E3's focus will be on the games

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With video game sales continuing to surge despite a slowing economy, this week's E3 Media & Business Summit in Los Angeles should be marked by plenty of optimism and excitement, even if actual surprises may be few and far between.

The worst kept secret in the game industry--Microsoft's decision to drop the price of its most popular model, the 20GB Xbox 360 Pro, from $349 to $299---has been out of the bag for weeks.

With little new on the hardware front, the focus on the show floor of the Los Angeles Convention Center this week will be squarely on the games themselves, as retailers, analysts and journalists try to figure out which title is most likely to emerge as this holiday's version of "Halo 3" or "Grand Theft Auto IV."

Michael Goodman, director of digital entertainment at Yankee Group, said he doesn't expect Sony Computer Entertainment to respond at E3 with a price drop for the $399 Blu-Ray equipped PlayStation 3.

"I think Sony would have felt a lot more pressure it the Xbox 360 had been cut by $70 or $100," he noted.

Nintendo, the current leader in the console wars, also has little incentive to drop the price of the $249 Wii, given that they can't keep up with demand as it is.

On the software front, Chris Carle, entertainment and lifestyle editorial director for IGN, noted there are several contenders that will get a closer look, most notably Epic Games' "Gears of War 2" and Lionhead Studios' "Fable 2."

"I think 'Gear' has the most potential to come close to that level of game," he said. "But what will probably be the biggest selling game this holiday is going to be Activision's "Guitar Hero 4," which is now going to be shipping with drums."

But with the cost of developing top-tier games now topping $40 million according to some industry insiders, publishers are increasingly taking a page from Hollywood and pushing newer versions of what's worked in the past. "This year's E3 is mainly going to be about sequels as it has been a lot lately," noted Carle.

This year's show should also see a bigger emphasis on downloadable content for video game consoles, especially now that Microsoft and its Xbox Live service has proven that consumers are willing to pay for online delivery of movies, TV shows, music videos as well as additional game levels.

Sony Computer Entertainment is expected to use this year's E3 to showcase its oft-delayed Home service for the PlayStation 3. But David Cole, president of the DFC Intelligence, noted Sony has already provided most of the information on Home-- including its ability to provide download movies--save for when it is finally going to formally launch.

Cole added he doesn't expect anything as this year's E3 to dramatically change the competitive landscape between the Sony PlayStation 3, Microsoft Xbox 360 or the current leader, the Nintendo Wii, adding, "Clearly Nintendo's momentum doesn't appear to be slowing."

But with three viable platforms all with fairly sizable global installed bases, he argued that game publishers, including those with Hollywood licenses, now have real choices and opportunities in the coming years, going forward.

"Each platform has a different user base and will be appropriate for different games so for the publishers, it's not really about deciding which console is winning, but which one is going to best for my game," Cole said.

This year's E3 should also highlight the growing impact of traditional entertainment companies in the video game arena. MTV Games, part of Viacom, is expected to showcase "Rock Band 2," its sequel to the last year's wildly successful music themed game. Disney Interactive Media Group will unveil several upcoming new titles, including the off-road racing game "Pure," the music-themed "Ultimate Band" as well as games based on the "High School Musical" franchise and holiday 2008 movie "Bolt."
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