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The Cutting Edge | SPECIAL REPORT: ELECTRONIC ENTERTAINMENT

Game Makers Aim for New, Diverse Players

May 10, 1999|LESLIE HELM | TIMES STAFF WRITERS

In "Soldier of Fortune," a new video game that Activision will unveil at the Electronic Entertainment Expo in Los Angeles, hard-core gamers can pick their favorite weapons, go to their favorite foreign country and kill their chosen enemy in hundreds of brutal variations on the traditional shoot-'em-up game.

But the world's leading game developers will also show hundreds of new games, many of them based on card and board games, that are aimed at families, teenage girls and other customers not traditionally served by the business.

It's the ability to develop a variety of games for a diverse new audience, rather than for the small but dedicated core of violence-craving gamers, that will allow game developers to avoid future downturns in the highly cyclical video game industry.

The challenge to the industry comes from a new generation of game machines, starting with a machine from Sega that will be shown at E3. In the past, such introductions have sent game sales plunging as customers have waited for games designed for the latest devices.

And game companies face development costs that have ballooned to nearly $3 million a game. That means only a small number of the 1,900 games shown at E3 this year will turn a profit.

Such problems will continue to drive the "Pac Man"-style consolidation in the industry. The Interactive Digital Software Assn., an industry trade group, has shrunk to 35 members from 46 three years ago. But its membership now accounts for 90% of industry sales, up from 75%.

The good news is that the companies doing the acquiring are better managed, globally based and better positioned to ride out the tough times. The largest American company, Electronic Arts, had $1.2 billion in sales last year--twice its revenue for 1997--and has strong products in virtually every category, from John Madden football to "Need for Speed," a car-racing title.

The leaders have built strong overseas operations. When Activision launches its new "Star Wars" this year, the product will come out in 46 countries. Almost two-thirds of the company's $436 million in sales last year came from overseas. Since video game machines tend to be introduced first in Japan, a year later in the U.S., and only then in Europe, overseas sales help offset slow domestic sales.

Since these companies sell games not only for console machines, but also for personal computers, they have been beneficiaries of the boom in personal computer sales that helped generate $1.8 billion in PC game sales, accounting for nearly a third of all video game sales.

"We always believed the elusive PC consumer would emerge at some point," says Robert Kotick, Activision's chief executive.

The PC market is important not only because it offers an alternative to the cyclical console business, but also because it brings a diverse new audience to an industry traditionally focused on young men.

The PC has brought to the industry a new kind of customer called the "casual gamer." These are people who want a game that's cheap and doesn't take hours to learn.

Although games aimed at casual players typically sell for $20, about half the price of more sophisticated games, they are attractive because they cost one-tenth or less to produce than games for hard-core fans. Typical of this category are computerized versions of traditional games such as Monopoly and mah-jongg.

Another smaller but rapidly growing sector that will help offset slow sales of console games is the online segment. Microsoft has done poorly in the traditional gaming sector but has attracted millions of registered users to its online site the Gaming Zone.

There is also growing competition between the Japan-based manufacturers of the game machines.

Today, Nintendo takes $18 from every game sold for its Nintendo 64 machine. That's a sharp drop from the $28 per cartridge it charged when the machine first came out. That's because competitor Sony cut its licensing charges to $10 per game. Sega will similarly have to keep the licensing fees on its machine low if it is to persuade game makers to develop for its new machine.

Times staff writer Leslie Helm can be reached at leslie.helm@latimes.com.

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The Buying Game

The video game business continues to consolidate. Some recent acquisitions, listed by buyer and year acquired:

*

Microsoft

1999:

FASA Interactive Technologies, Chicago; makes "MechWarrior"

Access Software, Salt Lake City; makes "Golf LS Links"

*

Activision

1998:

CD Contact Data, the Netherlands; distributor; $19 million

Head Games Publishing, Eden Prairie, Minn.; makes "Cabela's Big Game Hunter"; $10 million

1999:

Expert Software, Coral Gables, Fla.; $23 million

*

Hasbro Interactive

1998:

MicroProse, Alameda, Calif.; makes "Grand Prix II"; $70 million

Avalon Hill Games, Baltimore; $6 million; makes "Advanced Civilization"

*

Electronic Arts

1997: Maxis, Walnut Creek, Calif.; $125 million; makes "Sim City"

1998: Westwood Studios, Las Vegas; $122 million; makes "Command & Conquer"

Tiburon Entertainment, Maitland, Fla.; makes "John Madden Football"

*

Eidos

1998:

Crystal Dynamics, Menlo Park, Calif.; $47.5 million; makes

"Gex: Enter the Gecko"

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