The Video Game Industry's Strategy Guide

By Robert MacMillan
washingtonpost.com Staff Writer
Friday, May 20, 2005; 10:42 AM

Douglas Lowenstein is a little like Sonic the Hedgehog; he's on a tireless race to take his game to the next level.

I'm not saying that he resembles a hedgehog (you can compare and contrast on your own time). Rather, the chief of the Entertainment Software Association is determined to turn the video game industry into the multi-billion-dollar kraken that so many people already think that it is.

Speaking at the start of this week's three-day Electronic Entertainment Expo in Los Angeles, Lowenstein urged developers and executives to take video games out of children's bedrooms and basements and turn them into conversation pieces at happy hours and dinner tables. Sure, this is something that happens already, but don't think for a minute that the intensity has reached the level that Lowenstein wants.

"Lowenstein ... compared the gaming and film industries for the first of many times in his speech, and commented on the increasingly common claims that the video game industry is bigger than Hollywood," Gamespot's Brendan Sinclair reported. "'Let me set the record straight. It's simply not true,' Lowenstein said. 'We like to say it. It feels good to say it, but it's not true yet.' While game hardware and software sales together exceed the motion-picture box-office figures, Lowenstein pointed out that such a comparison doesn't factor in the sales of DVDs and VCRs and rental and television revenue. When taking everything into account, Lowenstein said the actual breakdown shows film as a roughly $45 billion industry, with gaming trailing behind at $28 billion."

Here's a quick take from the USA Today E3 blog, courtesy of Pete O'Brien: "[Lowenstein] urged the gaming community to learn a lesson from 'The Passion of the Christ.' He said Hollywood didn't recognize the desire for alternative content, and he doesn't want his industry to make the same mistake. He hopes games are made that 'keep you up at night wrestling with whether or not you made the right moral and ethical choices.' Lowenstein also believes the industry can't get snobby about its offerings, recommending significantly shorter and cheaper games. Much like a silly comedic movie that provides an hour and a half of escapism, 'we need games that are shorter, simpler and more shallow.'"

The Dallas Morning News's Victor Godinez wrote a longish story outlining Lowenstein's master plan for the video game market: (He also offered the best one-sentence description of E3 that I yet have seen: " The show floor feels and sounds like a rock concert in the middle of a battlefield.")

  • One way to get game talk on more people's lips would be to make them give people "a thrill from achieving success." In other words, make them easier, as Lowenstein said: Too often in games, "we make it a grueling and unsatisfying experience for newcomers. Let's be honest, no one likes to die over and over and over."

  • The games business needs more money: "Mr. Lowenstein said worldwide sales for the industry are at $28 billion now. Video and computer game sales hit a record $7.3 billion in the United States in 2004. 'But if we're going to equal or surpass the film industry, I suspect we'll need new sources of financing beyond the existing ones,' he said." Among the strategies: squeezing venture capitalists for more cash; squeezing cell phone subscribers for the same.

  • China, baby. Lowenstein said a country with 103 million Internet users by 2006 and broadband Internet access available to 30 percent of the population in major cities is an indispensable market.

    It's a Bandwagon

    Two recent news stories contradict Lowenstein's assertion that video games haven't taken their proper place in modern American culture:

  • You know there's real money in any industry where the talent starts complaining that there's money out there being made that they're not getting. The Screen Actors Guild and the American Federation of Television & Radio Artists sense this trend in games, according to Boston Globe columnist Hiawatha Bray.

    "While major stars can command fat contracts for their work, most of the roughly 2,000 SAG members who do game voice-overs earn a standard rate of pay. Game companies have offered to increase wages by 35 percent over 3 years. They've also agreed to shorten hours, improve working conditions in recording studios, and increase the companies' contributions to the unions' health insurance programs," Bray reported. "But the unions want something more: a cut of the profits made by the most popular games. They're pushing a plan similar to the 'residual' benefits that actors get when one of their movies or TV shows is rebroadcast or sold on DVD. The unions say their performers ought to get a similar deal for any game that sells more than 400,000 copies."

    In case you're wondering what kind of big fish we're talking about, Bray notes that Sean Connery and Clint Eastwood are some of the top luminaries who lent their distinctive voices to the game world.

