E3: Excitement, Expectations, Earning
In an attempt to please the growing and increasingly sophisticated interactive entertainment audience, console manufacturers and game developers pulled out all the stops at this week's Electronic Entertainment Expo. Price cut disappointments, Sony's new hand held device, and slicker, more sophisticated standards in gaming graphics took center stage.

Before last week's Expo, Sony and Microsoft were expected to announce a $50 price slash on the Playstation 2 and XBox systems. The drop turned out to be about $20, sparking disappointment among game developers who had been hoping for a more significant console price slash that would give software sales a boost. The price drop was previously thought to be a centerpiece of Sony's major announcements at the Expo, but it didn't even receive mention during its press conference. The price drop was announced in a news wire on Tuesday. Microsoft responded by dropping its XBox console price by only $20, to $179, while Nintendo, already a lower-priced console, didn't budge from it's $150 price tag. "Like all publishers, we were looking for a $50 price cut, but Sony wants to maximize its revenue," Jeff Lapin told CNN/Money in an interview at E3. "I am hopeful that by the end of the year we'll see the $149 price point - but I was disappointed we didn't see a drop to $149 here."

New from Larta Research Electronic Games Industry Examines current trends and market conditions in interactive entertainment, and includes the latest data, recent announcements by Sony, Nintendo and Microsoft, and analysts' forecasts for the future of the industry.

One announcement that Sony made last week that caught the industry by surprise was the introduction of the Sony Playstation Portable, PSP, which will be going head to head with Nintendo's Gameboy Advance in the handheld marketplace. Slated for a late 2004 release, the PSP, which CEO Ken Kutaragi called "the Walkman of the 21st century," will feature a 4.5-inch 480x272 pixel backlit screen, a rechargeable battery source, and a new format disc, the Universal Media Disc, which measures 2.4 inches and packs 1.8 gigabytes of memory. The industry has anticipated that Sony would compete with Nintendo in the handheld marketplace for some time, and the announcement of this new device piqued widespread interest. The pricing of the unit, and the marketing strategy behind it, are details that are going to be watched closely in the next year. Another new mobile device announcement came from Nokia, which heralded the Fall 2003 release of the N-Gage, a GSM cell phone and MP3 player that also functions as a mobile-gaming device. The company hopes to sell the new device for around $300. Unlike the Gameboy Advance or the Sony PSP, the N-Gage's games will mostly be simple, single-player Java or Brew-based games that can be downloaded or shipped with the phones, and are limited by bandwidth to 50 KB or 60 KB.

Meanwhile Microsoft, in many respects, repeated its digital utopia mantra about XBox, making pronouncements about system modifications that would enhance its role as the "cornerstone of the digital entertainment lifestyle." At its Monday night press conference, MS showed off the expansion of its XBox Live gaming service, XBox Music Mixer, which will ship for $40 in time for the holiday shopping season. "What if you could use XBox to mix your favorite music and digital photos, bring the experience into the living room, and share it with your friends?" asked the company's corporate vice president of game publishing, Ed Fries. Other new services to XBox Live that were announced included Live Web and Live Web alerts, which will allow users to access and manage an XBox Live account using a PC. Microsoft's desire, to be seen as (and becoming) the centerpiece of the digital lifestyle is a long-standing one, and one that has been met with some skepticism. Although the company has a unique stronghold (some would say chokehold) over the personal computer industry, some critics feel it is overly confident in its ability to dominate other platforms and devices. Meanwhile, Nintendo's press conference boasted recent healthy sales figures, and touted the GameCube and Gameboy Advance link throughout its promotions. The company also dismissed any concern over the introduction of Sony's PSP unit. "We are essentially in control of the handheld market," said president Satoru Iwata, who said there wasn't "anything to worry about."

Historically, the success of gaming platforms has always been about software titles that are available for those platforms, as opposed to the bells and whistles of the systems. The console makers predictably showed off clips of highly anticipated title releases for each of the platforms: Doom III, Star Wars: Republic Commando (XBox), Final Fantasy XI, Grand Theft Auto (PS2), while Nintendo lauded a new Sims and multiplayer Pac Man game that will use the Gamecube-GBA connection.

For PC titles, this year saw good news for hardware and chip manufacturers, as many of the highly anticipated releases consisted of graphically complex games that will require players to shell out big bucks for system upgrades or new systems altogether. The increased sophistication of the gaming audience has now given way to a period in which game developers, who have previously struggled with pushing the cutting edge while producing games that a large enough demographic can play, are now positioned to work with new, advanced graphics cards and software standards. This will likely usher in a period not only of increased revenue for hardware manufacturers, but also of exciting innovation by game developers.

by Wendy Hall, Larta Staff Writer

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