From the April 3, 1995 issue of Smart

PC Game Playing Continues to Rise

By David English

Sales of computer-based games are stronger than ever, despite competition from a new generation of dedicated game machines. In its fourth annual consumer survey conducted in early 1995, the Software Publishers Association found personal computers in 33 percent of the homes in the U. S.—up from 27 percent just a year ago. Of those homes identified as having a PC with games, each household bought a median of 4 computer games in 1994, bringing its total number of games to a median of 7. About 59 percent of the households that have computers use games—up from 52 percent two years ago—and spend an average of 7.5 hours each week playing the games.

Part of this growth can be attributed to the growing number of families that have multiple PCs. According to Link Resources, 23.6 percent of the households that owned a computer in 1994 owned more than one computer. That's up from 21.4 percent in 1993 and 18.4 percent in 1992. Link also found that having kids significantly increased the chance of owning a computer—42 percent of homes with kids have computers, while only 29 percent of homes without kids have computers.

Will the future for computer games be as bright as the recent past? Computers are likely to beat out the dedicated game machines because they can run other kinds of software. With multimedia PCs selling for less than $1,300, many consumers would rather step up to a computer than spend $300-$800 for a next-generation game machine. Game developers, who often have to plan their projects two years in advance, are also betting on the PC. George Grayson, president of 7th Level, explains that his company can make an 80 percent margin on a computer game, but considerably less with a cartridge game.

Follow the Trends
The most significant trend for entertainment software in 1995 is likely to be a steady decline in the retail price of computer games. Just as the videotape release of E.T. helped switch the videotape business from rentals to sales, a major game will someday be released at $25 instead of $45—and the software business will never be the same.

Many software publishers are experimenting with lower prices on their "B" titles and repackaging major games that have had a first run through the stores. Interplay is offering a floor display with nine classic titles that will retail for approximately $29.95 each. Accolade recently began shipping CD-ROM versions of Hardball III, Jack Nicklaus Golf, and Star Control II, also at $29.95. And Velocity has begun selling its $39.95 Mile High Club, which has eight classic flight simulators on a single CD-ROM, including JetFighter II, F-14, and the original Wing Commander.

This year will also mark the continuation of last year's major trend: the transition of computer-based games from disk to CD-ROM. By December 1994, 51 percent of all computer games were on CD-ROM, making up 61 percent of the revenue, according to PC Data. In December 1993, just 13 percent of all computer games were on CD-ROM, making up only 19 percent of the revenue. Expect 1995 to bring further growth in CD-ROM games, with nearly every major game being released only on disc.

Other trends we're likely to see in 1995 include larger production budgets for many of the top entertainment titles. With so many games fighting for limited shelf space, budgets for major projects will be in the range of $2 million to $5 million. Following the acceptance of CD-ROM games as a mass consumer product, we'll see more Hollywood actors, production people, and special-effects companies becoming involved in top projects. To lessen the risk, many of these projects will be based on well-known film, television, and recording properties (current examples include Behind the Mask, Monty Python's Complete Waste of Time, and Bob Dylan: Highway 61 Interactive). Also expect more titles to be available on multiple platforms to help spread production costs over a larger number of potential customers.

From Shareware to Retail

Who would have guessed five years ago that a software developer could gross well over a million dollars with a shareware game and leverage that success into a wildly profitable launch at retail? "DOOM II owes a lot of its success to the success of DOOM as a shareware product," says Allan Blum, vice president of marketing for GT Interactive. "By making products available on BBSs, you're reaching the cream of the crop, the strong gamers, the strong PC fanatics. Once they've tried a game and liked it, they spread the word. So when you finally show up with a retail version of the game, everyone has already heard about it."

Interplay has followed a similar strategy with Descent by allowing consumers to sample a limited number of levels with its shareware version. Just four weeks after its December 12 launch, the shareware game moved to the number one spot on the Internet Top 100 Games list. Interplay claims that the program received 900,000 downloads before the launch of the full retail version on March 17. "The sell-in of Descent has already surpassed our projections," says Kim Motika, vice president of sales for Interplay. "Retailers of all sizes have ordered product and every major retailer has bought in deep." The company plans to spend $1 million in the largest television campaign ever for a PC game.

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