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Whassup?: A revealing interview with Sony Computer Entertainment Europe President David Reeves was posted and then quickly removed from the official Playstation Web site last week. In it Reeves reveals that Sony will releases a smaller version of the PS2 in order to move price points even lower for the later part of the console's life. Sony is also considering releasing the PS3 in several models with various levels of multimedia home theater capabilities. So What?: Both Microsoft and Sony are rightly worried that making use of their next gen hardware is going to drive game development costs sky high. MS is promoting its new cross-platform development kits as efficient ways to amortize investment, while Sony keeps arguing that even publishers who can't compete on next-gen hardware will have loads of opportunity on the PS2 in late adopter and emerging markets through 2010. The big question in this industry in the next few years is going to be whether the game economy really can sustain the budgets and production complexity required by the next level of hardware.

Whassup?: Atari On Demand ( http://www.atariondemand.com ) is the first attempt by a major game publisher to distribute its back catalog of titles via digital download for $14.95 a month. A couple of dozen of branded titles like Boggle and Putt Putt can be played online in less time than it takes to download a full game file, the company claims. It is powered by digital delivery service Exent, which Yahoo also uses, and who claims AOL and Comcast as major shareholders. So What?: A noble experiment that defies most of the laws of online content sales. Unless you are Consumer Reports or Wall Street Journal, single brands do not sell subs online. Aggregation of multiple brands (a la Yahoo On Demand) is a more likely model. The menu of games is severely limited for $14.95 a month, which is more than any one of the titles costs in bargain bins. This is the sort of business model that only dedicated game players would buy, yet the title selection is not aimed at them but rather at precisely the kind of audience that would not pay for online games.

Whassup?: Beleaguered and revenue-challenged Midway Games got a rare win with its recent release of The Suffering and the company followed it up by acquiring its developer Surreal Software for $540,317 in stock. Midway also raised its guidance quarter ending March 31 to $18 million revenue, up from $12 million. So What?: The foul-mouthed Mature-rated The Suffering is a good example of well-made B titles being able to capture console audiences with strong mood and storytelling. Much more compelling than Rockstar's gross exploitation slasher Manhunt, this game actually keeps you interested in the plot and character. If middle-tier publishers like Midway can produce original IP like this during the transition years, they might be able to take some thunder away from EA and Activision and their franchise/movie fetishes.

Whassup?: DFC Intelligence president David Cole echoes EGB's recent tirades in reporting in his latest brief that game brand clearly is trumping game quality. In the last holiday sales cycle, very well-reviewed and heavily promoted Prince of Persia sold only 330,000 PS2 units through Jan. 2004, while less well received Dragonball Z: Budokon II sold twice as well. Cole says the industry has become highly risk averse, and this tends to concentrate power and sales among major players, like EA.

So What?: Our worry is that publishers will respond to last holiday's failure of original IP (aside from Call of Duty and True Crime, which were original but devoutly derivative) by shrinking from interesting product. We say let them, and then let a smart middle tier publisher take up the mantel of innovative design. Companies like UbiSoft (POP and Beyond Good and Evil) should not retreat from innovation, because ultimately gaming will suffer the same cycles as Hollywood. Sequels and blockbusters eventually bore the crowd, which starts turning to offbeat and new experiences. Will EA and Activision be ready for that?

Whassup?: Activision CEO Barry Kottick crowed to investors at a recent Bear Stearns Media Conference that his company's new strategy of focusing development and marketing on a select line of AAA titles was a tremendous success in 2003, and he promises that Shrek 2, Doom 3, Spiderman 2 and other high profile Activision titles for 2004 bode well. Both Shrek 2 and Spiderman 2 will be among the biggest media launches ever, which will help take game titles out of the game ghetto at stores like Wal-Mart and put them next to the DVDs. So What?: Kottick also hinted that revived handheld development and PC titles will be the response to console transition. Kottick admits, "we exited the handheld market a little early," but is excited about the PSP. Not only are PC titles thriving (Call of Duty), but his subsidiary Cabela and its blue collar hunting games grew 400% last year, signaling a real opportunity way outside the core game market. In its battle with EA, Activision is hoping to move internationally, beyond the mere seven countries in which it now distributes.

