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TK's MORNING BUZZ: It's E3 Eve, and the Buzz on the Video Game Industry Couldn't Be More Positive -- But Are Software Retailers Ready to Play?

15 May, 2001 By: Thomas K. Arnold

On the eve of the Electronic Entertainment Exposition (E3), the buzz on the video game industry couldn't be more positive. In addition to the unveiling of games for Microsoft's highly touted Xbox, Nintendo and Sony are each on a roll, Nintendo with plans for its own next-generation game system (and a reputation for having some of the strongest game franchises in the business) and Sony with its PlayStation 2, which is finally beginning to make the transition from high-priced eBay auction item to retail shelves.

Not only that, but a report issued last week by the NPD Group maintains retail sales of video game hardware, software and accessories rose 18% during the first quarter of this year.

Contributing to the upbeat mood among gamers is an Associated Press story that wonders whether the time has, in fact, come for movies based on blockbuster game franchises. The story notes that previous attempts have been hit (Mortal Kombat) or miss (Super Mario Bros.), but quotes analysts as saying "this might be the year it works," with Final Fantasy and Tomb Raider expected to do quite well. A key reason: graphics in games have become increasingly lifelike, all the better for a movie adaptation.

And yet there's also a tremendous amount of uncertainty. Will Xbox deliver on its promise? Will the games be good enough to drive the platform to success? To dominance over the competition?

And what about Sony and Nintendo? Will PlayStation 2 maintain its momentum despite continued shortages at retail? Will Nintendo hang on to its core youth audience, or will the little kids jump ship to a competing platform?

At this point, it's a three-way race, but in the past there have always been only two real contenders -- one leader and one also-ran. For a long time, it was Nintendo and Sega, then Sony came along and Sega faltered and ultimately dropped out.

I'm curious about how all this optimism-mired-in-uncertainty (or is it the other way around?) affects software retailers. And for that I once again turn to you, the readers. Are sales and/or rentals picking up again, and if they are, do you expect this trend to continue? Which platforms are seeing the most action, and which ones do you think will dominate once the fourth quarter rolls around?

I'd also like to hear from retailers about the game trade in general. I remember in the middle 1990s, many video retailers were depending more and more on games; one strong regional chain, Movies to Go, even opened up a separate chain of game stores. Then, the market hit a slump. Are we back up to those lofty heights, or are we at least headed in that direction? What should retailers do to take advantage of gaming's resurgence, and by the same token, what should they do to protect themselves from another downturn?

This time, please provide me with your name, store affiliation and percentage of total revenue that comes from game rentals and sales. Edited responses will be printed in this space later this week.

Comments? Contact TK directly at:TKArnold@aol.com

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