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The Cutting Edge: COMPUTING / TECHNOLOGY / INNOVATION : Redux of Atari Crash of '83? : Video Game Machine Sales Are Expected to Be Off 15%


"The younger kids are used to playing PC entertainment and educational titles," said Keith Benjamin, who follows the industry for Robertson Stephens, an investment firm in San Francisco. "We suspect parents may be holding off on video game platforms for them."

Benjamin noted that several video game titles aimed at young kids this season, including the most recent in Sega's hit "Sonic" series, "Sonic and Knuckles," have done poorly.

Microsoft Corp., for one, is making a big push to woo children who may not have been exposed to video games yet. The firm's multimillion-dollar advertising campaign for its new "Microsoft Home" line of CD-ROM software includes, among other things, a 45-foot-long "ExplorasauraBus" currently making a nationwide tour.

Traditional video game developers are plowing more money into development of CD-ROMs for the PC market, too. San Mateo-based Electronic Arts spent nearly $5 million developing "Wing Commander III," a flight-simulation game for the PC with live action video "starring" actor Mark Hamill of "Star Wars" fame.

"CD-ROM games will be 20% to 25% of our total revenue this year, up from 2% last year," said Bing Gordon, EA's executive vice president. "That's a dramatic change."

To be sure, the video game business, even in decline, is not to be sneezed at. Nintendo expects to sell a whopping 2.5 million of its just-released "Donkey Kong Country" game for the Super NES--enhanced by sophisticated computer programming to look far more realistic than other NES games--by the end of the year in the United States alone.

"In my mind, we have to take a cue from the traditional linear media business," said Robert Kotick, chairman of Los Angeles-based Activision, whose main Christmas offering, "Pitfall," is, ironically enough, recycled from its days as a hit on the Atari 2600.

"Our strategy is to do 10 of the biggest-budget, highest production value games, and market the crap out of them," he said. "The key to our future is mass media exploitation of characters and stories that go beyond our medium. Video games have to become the place where new concepts in pop culture start, not end."

Peaking Popularity?

Sales of video game hardware and software appear to have peaked, while sales of personal computer CD-ROM games are growing sharply. Sales, in millions of units:


1985: 1.0

1995: 111.7


1985: 1.2

1995: 17.6


1991: 0.3

1995: 62.1

Note: 1994 and 1995 figures are estimates.

Source: Jefferies & Co.

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