Big stakes in holiday game scramble

You may still be making Halloween plans, but for video game companies it's already the beginning of the most wonderful retail time of the year.

Holiday business typically accounts for about 60 percent of annual sales for makers of games and related hardware. With US game software sales expected to hit $8.3 billion this year, according to research company Yankee Group, the potential spoils are huge, as a slew of high-profile games and several new hardware options compete for gift-giving attention.

The race starts Tuesday with the scheduled release of the recently leaked Grand Theft Auto: San Andreas, the latest in game publisher Take-Two Interactive's street-crime franchise, which has sold more than 32 million units to date.

Microsoft weighs in November 9 with Halo 2, the sequel to the shooting game that helped establish the company's Xbox console as a legitimate competitor with Sony's PlayStation 2 and Nintendo's GameCube.

Nintendo lobs its own salvo November 21 with the DS, a dual-screen handheld game player intended to expand the portable gaming market, which the company already dominates with its Game Boy Advance.

For PC gamers, the big news will be Half-Life 2, the long-delayed sequel to the breakthrough shooting game. Throw in a handful of other high-profile titles, including new installments in Konami's Metal Gear Solid action series for the PlayStation 2, Nintendo's Metroid shooting series for the GameCube, and Electronic Arts' Need for Speed racing franchise. Then add a streamlined new version of Sony's PS2 console and the planned release early next year of the PlayStation Portable handheld game player.

It's no wonder some industry observers are wondering whether the 18- to 34-year-old males who support the game industry are going to have enough cash to buy every cool new game, each of which runs about 50 bucks.

"There's so much really great stuff coming out, and there's only so much money people can spend for games, said Schelley Olhava, an analyst for research company IDC.

"There's only so much money you can spend and so much time to play all these things," agreed David Cole, president of research company DFC Intelligence. "That's always a limiting factor. Games are big-ticket items, so people have to make choices."

The end-of-the-year glut is the result of several factors, including bad luck--Half-Life 2 was supposed to be out last year, but stolen source code forced a lengthy delay. The increasing complexity of game development is also a major factor--Halo creator and Microsoft subsidiary Bungie has been sweating away on the sequel for years. The finished product will arrive just in time to help buoy the Xbox in what's expected to be its final year on the market before Microsoft releases a new console next year.

"A lot of it is just dumb luck," Olhava said, "but a lot of it's planned, too. The holiday season is when a lot of sales take place, and publishers want to save their best stuff."

There's also incentive to save potential blockbusters for the end of a console's life cycle, Cole said, when there's a big and fairly predictable installed base of potential buyers to sell to.

"The systems are at a point in the life cycle where you have a locked-in consumer base that knows what they want, which publishers like," he said. "You don't see a lot of publishers taking huge risks at this point as far as introducing new brands or new styles of gameplay. They're taking known successes and squeezing more money out of them."

That means sequel city, and the grand poobah of "Revenge of" releases this year is likely to be Halo 2. Microsoft announced recently that retailers have already rung up more than 1.5 million advance orders for Halo 2, prompting the company to boast that it expects to beat box-office hits such as Spider-Man 2 in launch-day revenue.

The original Halo was one of the biggest drivers for initial Xbox sales. Shane Kim, general manager of Microsoft Game Studios, expects the follow-up, which will introduce multiplayer online gaming to the series, to have a similarly galvanizing effect on Xbox Live, Microsoft's online gaming service.

"I believe it's going to drive an awful lot of Xbox Live subscriptions," Kim said. "It's a great showcase title in terms of...exploiting the underlying power of the Xbox and Xbox Live and really showing people what's possible."

Halo 2 will also help Microsoft tee up the ball for the next version of the Xbox, expected late next year. "It's going to help us a ton in this generation, and it establishes a lot of credibility for the next generation," Kim said. "It's really important for us to drive these kind of franchises. Halo is something people are going to want to have a long-term relationship with."

Nintendo is equally optimistic the portable DS will stand out in a crowded holiday market. Perrin Kaplan, vice president of marketing for Nintendo of America, noted the DS will arrive in the United States two weeks before it goes on sale in Nintendo's home base of Japan, a first for a Nintendo gadget.

"We wanted to make sure we get that Thanksgiving buying activity," she said, speculating that Nintendo's biggest challenge will be keeping store shelves full. "We're pretty sure we're going to be shipping product as fast as we can."

To make sure there's nothing left to chance, Nintendo is supporting the DS with a $40 million marketing campaign that will include flocks of promotional workers descending on urban areas with demonstration units.

"It's the kind of product you need to touch and feel and really try out--that's going to be the core of our marketing campaign," she said.

Cole said Nintendo should have a fairly easy job leveraging its huge Game Boy Advance base to sell the DS. And the company doesn't have to worry for a while about Sony's competing PlayStation portable, set for release early next year at a price and date to be determined.

"I don't think many consumers think that far ahead with their discretionary spending," Cole said. "Most consumers aren't even aware there is such as thing as the PSP. Until the big marketing dollars hit, it's still Nintendo's game."