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E3 & The DaVinci Code

Written by: Andy Marken

Article Overview: Video games represent a billion dollar plus industry. Dominated by a few large players, the market also has tremendous opportunities for young, small firms with a good idea and dedicated people. Find out here...(graphics available upon request).

E3 & The DaVinci Code

- You asked what would be worth killing for
- We are in the middle of a war
- I’m into something here that I cannot understand



The DaVinci Code the game had its sneak peak at E3 and represents the entire DNA of the game industry.

The book – regardless of what you believe – was a huge success. It was turned into a movie set to be released May 19. It was whipped out as a video game hitting the stores May 19.

E3 was all about a lot of sequels. Lots of noise. Lots of mixed messages. Lots of promises. Lots of deliverables … later!

Folks who had been raised on Tetras, Slime World, Electrocop, Mario, Blue Lightning and hundreds of other simplified games had snuck away from their offices around the globe and scurried to LaLa Land to attend E3. They were there to get the straight facts about the battle of the console titans. They were there to see what new parallel universe world they could escape to.

But they weren’t alone in their quest.

Also there were the suits. Tellywood producers looking for cross-licensing deals. Ad agencies/brand managers looking for product placements. Hedge funders looking for the next big kill. Lawyers ditto.

Walking the crowded halls, we saw slick presentations and watched the addicts’ eyes glaze as they lusted for the multi-player realism that would be available – next year.

The console boys, girls were in their groove.

Consoles bore us!! We still like the portables.

But then 23 years ago we had been a part of launching the new era…great color, fun play, portability. That was when the Tramiels launched the go-anywhere, play-anytime system of the future – the Lynx.

The little beauty kicked butt!

Sure J.T., Sam and his brothers had gotten the system from Epyx. But it was the Atari name that would take it to the top. Even at $189, the Lynx and later the Lynx II were the systems shallow-eyed, acne-plagued, Twinkie-eating kids had to have.

Hundreds of thousands of them around the globe – now with graying hair and pot bellies -- still do.

But that was then. This is now.

E3 was…the new tomorrow!

With the next generation of consoles and games the stakes are high.

This is now a $30 billion worldwide industry.

While PC folks find pushing game-ready systems more profitable than plain vanilla desktop and notebook sales, Sony and Microsoft have the better road to success. Wrap $100+ bills around each unit.

Nintendo has this revolutionary approach…focus on the game fun and make a profit.

As if we don’t do enough with our cellphones, now we have to play games in between IMing, watching movies, taking pictures and yeah…making calls.

No wonder kids multitask.

They’ve got a lot to do!

The Console Vision
When we saw the first PlayStation we went back and said, “Those guys don’t care about the stupid DVD format battle. They want to own the home. That thing has it all – networking, internet connectivity, intelligence, place to add on storage, the works.”

Fast forward…we were wrong.

Oh sure a few gamers did but not like we forecast.

With the PS2, Sony threw in a DVD player. Surely now…

Wrong again.

Still only made a dimple as a home entertainment solution

Tweens, teens and gamers just don’t think like ordinary people !!!

Sony has an installed base of more than 100 million PS2 systems and more than 120 million of the original PS systems. Most in the kids’ rooms.

Microsoft has an installed base of 24 million Xboxes and 3.2 million Xbox 360s. Same location.

Sony promises four million PS3s by the 1st of the year.

Microsoft says they will have shipped more than 10 million 360s by then.

Sony says they will deliver a powerful system with a BD player and a world of connectivity for under $700.

Bill says the Sony price tag is too high. His HighDef answer is to offer an HD DVD player add-on at “some” cost.

Sure technoweenies who have to have the early PS3s will gladly pay $1,000+ for a system off eBay just as they did for the Xbox.

Hey…it is bragging rights we’re talking about !!

Both systems are so powerful they put the old IBM 360 to shame.

Both companies want their console at the heart of home entertainment. That would make our forecasts a little late but credible.

But…

Both companies know that winning involves more than just “the good old days.”

Sure it’s the games for the systems.

It is also games for PC play.

For Internet play.

For cellphone play.

Wait a minute! It has nothing to do with the console!

Don’t get swept away with Sony’s…”The Next Generation doesn’t start till we say it starts.”

It may be their game to lose but…

The Alternative
Microsoft and Sony just keep following the DNA of the past. The core community that grew up and is growing up playing games.

Nintendo’s less bleeding edge approach could be the smart – and profitable -- path.

Nintendo only has 20 percent of the total market but while the titans exchange punches, they could gather up millions of profitable, maybe even new customers. People who just want to have fun. People who aren’t intent on spending 10+ hours a week in the virtual world.

The great thing about the console confusion is that the PC people have a chance to sell upscale systems that let you play a ton of games, listen to music, watch some TV and...work.

Have you seen those Alienware and Voodoo systems? They scream !!!!

That won’t disappoint Gates. He’s got this neat solution called Live Anywhere and it is “ready to meet the market’s demands.” All you have to do is wait for Windows Vista to get out of beta. Then he’ll start shipping you patches !!!

The Internet and wireless multi-player games have drawn in a lot of players (Figure 2).

It is interesting that this segment shifts the gender mix.

Typically a testosterone activity, online gaming has seen a dramatic increase in female players.

In some countries like India and China where game systems and games are prohibitively expensive Internet café play is nearly 50-50 male/female.

According to an AP-AOL survey 42% of the online gamers spend at least four hours a week playing games. One in six plays more than 10 hours. And there those who have absolutely no lives who rack up 40+ hours a week in their artificial world.

That’s got to be true.

World of Warcraft has more than six million members. They send the developers more than $1 billion in subscription fees each year. That’s a community that the folks at EA, Activision, Take-Two, Sega and Ubisoft would love to build.

Going Mobile
With people IMing, taking/sending/receiving pictures, listening to their music, watching their TV shows/videos and occasionally placing a call; it’s tough to believe people would have time left to play games with their cellphones…but they do.

More than 27% of the U.S. mobile users play games on their phones and in two years that number is projected to double.

That’s great for the phone services because it’s another revenue stream.

It’s also good news for game developers because the games aren’t as intensive (expensive to develop) as Spore, Army of Two, Command and Conquer, Halo, Doom and Grand Theft Auto. These games easily cost $15 - $30 million to develop (excluding marketing costs).

Mobile games return to the early days of the industry -- puzzles, racing, casino and the good old classics .

These are time fillers (wasters). You know grab the phone, play for 10-15 minutes while you’re in a meeting or bored with the teacher.

Game play is more popular – and has more potential – than TV watching. But it has a long way to go to be as profitable as ring and music downloads or IMing.

Service providers are still trying to get the game mix and pricing right . Who knows Spore just might be the winner here. Nurture your one cell out of the bog, onto dry land into a higher form and eventually into outer space.

A real DIY universe !!!

Cracking The Code
What the game developers are looking for is the hidden key that will do more than just suck in millions of downtrodden, dedicated game players.

You simply aren’t spending enough time improving/saving the world.

Suddenly, they’ve found the revenue stream Tellywood has long enjoyed…product placement. Mountain Dew, AT&T, McDonald’s, Fritos and others who see you avoiding their ads on the tube are paying big money for glazed eyeballs.

Developers also want to keep more money at home rather than pay residuals to the NFL, NCAA, Lord of the Rings, Star Wars and Superman. Addictive original content makes all the difference.

Perhaps it is the biggest cover-up in human history…

Life just might be a game after all !!!

They could have broken the code.

########

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