The games we play

The games we play

The sleek box with a brain sprawls across the rumpus room floor. Its wireless body arches towards the TV, delighting users with intense images and some severe game play.

Welcome to the world of video game consoles. The technology - which used to be clunky and somewhat menacing - today offers design and feature advancements, making it not only svelte and esthetically pleasing, but a very smart creature indeed.

The latest and soon-to-be released gaming consoles pack a punch in terms of added functionality, industry proponents agree. Given the added processing power, the movement of characters and objects are more realistic, while landscapes and virtual worlds can be rendered in real-time.

But that's just one part of the gaming equation, according to Xbox product marketing manager, Nick Segger.

The Xbox 360, the console slated for release next year, offers a seamless digital entertainment experience: "It offers hardware/software and services integration," Segger said.

The IT functionality on the gaming consoles is helping consumers play full 3D games, watch movies, listen to music and connect wirelessly - and there was more, he said. The Xbox 360 has built-in progressive scan DVD movie, CD music and photo playback support.

Indeed, game consoles had morphed to the next-generation, Sony Computer Entertainment Australia managing director, Michael Ephraim, said. "There's a morphing of the console from a pure video game machine into the digital hub of the lounge room - and the transition is happening right before our eyes," Ephraim said.

"PlayStation1 and 2 prepared us for 3, which is now an evolution of turning the box under our TV set into a super computer and a digital hub for entertainment and communication requirements for the family."

Building on the intelligence factor, the PlayStation3 (PS3) will feature a cell processor with super computer-like power, Ephraim said, and offer computing power of 2 teraflops.

How will it work? The system features cell, a processor that's jointly developed by IBM, Sony and Toshiba, and adopts Blue-ray Disc ROM (BD-ROM) with maximum storage capacity of 54GB (dual layer).

This enabled the delivery of entertainment content in full high-definition (HD) quality, Ephraim said.

So how big is the game market?

GFK analyst, Phil Burnham, said the local games market was worth $850 million ($32 billion globally).

The overall interactive entertainment market (including PC games, hardware consoles, entertainment software and game peripherals), grew by 4 per cent over last year, he said.

"Australia has gone from under $100 million 10 years ago to $850 million today," Ephraim said.

And while game console revenue decreased by 17 per cent from April 2004 to April 2005, mainly due to price erosion, console software revenue increased 17 per cent, and PC gaming software bulged by 10 per cent, Burnham said.

Nevertheless, game console sales are expected to soar according to industry experts.

One reason for the anticipated upswing was that the latest high-powered game consoles (with sleek lifestyle-type designs) would attract a new selling crowd and drive future business, Ephraim said.

The convergence of IT and CE electronics was reshaping retail channels, he said.

"IT players, telcos, CE and media providers are all seeing the change ahead of us and wondering where they fit in," he said.

The September launch in Australia of the Sony PlayStation Portable would mark a turning point for retail distribution, Ephraim said.

"Knowing how and where to sell these types of convergent devices is just the beginning," he said.

The line between IT, gaming, and home entertainment was blurring, Lako Pacific marketing manager, Eugene Wong, said.

"We're all trying to sort out where we fit into the scene," Wong said. "The PS3 and Xbox are marketed as game consoles, but God help me, if they shouldn't be considered an overall home entertainment system."

Given the increased gaming action, the Melbourne-based distributor is looking to get into the games accessories market (peddling stands, cases and a host of wireless devices) in September, to coincide with the Sony PlayStation Portable launch, Wong said.

"The new game consoles will push awareness of home networking, as well as the importance and need for high definition content and players," he said. "Everyone is looking towards high definition as the way of the future."

Given the growing interest in the convergence of IT and CE devices, the distributor has seen its sales increases in the entertainment segment.

"The biggest interest now is with set-top boxes that are marrying high-definition TV tuners and built-in networking and storage features," Wong said.

Battling it out in console land

With the forthcoming launch of the Xbox 360 and various iterations of Sony PlayStation (including the portable handheld version and the silver edition of the slimline PlayStation 2), the console game wars have cranked up a notch.

Let's talk numbers: According to GFK analyst Burnham, Sony is the game console market leader in the 128-bit box space, capturing 63 per cent of the market, with Xbox grabbing 31 per cent and Nintendo scooping the final six.

The Microsoft Xbox camp is banking its forthcoming console will turn heads as users will be able to play games in high definition vision, and connect the console to other entertainment devices such as the iPod (MP3 players), digital cameras and PCs.

Microsoft has chosen Samsung as the exclusive HDTV partner for the Xbox platform. As part of the deal, a host of visual screen sized and technology platforms (including LCD, plasma, micro display [DLP] and Slim Fit HDTV CRTs) will be combined with the Xbox console.

The current Xbox had done extremely well over its three-year lifecycle, Xbox's Segger said.

"We have gone from nothing to a position of strength," he said. "The 360 will take us to the next level. It gives consumers a whole new entertainment and gaming experience. Boosted graphics and sound in video games - where you can hear the cars roaring past and feel the sweat dripping off your components - is just the start."

The added hardware, software and service integration such as Xbox Live, where players can share digital identity would open up new selling opportunities, Segger said. And while the go-to-market strategy was still in the works, the company aimed to position the gaming system as a lifestyle device.