  • Best Buy adopted a tough new policy to restrict sales of violent and sexually explicit video games to people under 21 years of age. The Minneapolis Star Tribune reported that the retailer will send mystery shoppers to its 679 stores nationwide to make sure that cashiers ask for identification on games that Lowenstein's association has rated "M" for "Mature."

    The policy persuaded Christian Brothers Investment Services Inc., a conservative Catholic group that claims to manage nearly $4 billion in investments, to withdraw a shareholder resolution to persuade the Richfield, Minn.-based company to publicly outline its stance.

    Here's more from the St. Paul Pioneer-Press: "Best Buy spokeswoman Susan Busch said the timing of the posting was 'a coincidence,'' noting her firm puts its video game policy in place last year but Christian Brothers wasn't aware of that until recently. Best Buy had objected to the Securities and Exchange Commission about Christian Brother's proposed resolution, contending it interfered with the company's regular business operations."

    Poker Trumps AP Exams

    I took three Advanced Placement exams in high school. It cost my folks $180, but saved us some $10,000 or more when I did well enough to place out of several core college classes and save them a semester's worth of tuition.

    Of course, I could have learned to play poker for free and achieved the same goal: Absolutepoker.com, an online gaming company based in Toronto and San Jose, Costa Rica, will pay a semester's tuition to whoever wins its college Internet poker tournament. The company hasn't put a limit on how much it will pay, marketing chief Garin Gustafson told me earlier this week, but he said that the offer does not cover room and board, textbooks or ancillaries.

    The tournament, which is scheduled for May 26, has already lured 4,000 people. Gustafson said that it will not involve real money. This is significant considering that online gambling in the United States is technically illegal. (It depends on whom you ask, but we'll take the government's word for it. Better safe than sorry.) Nevertheless, the industry rakes in millions of dollars from American players, and is embarking on a hefty marketing campaign despite the legal questions that remain. I was tempted to ask whether hooking kids on a potentially illegal activity as part of helping one of them pay for college is a smart idea, but if you think poker is the most dangerous activity at the nation's universities, you need to go back to school.

    The Long Road to Internet 911

    It took a long time in coming, but the path to local 911 service for Internet phone customers must take no longer than 120 days, the Federal Communications Commission ruled yesterday. I have written several times about incidents in Houston and Hartford, Conn., involving 911 calls made on unequipped Internet phones served by Vonage Holdings Inc. that prompted two state lawsuits.

    Here, from the West Volusia County edition of the Daytona Beach (Fla.) News-Journal, is the most tragic tale of all: "Cheryl and Joseph Waller did not want to tell strangers about the worst day of their lives. But they did. ... The Deltona couple told federal officials in Washington, D.C., on Thursday about the day their 3-month-old daughter Julia died, when their Internet phone service could not reach 911 after the baby stopped breathing."

    Waller, the Associated Press reported, "told the commissioners before their vote that '120 days is seven days longer than my daughter lived.' Julia Waller 'died at 113 days old because I can't reach an operator,' she said."

    The News-Journal also offered a reaction from Vonage: "Vonage spokeswoman Brooke Schulz said the company had no idea their Volusia County customers' calls were going to a non-emergency line and they have recently changed the service to take advantage of the Sheriff's Office Internet line. 'Our hearts bleed for the Wallers,' Schulz said. 'Our company's No. 1 priority is to make sure something like this does not happen again.'"

    Vonage and other Internet phone companies have made deals with several of the nation's largest phone companies to provide local 911 service. The Wall Street Journal noted that the FCC's action, meanwhile, marked an abrupt reversal of the commission's normally hands-off approach to regulating the hot new technology.

    Finally, News.com reported that Internet phone companies that assign numbers that aren't based on where subscribers actually live might run into trouble complying with the FCC's ruling.

    Hot, Fiery Passion at $3.99/Minute

    The New York Fire Department's emergency hotline phone number will raise your temperature, all right. The New York Daily News reported that the phone number "was mistakenly canceled by bungling bureaucrats -- and the easy-to-remember digits are now in the hands of a phone sex company."

    "In April, a Philadelphia-based company, PrimeTel, bought the number," the Daily News reported, and boy, does it have a track record: "The company has previously grabbed numbers from the Phoenix-based Mexican Tourism Bureau and a Tulsa special-education group, according to a Philadelphia magazine report in January."

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