games reporter

This season, games biz hopes for 'Halo' effect

The next three months are make-or-break time for the video game industry — as they are every year. This year, Americans will shell out as much as $18 billion on interactive entertainment, reports Port Washington, N.Y.-based NPD Group. About half of that spending will occur between Oct. 1-Dec. 31.

"No matter what the state of the industry is going into that time period each year, the all-important end-of-year selling season is nail-biting time," NPD analyst Anita Frazier says.

Because games — like the movie business — are a hit-driven industry, all eyes will have been on two highly anticipated titles: "Grand Theft Auto IV" from Rockstar Games and "Halo 3" from Microsoft Game Studios. Only "GTA4" is nowhere to be found, leaving "Halo 3" to shoulder the burden when it is expected to hit shelves Tuesday.

What happened? Rockstar declined comment on why its parent, Take-Two Interactive, announced Aug. 2 that it would delay release of the 11th installment of its hugely successful action game by four to six months — from Oct. 16 to sometime during its February-April fiscal second quarter. (Take-Two's shares subsequently fell 28% during a two-week period following the announcement.)

Instead, Rockstar sent a news release quoting Take-Two chairman Strauss Zelnick: "Certain elements of development proved to be more time-intensive than expected, especially given the commitment for a simultaneous release on two very different platforms (Sony's PlayStation 3 and Microsoft's Xbox 360)."

Such potential blockbusters as "GTA4" and "Halo 3" have the ability to energize the industry, UBS' Ben Schachter says. The analyst describes a ripple effect that top-selling games generate.

"Like in many other businesses, blockbusters get the excitement going inside the industry," he says. "And if gamers perceive them as 'must have' titles, then they also must have the hardware — the consoles — that's needed to play them. At the end of the day, sales of hardware don't depend on how good or bad the equipment is but on how good are the games that play on it."

He adds: "I would argue, for example, that you would likely not see the Xbox 360 game console in existence if it weren't for its exclusive 'Halo' series. Because if it weren't for the huge success of that one title, the original Microsoft Xbox would not have done nearly as well as it did. I would also argue that if not for the success of the 'Grand Theft Auto' series, you may not have seen Sony's PlayStation 2 do as well as it did. The point is that one or two key titles — particularly key exclusive titles — can really make or break a platform."

At Microsoft, Shane Kim admits that the "Halo" series has sold an awful lot of Xbox consoles for Microsoft. Kim is corporate vp at Microsoft Game Studios.

"We consider it our flagship franchise for Xbox," he says. "Even though it came out three years ago, we know there are still 21/2 million people playing 'Halo 2' and, by the way, plenty of people still playing the original 'Halo,' which was released in November of 2001."

Kim also believes that blockbusters have an impact outside of the games industry, too.

"The big releases are helping legitimize our industry," he says. "For example, 'Halo' has been able to break into pop culture and make people outside our industry aware of what we do and what we create — not just toys but big pieces of art. It's all about moving our industry forward on the path toward becoming a mainstream form of entertainment."
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