Gamer's Paradise

Computer and video games invade every part of our lives. Even if you don’t play them the chances are that either your family members or friends do. However, as one of the fastest growing areas of mass entertainment, what started out as a pastime for rich kids and geeks is now a massive multi-billion dollar industry that is threatening to overtake Hollywood in terms of global revenue.

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By  Will Milner Published  August 23, 2001

The new Hollywood?|~||~||~|The picture opposite shows:

A) Mindless games played by children?

B) The future of global entertainment?

Whatever it is that you see, the fact is that computer and video games are no longer merely a hobby for youngsters. Globally, gaming (as the pursuit is commonly known) is the fastest growing form of mass entertainment. In the United States alone, 215 million games were sold, generating $5.6 billion of revenue in 1999. This makes the revenue comparable to the Hollywood film industry in terms of box office/software sales revenue.

Games, after years of behind the scenes growth, are now everywhere. The style and aesthetics of gaming influence every area of popular culture from Hollywood movies to music videos, literature and modern art. "Games are at the centre of the home, they're on the Internet, they're in the schools, they're on the cell phones and PDAs, on planes and in hotel rooms. From the living room to the friendly skies, games are truly everywhere" commented Douglas Lowenstein, president of the Interactive Digital Software Association (IDSA), the trade association representing US computer and video games at the recent Electronics Entertainment Expo (E3).

It is certainly true that the industry for computer and video games is stronger than ever before, and that the momentum exists to propel it from an interesting aside to a dominant medium. However, it is still unclear how the industry works and what state it is in. For example, despite its revenues being compared to those of the Hollywood box office it is still unclear who the games are made by. Outside of a handful of characters such as Nintendo's Mario, Sega's Sonic the Hedgehog and the multiplatform phenomena that is Lara Croft there are very few names that are internationally known.

When it comes to the creative talent that actually produces, designs, programs and develops games then there isn't a single superstar name recognised outside of a very small ultra dedicated fan base. There is no Steven Spielberg of the games world.

A possible reason for his is the way in which games are currently played and in particular the hardware situation. For Hollywood, content truly is king. When a cinemagoer visits a movie theatre they do so entirely to watch a given movie. They do not, in any circumstance, leave the cinema talking about the latest projector they just watched the film on. This is not the case for gamers who are always faced with a huge variety of standards. Ever since the very early Atari consoles and PCs started to bring video gaming into the home, players have had to make an active choice of which system to use.

It can be a generational divider, with the current life cycle/business model dictating that a new generation of device be released every 3-5 years. So whether the choice was Sega Master System v Nintendo Entertainment System, Sega Megadrive (also known as the Genesis) v Super Nintendo Entertainment System (SNES) or even the last generation, a three way battle between the Sega Saturn, Nintendo 64 and the newcomer, the all conquering Sony Playstation there have always been hardware choices to be made.

Although the target audience for different consoles is generationally based (Nintendo, for example has always been considered as the dominant force for the under twelves) the competition has been aggressive. And this does not even take into account the humble PC, one of the fastest growing platforms for gaming. In fact, acccording to the IDSA the most popular use of the PC in the home is gaming, used 31% of the time, ahead of email which comes in at second with 21%. So with users having to chose between a variety of consoles and also the PC there is little wonder that a consumer can be confused.

What seems certain is that while a hardware battle rages on, it will be software companies that are likely to be guaranteed a succesful time. That is the opinion of Sega anyway. The former hardware giant, after several years of disappointing console flops like the MegaCD, Saturn and Dreamcast, has announced that it is to quit producing hardware. Despite claims that a trend away from consoles in the near future will see others follow the lead it is, more realistically, an admittance of defeat. After all, at the start of this year former rival Nintendo was given a market value of $22 billion while Sega had slumped to just $1.2billion.

||**||It's in the game.|~||~||~|The move away from hardware was the only choice for Sega which has always had a reputation for producing some of the finest quality games. This is the sole reason that it has managed to survive so long, with a loyal and dedicated fan base always supporting it through times of need. However, if Sega thinks that a move away from hardware will see a reduction in competition and a resulting easy time it will soon wake up to a realisation that there is still a fight on its hands.

There is no way that the current gaming giants will just roll over and die when the Sega name tries to muscle in. Electronic Arts, in particular is currently the crowned king of gaming software. Electronic Arts (EA) has become such a dominant force that it has been claimed they have the power to make or break a hardware standard. Such talk is obviously an exaggeration but it is a testament to the respect that EA has built up. A perfect example of how gaming has become a purely financial industry EA tells a story of corporate success.