Whassup?: Informa Media Group predicts that in the European market, Sony will succeed in selling 30 million PS3s by 2010. Nevertheless, Informa sees Microsoft putting on a stronger challenge in this next gen of consoles, selling about 10 million Xbox 2s. Nintendo will not be able to keep up, with only 5 million project sales for its next GameCube iteration.

So What?: Informa thinks that offbeat new input technologies like the Eye Toy and motion detection will be an important factor in expanding the base of consoles to women and older user who might not be attracted to the platforms otherwise. Informa shares everyone's assumption that online gameplay will be a key competitive point in the next generation. We have to differ. As the Zanthus stats (see Talking Points) suggest, many more people say they are interested in online multiplayer action than actually end up paying and playing.

Talking Points

In its latest survey of youth gamers, research firm Zanthus discovered that 92% of 14- to 26-year-olds in the U.S. own and play video and computer games. Despite the hobby's ubiquity, however, there is a range of usage habits and opinions about gaming within this segment that represent both opportunities and warning to the industry.

* Light gamers tend to be 18- to 26-year-old females. Typically, they have played games for six years and devote about eight hours a week to gaming. Nevertheless, this was the group that also ranked "lack of variety" as one of the major gripes with the industry. So far as this part of the demo is concerned, game companies just aren't giving them what they want or need.

* Levels of satisfaction with gaming are good, not great. On a scale of 1 to 10, youth gamers rate the industry a 7, but only 39% rate it 8 to 10. This will be an interesting question to track in coming years as transition ennui may set in. Regardless, there is substantial room for improvement.

* Only 5% of youth gamers subscribe to an online gaming system or world, although 21% say they are interested in the model.

Rumors

Get ready for the Gigabytes. A Japanese newspaper quotes a Sony official letting drop that the PS3 will use next-gen Blue-Ray disc technology. There are also rife suggestions that wireless connectivity between the upcoming handheld PSP and PS3 will be a major selling point for Sony.

"Nintendo DS" will likely not be the name of Nintendo's upcoming dualscreenhandheld. In a CNNMoney story on the company, a Nintendo spokesperson said the name was never intended to be used ultimately at retail.

Shares of Daily Time spent With Media

             All 12-64  Males 18-32   Males 12-17
TV           51%        42%           45%
Radio        26%        28%           17%
Internet     14%        19%           16%
Video Games  3%         6%            15%
Newspapers   4%         3%            3%
Magazines    3%         2%            3%
Source: Knowledge Networks/SRI

In what proved to be a surprise even to the media researcher who ran the study, game playing is now the fourth most used medium among young males in terms of time share, and it is even with printed media among all age groups. "We knew it was high, but we were surprised to learn it was that high," Robert deFelice tells ad trade Mediapost.com. To be sure, this is another media share study based on consumer self-reporting, and some recent research has shown that there is a marked difference between actual media usage when observed by a third party and how people say they use media. Most people understate their TV watching, for instance. Regardless, expect these figures to be carted out as gospel in pitch meetings with ad agencies for the next year or so.

GameSpot Trax/EGB Market Watch: The Revenge of the First-Person Shooter

According to games market tracking service GameSpot Trax, the prolonged anticipation for Half Life 2 and Doom3 among PC gamers is paying off for other titles in the first-person shooter genre this spring. Information requests for Battlefield Vietnam, Unreal Tournament 2004 and Far Cry spiked in March and seemed to take some interest away from the big FPS sequels everyone is waiting for. "They have stolen mindshare from those other shooters with a monster March," says Josh Larson, director, GameSpot Trax. "Total info requests across the three titles even eclipsed the 1 million mark on March 24." As consoles move into their transition years, clearly the PC is poised to have a good year, led by a genre it does best.

All boats in the FPS field seem to be rising, but the arena is also getting cluttered and expectations are high. Among shooters released since Jan. 2000, UT 2004 and Far Cry have ranked first and fourth, respectively, in terms of quality of reviews. All three shooters, led by Far Cry, are placing in the top six in the U.K.'s sales charts last week. This week's release, Painkiller is also spiking in GameSpot Trax's search requests and demo downloads, both good predictors of sales. While the FPS market may not be worn out by the time HL2 and Doom3 hit stores later this year, "the bar for this category definitely has been raised," says Larson.

[Copyright 2004 PBI Media, LLC. All rights reserved.]

COPYRIGHT 2004 PBI Media, LLC
COPYRIGHT 2004 Gale Group





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