 is the gaming industry’s biggest and splashiest event of the year. Companies go all out to wow media, analysts and retail buyers — often sparing no expense — in hopes that the excitement will rub off on consumers when the products eventually hit store shelves.

Microsoft lured Paul McCartney and Ringo Starr (as well as the spouses of the late John Lennon and George Harrison, Yoko Ono and Olivia Harrison) to its press conference last year to talk up “The Beatles: Rock Band.” Steven Spielberg showed up last year to introduce Project Natal, which lets players use their bodies as game controllers.

This year, Microsoft enlisted Cirque du Soleil to give a performance Sunday at USC’s Galen Center to unveil Natal’s launch date and retail name. Many are awaiting its pricetag: Analysts say it will need to cost less than $100 for the mass market to adopt the system.

Activision Blizzard, the industry’s largest gamemaker, booked Eminem and Jay-Z to promote its “DJ Hero” title with a concert at the Wiltern Theater. This year, it’s taking over Staples Center to host a Lollapalooza-like rock show featuring a secret lineup of various music acts to promote new versions of “DJ Hero” and its staple music franchise, “Guitar Hero.”

“We felt like we needed to produce an event that would bring the videogame industry to a different place and show to everyone how compelling we are as a form of entertainment — on par with the best film or TV events,” hinted Activision Blizzard’s CEO Bobby Kotick.Microsoft and other publishers like Electronic Arts, THQ, Nexon, Atari will similarly look to make big splashes by taking over hot spots around town, such as the Edison, J Lounge, the Colony, the Conga Room and the roof of the Standard Hotel downtown LA.

Of course, beneath the glitz, there’s serious business that goes on at E3. Some 290 companies will be on hand this year to show their latest products. That’s a jump of nearly 50% from the 2009 show.

The enthusiasm for the industry is also reflected in the number of attendees expected. Online registration for the show was shut down early this year, to prevent E3 from becoming the circus it was a few years ago, when the number of attendees closed in around 60,000 and navigating the show floor was nearly impossible.

“We want to ensure business can get done,” said Dan Hewitt, senior director of communications for the Entertainment Software Assn., which owns E3. “To ensure the overall integrity of the show, we just had to cap it. But it’s good to see the amount of interest in the show. People want to see what games are coming out and they certainly want to see the hardware advancement that are going to be coming out.”

Outside of the hardware news Nintendo, Microsoft and Sony are expected to make, other trends are expected to stand out from this year’s show, according to industryites.

  • After trying to attract more casual gamers in the past, strong sales of recent titles such as “Call of Duty: Modern Warfare 2″ will have many publishers turning their focus back to producing actioners for hardcore gamers, realizing they’re the bread and butter of the biz.

  • Gamemakers are putting a greater emphasis on making titles playable across multiple platforms, like consoles, social networks, PCs and mobile phones.

    “At a time when games are being played on various devices and screen sizes than ever before, the videogame industry is at a crossroad to develop games that link multiple platforms and reach consumers with consistent and fulfilling game experiences,” said Minton.

  • Publishers will introduce more ways to extend a game’s shelf life through downloadable offers like new levels, map packs, characters and other enhancements. Every major title in development now has a downloadable component planned from the very beginning.

  • More online-only titles will also be pushed, including titles similar to Zynga’s successful “Farmville” game on Facebook, to massively multiplayer online titles that try to replicate the continued success of “World of Warcraft,” such as Sony and Warner Bros.’ “DC Universe Online” and EA’s “Star Wars: The Old Republic.”

    Over 60% of Activision Blizzard’s revenue comes from non-console-based games such as “World of Warcraft,” for example.

  • The biz will also be trying to reverse a steep decline in music-related games and hardware with new announcements.

“Publishers will really make the case that the weakness in that genre was an anomaly and that it will continue to be a major part of the industry,” Minton said. “They will put real money behind it to prove to everybody that it wasn’t just a fad.”Activision Blizzard was criticized last year for focusing too heavily on pairing up with heavy metal acts, and will make more orchestrated moves to branch out and appeal to the masses with more pop acts.

The company, like MTV and other publishers producing music games aren’t eager to give up on what has proved to be a category that pumps out considerable coin.

“Major music acts are really getting involved with videogames,” Kotick said. “They don’t need to do it for commercial purposes. They’re getting inspired creatively by it. The challenge now is communicating that with the record labels. The fantasy of unleashing your inner rock star isn’t going to go away.”

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