The interactive video game industry's biggest convention meets next week in Los Angeles promising a return to its glitzy past, but on the heels of weak sales and the slumping economy, the future of this fun and games business is no laughing matter.
A wave of fitness games, an expanded lineup for Nintendo Co Ltd's popular Wii console and, possibly, hardware price cuts, are all expected to be major themes at the Electronic Entertainment Expo, or E3, which starts on June 2 in Los Angeles.
To be sure, the industry is doing well, even as the economy shrinks and unemployment in the United States swells. Hudson Square Research analyst Daniel Ernst pegged video game sales for the fiscal year ending in March at $28.7 billion, up 13 percent, and bigger than the $27 billion movie business.
The challenge is to keep growing as consumers think twice about discretionary spending, particularly on game consoles that cost up to $500 and top games priced at about $60.
April U.S. sales of video games fell 17 percent, after sliding 23 percent in March, according to research group NPD. The decline is somewhat skewed by a tough comparison, since two of the biggest games of 2008 were launched at the same time one year ago.
Still, the economy is impossible to ignore. One analyst suggests that a long rumored price cut for Sony Corp's PlayStation 3 console, currently selling for more than $400, could fuel a new wave of demand.
The thing that would really boost the industry in this traditionally slow period would be a Sony price cut. That would really help right now, said Billy Pidgeon, an independent analyst at Game Changer Research.
But don't cry for the industry, whose global sales -- including hardware -- could top $98 billion this year and $110 billion in 2010.
If it doesn't happen, I don't think the industry is in for rough times, Pidgeon added. I do see that, in the fourth quarter, there will be a return to form.
In addition to a host of new video games from the likes of Electronic Arts Inc, Activision Blizzard Inc, and Take-Two Interactive Software Inc, the crowd of 40,000 game enthusiasts are expected to see an updated portable game player -- call PSP GO -- from Sony, and an accessory for Microsoft Corp's Xbox 360 that senses motion similar to remotes made for Nintendo's Wii remotes.
Nintendo, whose Wii console has sold more than 50 million units and dominated the market in recent years, is likely to unveil a new versions of its own bankable franchises, including Zelda, and Wii Fit, as well as more games from third-party developers, and a new peripheral.
Overshadowing the announcements may be a renewed thrust by the show's organizers to return the show to its formerly large scale in an attempt to regain the spectacle, glamour and glitz from prior E3 events, Wedbush analyst Michael Pachter said.
The show, which once drew crowds estimated as big as 80,000, downsized to about 5,000 in the last two year, seeking a less stressful, more personal focus with industry insiders. The idea was a bust.
E3 used to be a great event (that) helped to push the games to a more mass market audience, said Yves Guillemot, chief executive of France's Ubisoft Entertainment SA, maker of the hit franchises Assassin's Creed and Splinter Cell.
In the last two or three years it was almost a nonevent, he said. We think it will be a major event -- the show has to be big. We want to attract more and more talent from all the other industries (so) they can see what is happening now.
(Reporting by Franklin Paul; Editing by Andre Grenon)