Next Generation of Game Consoles Set to Shake up Gaming Industry

Next Generation of Game Consoles Set to Shake up Gaming Industry As the Next Gaming Cycle Approaches; Developers, Publishers, Peripheral and Hardware Manufacturers Set Sights on New Opportunities. By: Ann-Marie Fleming July 2005 As the gaming industry prepares for the launch of the next generation of gaming consoles, discussions are heating up as to the potential impacts that may ensue. Previous transitions have revealed that entrance into the next gaming cycle often results in higher costs, bigger budgets and larger production teams. As the current gaming cycle comes to an end and the industry prepares for the next generation, these impacts are believed to reach new levels. As Glenn Entis, Electronic Arts' (EA) Vice President and Chief Visual Officer explains, "It's a time of potential dislocation because there is discontinuity. Costs definitely go up because there is new technology and a lot of new techniques involved. Part of the issue is that you have to accelerate experience. Game teams now have to basically master new techniques that they have never used before, things which by definition we have no experience in, and that require a quick time to market for each launch." Companies that have learned from previous transitions adjust and adapt to ensure that the next cycle proves beneficial. For many this approach becomes one of safety, as developers and publishers turn to genres, titles, themes, licensed products and brands that have proven successful, many times avoiding new and riskier directions. According to Philip Holt, Senior Vice President of Product Development for THQ, "What it means is that creative risks are minimized because of the dollar amounts involved. People look to things that have worked and try to offset some of the risks associated with increasing development costs by trying to recreate that formula that has worked for other people." Confident that transitions are having a positive impact on the industry is Kathy Vrabeck, President of Activision Publishing who explains, "We always end up with greater household penetration of video gaming systems than we did in the previous cycle, so this is really good for the industry." Activision who experienced great success during the last transition, attributes their achievements to the Company's realization that the older platforms stay around for a while and bring with them lower development costs, reused technology, big brands and big sales, which can be utilized to offset the investments being made in the new technologies, according to Vrabeck. THQ believes their broad portfolio will allow them to continue to do very well on the PS2 as well as with their family oriented brands. "As price points come down and a new part of the market enters the console space at a sub $99 price point, a lot of our games are going to sell very well" states Holt. PC Industry: Another trend associated with console transitions explains Kevin Bachus, President and Chief Operating Officer, Infinium Labs, "is that game publishers tend to gravitate towards the PC market as a form of safe harbor while things are shaking up, because there is not going to be enough of an installed base on the consoles for the first year or so to support the kind of investment that goes into that." Infinium has turned to the PC arena to tap into the vast library of content available to fuel their on-demand online game service and product called Phantom