To see how the industry has grown with EA, we can use a report from Deutsche Bank, which shows that when EA was starting out the targeted population was around 20million and it estimates that this will rise to almost 120million over the next three years. This is perhaps the reason why IDC reports estimate that by 2003 an extraordinary $16.9billion will be generated from computer and video games sales.
If current market trends are anything to go by, then a lions share of this figure will belong to EA.

Two of its most popular franchises (FIFA and Madden) have already passed the $1 billion mark and individually each has made more money for EA than the record breaking Star Wars movie made for Lucas Arts (the amount of money made by Star Wars as a cinema release and not including spin off merchandise). So what then does the future hold for EA? To begin with, the opening of a brand new $30 million office complex in London, England, to act as a centre of operations and studio for Europe and the Middle East, shows a serious investment in talent.

Acquiring and keeping the talent that is required to make best selling games is one of the hardest challenges for EA. As the largest independent games company EA is in a unique position to be able seek out the smaller publishing companies and just buy them out. It is partly in this fashion that they have been able to acquire some of the best talent in the industry. In recent years it has bought the smaller Bullfrog, Maxis and Westwood studios. This gives them the rights to some of the most lucrative franchises in the industry (including the ever popular Command and Conquer, The Sims and Theme Park) and, of equal importance, some of the best designers.

But having all of the best talent may not be the only way to succeed. Screenwriter William Gibson, once said of the Hollywood system that "nobody knows anything". The same is true of the games industry. No matter how well publicised a game may be, and how high expectations may be, the title fails to do as well as expected. With the budgets for games escalating to an excess of $10 million it is clear that no company will be able to survive too many high profile disasters such as this. The maths are simple.

With a budget of $10million and an average game cost of (globally) approximately $40 for a new title then the publisher will need to sell at least 250, 000 copies to break even, and this does not even take into account the percentage taken by resellers and various "middle men". Only a tiny minority of games will go on to sell this many copies. The result is that only the largest publishers are able to take the risk of developing the most ambitious products. Even then the risks of innovation and creativity are often masked by the caution of corporate planning.

Much better to rely on a proven formula, is the philosophy that could stifle the creativity of gamers. What this means for the gamer, is that the market is filled with sequels to and pale imitations of games. Many of the best selling "new" titles of games every year are, in actual fact expansion packs or plain sequels to existing games. Although, to hardcore fans, a new Command and Conquer title, for example, will always be well worth the money it is a principle that could end up stifling choice and creativity as smaller publishers cannot compete with these giant brands.

||**||Reaching the next level.|~||~||~|However, consumers are starting to wise up to this and developers are starting to realise that games must be designed much more carefully. Predictably it looks as though it will be EA again that is leading the way into the next generation of game. The forthcoming EA title Majestic promises to be a landmark game for the publisher. Offering an all new experience for gamers, it will offer a much greater level of interaction than is previously noted. It will not be about just sitting infront of the TV and idly playing for a while.

Instead it looks to completely invade the players life. Details, at this stage, are still not entirely clear but it is known that it will be the most intrusive interactive games experience ever. Players will be allowed to let the game take over their lives and will progress the development of the plot by receiving phone calls, emails, faxes and even SMS messages. These can come at any time of the day and may incorporate real life news events to give clues that the player must solve to get to the next level.

This, of course, will envolve a great deal of online action and technology. This is certainly an area that EA thinks will be a rapid area of expansion. As always leading the way its own Website is one of the most viewed on the Internet. After recently acquiring mobile technology and games company EA is stressing its power as an online power. Dr Gerhard Florin, managing director, EA, European operations claims that the company hopes to be making a profit from the site within the next twelve months.

When asked whether the ASP model, a factor so exciting most business software developers, will affect EA much Florin is less sure. "For us, it does not really matter if the consumer wants their product online or offline. They can choose. The possibilities online are huge" he states. "Of course the physical constraints are much larger than people realised even three years ago. When you are talking about the Gigabyte arena, even with a fast broadband connection you will need a few hours to download a product," he adds.

Florin believes that CD based distribution is "the only proven and globally succesful method of distribution" and predicts that it will remain so for several years to come. What will happen he envisages is that a solution will be to buy a DVD, in the regular way, which will contain a vast majority of information on core essentials such as graphical data. The consumer can then download episodic data and new technologies as and when they require. This will completely change the life span and product life cycle of a game — users will keep a franchise going as long as they are interested.

