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Game consoles playing big role at expo

Rabid gamers fret as rivals Microsoft and Sony aim new models at a wider audience.

June 11, 2013|Paresh Dave
  • The Electronic Entertainment Expo, which opens Tuesday at the Los Angeles Convention Center, is an important battleground for Microsoft and Sony as they try to reassure hard-core gamers that they are not being betrayed as the companies target a wider audience with their new consoles.
The Electronic Entertainment Expo, which opens Tuesday at the Los Angeles… (Susannah Kay / Los Angeles…)

It has the hallmarks of a colossal clash between two gaming titans.

Microsoft Corp. and Sony Computer Entertainment separately unveiled details about their new game consoles Monday, ahead of the Electronic Entertainment Expo, the big video game industry conference that starts Tuesday at the Los Angeles Convention Center.

But some analysts say the new consoles may instead represent last-gasp attempts by the electronics giants to fend off smartphones and tablets, which have made video games more accessible and cheaper.

Fighting for spending that is increasingly being diverted to games on mobile devices, Microsoft and Sony are telling consumers that their latest devices, costing as much as $500, are worth buying because they are conduits to a world of online entertainment, including video games, Netflix movies and Skype online chats. They're designed for the entire family, not just the kid in the basement, the companies say.

But that's stoking fears among rabid gamers that Microsoft and Sony are betraying their loyal customers.

And that's why the E3 conference has become an all-important battleground for the two companies as they work to reassure hard-core video game enthusiasts that the Microsoft Xbox One and the Sony PlayStation 4 are also the best gaming systems ever created.

"They are going to really have to make sure the consoles shine in a positive light for gamers and make sure to continue to push that these consoles are accessible to everyone," said Brian Blau, a research director at Gartner Inc.

Despite all the hand-wringing, industry analysts expect a bonanza at retailers this holiday season as customers clear the new devices off store shelves. Microsoft's original Xbox 360 came out almost eight years ago. The PlayStation 3 is almost 7 years old. In geek culture, the old models have become fossils. Yet the industry's hopes for robust sales are much weaker than they might have been a few years ago.

Sales of Nintendo's Wii U, which rolled out six months ago, have fallen short of even the most pessimistic expectations. Analysts said Nintendo erred in its marketing because many users didn't understand that it was a new console.

That's in stark contrast to when the original Wii hit the market seven years ago. Nintendo has sold nearly 100 million of the original Wii, compared with 80 million each of Xbox 360 and PlayStation 3.

But many people who purchased the original Wii are letting it collect dust.

Some of those casual gamers, such as young women and older adults, are choosing to play games on mobile devices instead.

These gamers now make up the largest segment of players in the U.S., at nearly 1 in 3, according to market research firm NPD Group.

At E3, the companies will be focused on making sure their main demographic -- males ages 13 to 34 -- don't feel alienated by the push to persuade casual gamers to buy consoles.

That die-hard gaming group will pick one platform this fall, and both Microsoft and Sony are angling for their business.

Console sales account for about 43% of the video game industry's $70 billion in annual revenue, according to Newzoo, a Dutch research firm that tracks the industry. Although the Xbox One and PlayStation 4 are unlikely to sell as well as previous versions, the amount of revenue generated per unit is expected to grow sharply because of the ease of downloading games and add-ons over the Internet.

Both devices will heavily rely on Internet connections, allowing users to buy and store games online rather than on their devices or in boxes on shelves. By 2017, $97 will be spent on online games for every $100 spent on console games, according to an analysis released this month by PricewaterhouseCoopers.

Still, Microsoft frustrated many gamers when it announced that the Xbox One will need to be connected to the Internet at least once every 24 hours when playing games. Microsoft says the policy will help it thwart piracy.

The cloud storage of games will enable users to access them from any console connected to the Internet at any time. As many as 10 family members can share an account.

The company also announced that game publishers could choose to restrict resale of games. Owners of Microsoft-designed games can sell them to "participating retailers" or transfer them to one friend for free.

David Cole, head of research firm DFC Intelligence, said the issue of trading games could come back to bite Microsoft.

"There's concern that when you lose the trading part of it, it's basically taking money out of a consumer's pocket that they can't spend on new stuff," he said.

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