The product positioning could attract resellers who had an interest in jumping into the growing digital home arena, Segger said.

"The way we look at it is games consoles are not purely a retailer domain," he said. "The system is an enabler: you can watch movies, music, connect to cameras, and the TV. The digital integration piece [which was the missing link] is now offering cross selling opportunities."

The target market was broad enough to expand the distribution reach, he said.

"The target market evolves over time," Segger said. "It caters to the gaming purists, but also to the digital lifestyle enthusiasts. It brings all devices together and can be used as a hub to watch HDTV, play games and talk to friends and family through real-time video and voice chat."

Ingram Micro game product manager, Andrew Hurford, said convergence, particularly from a digital home perspective, was increasing. Many keen resellers had already enquired about the technology, he said, but there were some hurdles to selling the gear.

The biggest problem is stocking issues. Retailers have a hard enough time getting enough stock, so resellers would find it doubly difficult to get their paws on the merchandise, he said.

"Whether it is Xbox, Nintendo or Sony, the tight stock issue will leave resellers high and dry," Hurford said.

As of August 1, Ingram Micro becomes the official Xbox distributor with the sub-distributor being All Interactive Distribution.

Since the middle of May, Ingram has been in distribution talks with Nintendo.

PlayStation2 sales, meanwhile, were the company's main bread and butter in the gaming category, he said.

"We see this market opening up to resellers down the road," Burford said. "Today, there's not a lot of margin on it. Technology retailers may use the hardware as a loss leader and look at bundling packages [and peripherals]."

In the future, resellers, catering to the smart home space, could add value by knowing the product range inside and out and offering complete systems, he said.

"With Sony, the message is clear: there is a range of audio and video solutions [movies, music and games - all stock associated with the PSP, for example]. It's iPod mixed with Wi-Fi access plus a PlayStation. It's all about the total solution."

Given the digital lifestyle trend, Sony's Ephraim said retailers (and possibly dealers) could generate even more interest by peddling the total digital concept, and its associated products.

And since Sony sees the upcoming PlayStation 3 as more than a pure video game console, and instead a super console with some major intelligence - that's one reason for a potential expanded market.

"PlayStation 2 was the dress rehearsal, while PlayStation 3 is the main event," Ephraim said. "It's far from a games machine - it's a supercomputer that manages all needs. It's the main digital device in the lounge room, so this opens up opportunities."

Ephraim listed off six USB ports, 802.11 wireless connectivity and seven games controllers running off of Bluetooth wireless technology as some funky functionality that's attracting attention.

In a bid to match the accelerating convergence of digital consumer electronics and computer technology, the PS3 also supported high quality display in resolution of 1080p as standard, he said, which was superior to 720p/1081i.

Meanwhile, for competitor Nintendo, the way of the future is the rollout of Nintendo Revolution, which is the size of three standard DVD cases stacked together.

The Wi-Fi-enabled Revolution will not only be backward compatible to play all games from the current GameCube generation, but the console would also have downloadable access to 20 years of fan-favourite titles originally released for Nintendo 64, the Super Nintendo Entertainment System (SNES) and the Nintendo Entertainment System (NES), Nintendo Australia spokesperson, Vispi Bhopti, said.

On a current system, the recently launched Nintendo DS, hot functionality includes dual screen gameplay, new control using both touch and voice and new connections with wireless play, Bhopti said.

"We also have games in development where players need only to tell their games what to do, like the upcoming Nintendogs software that allows users to talk to their virtual pet, teach it commands, call its name and pat it on your touchscreen", Bhopti said.

"DS software could identify everything from voice commands to hand-clapping and even the action of 'blowing air' on the screen.

"Players may be able to move their characters simply by telling them which way to go. At the recent E3 Expo in Los Angeles, we also demonstrated voice-over-IP capabilities that allow gamers to chat with one another over the Internet."

But game consoles don't always cut it for the hard core gaming crowd, Plus Corp managing director, Nigel Fernandes, said.

Hard core gamers are after 64-bit technology and dual core processing power to get an adrenalin-enhanced experience - and would pay big bucks for it, he said. On average gamers fork out between $5000-$7000 get the best functionality.

The company has seen a marked increase in the number of game assembled systems. Of the 200 machines assembled per month, roughly 30 are for gamers.

And while overall system turnover has recorded a slight increase (five per cent), the gaming market has jumped 15 per cent over last year. "Large screen TFTs, technology that allows two graphic cards in one machine, faster processors [in particular the AMD Athlon FX range], are some of the things that are important to hard core gamers," Fernandes said.

Whatever the platform, Ingram's Hurford said game technology was reinventing the lounge room.

"Whether it's Xbox 360, PS3 or Nintendo Revolution, the big buzz is wireless, having in-built digital cameras, being linked with plasma, TFT and computer monitors and having access to a range of home entertainment content," he said.

Indeed, the latest consoles, with myriad functionality, may take gaming past the 18 - 34 male target market, and into the mainstream living room, according to analysts. At least, that's what all three of the big boys (Sony, Microsoft and Nintendo) are hoping for.

It really is a case of watch this - and that - space.

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