Asked if a common standard will ever come to dominate and do away with the current hardware divide between consoles and PCs Florin is more certain. "The current business model would be completely turned upside down. I don't believe it can happen. Even if it looks enticing on paper there is simply no company powerful enough to standardise the industry like that." Adding that "hardware is subsidised by software, if you took away the competitiveness here, then the hardware would have to cost much more." It seems that Florin, for the time being at least is right, there will not be a single standard for playing games that will have hardware from a number of manufacturers.

||**||Games in he ME.|~||~||~|Despite the massive global appeal, gaming in the Middle East has failed to prosper as well as it should. In a time when the number of resellers specialising in IT hardware is at an all time hig,h gaming remains a niche audience. The exception to this rule is Dubai based Red Entertainment Distribution. Currently responsible for the shipping and distribution of seventy percent of the top selling games in the whole of the Middle East, RED is a huge influence on gaming in the region.

The chances are, if you have a legal game, bought within the Middle East then it was distributed by RED somewhere down the line. With a culture that could strongly embrace gaming the Middle East remains a relatively untapped market. The problem preventing the region from blossoming into a potentially huge sector is, and always has been, piracy. According to Michael Wombwell, CEO, Red Entertainment Distribution piracy is "absolutely huge"

As the market grows, games developers realise the importance of catering to a more international audience. "We must think more globally when a game is being developed" admits Dr Gerhard Florin. This does not just mean a more global view of distribution and marketing, but also a consideration of content. A hit in one region may not neccasarily do well somewhere else. This was highlighted to EA and RED earlier in the year with controversial hit Black and White being refused an official release in the Middle East.

With content adjudged as potentially offensive or unsuitable for this market EA voluntarily chose not to ship to certain Arabic regions. When designing a game for a mass and global market, just as with a movie, certain considerations must be made as to whether the game will translate well beyond the United States. A very basic example of this can be found in looking at EA's biggest franchises. The Madden series, by the end of this year, is predicted to have accumulated over one billion dollars in revenue.

However, its American football content is relatively unpopular outside of the US, in countries where gridiron is a minor sport. In other regions, it is EA's other billion-dollar sports franchise, the FIFA series, that is most popular - because the game of soccer is much more popular. The story does not end there though. EA is leading the way in the localisation of products for different regions.

Although the generic games engine will remain the same in each territory the tweaking of detail for each regions can vastly increase the popularity of the game. "When FIFA was localised into Greek, they [EA] saw a sixfold increase in sales because people wanted to listen to the commentary in Greek" explains Nitin Matthew, PR and Marketing executive at RED. Although there are obvious hurdles and limitations both RED and EA would eventually like to see an Arabised version. A financial decision over programming resources has prevented the latest edition, the soon to be released FIFA 2002, from receiving fully Arabised treatment.

However, it is possible that within the next year and a half, players will be able to enjoy, what is already a huge hit in the region, with full Arabic text, Arabic in-game commentary and real life teams from the region.

Again it is piracy that prevents the full Arabisation of much software. Although they currently lead the field, with no obvious competitor, in promoting and localising products for the region, EA must plan further moves carefully. "There is always going to be a piracy problem, there is even in the States, but if we could drive it down to lower levels, like under 50%, then we would probably do fifteen times the business we are doing on the Playstation — and it would be very easy to get an Arabic version of FIFA," laments Matthew.

Despite the software not receiving an Arabic makeover RED are responsible for the Arabisation of much of the packaging and product literature of modern games. Future technologies, particularly an ASP model of distribution and a stricter clamp down of the law will see gaming in the Middle East thrive. The framework is already in place with already over a thousand units of the Sony Playstation Console in Saudi Arabia alone and when piracy is restricted to a more acceptable level, the popularity of gaming is set to expand rapidly.

Until that time it is the responsibility of games developers, such as EA, Activision and Infogrammes as well as the larger companies such as Microsoft, Sony and Nintendo to more actively promote software in the region. A positive sign of things moving in the right direction is the recent announcement of RED distribution of their joint decision with EA to put the Asian Footballer of the Year, and Arabic sporting legend, Nawaf Al Temiyat of Saudi Arabia under contract to promote and appear in publicity material for this year's FIFA game. Using the Middle East's current expansion as an example it seems certain that, for enthusiasts interactive entertainment, the game is far from over.

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