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Last Updated: Thursday, 26 August, 2004, 09:10 GMT 10:10 UK
Games industry faces shake-up
By Alfred Hermida
BBC News Online technology editor

The coming of the next generation of consoles is going to be like a forest fire for the games industry, according to games giant Electronic Arts.

Screenshot from Madden NFL 2005
EA's Madden NFL title has already sold more than a million copies
The games maker is concerned about costs of games for the PlayStation 3 or Xbox 2.

It estimates these will be between 100 and 200% more costly to make than current titles.

"The transition is a very painful process for every game developer," said Jeff Brown, vice president of corporate communications at EA.

"We look at the transition like a forest fire. It makes the healthy trees stronger, but burns away the weeds," he told BBC News Online.

But he added that EA was ready for the transition and its balance sheet justifies his confidence.

The company has revenues of nearly $3bn (1.65bn), profits of $577m (306m) and a market value of $15bn (8.28bn).

It has based its success on a tried and tested strategy of game franchises, which has so far proved very lucrative.

The latest version of its American football franchise, Madden NFL 2005, has sold more than 1.3 million copies in its first week of release in the US.

EA is gearing up for a similar onslaught in Europe with the latest incarnation of its Fifa soccer title, due in October.

"This particular quarter is looking exceptionally well," said Mr Brown.

Games formula

There is some debate as to whether innovation and creativity is suffering as game publishers become increasingly unwilling to back any project that lacks a built-in audience.

Screenshot from The Sims
EA is behind the popular and lucrative Sims franchise
A glance at the games charts in the UK shows that most of the titles in the top 10 are either sequels or tied to a film.

Many have come from the EA stable, but it makes no apologies for sticking to a successful formula.

"The franchise strategy is good for the company, investors and consumers as this is a hit-driven business," said Mr Brown.

He explained that EA had honed its franchise strategy, learning with every new version of a game. And he argued it also sat well with investors, who could forecast sales of a hit series.

"More importantly, it is good for the consumer as video games cost a lot of money to make and have a high price at retail," he said. "If you buy three or four games a year, you don't want to make a mistake."

However, he admitted that there was a risk that a franchise could be exploited.

"I'm not going to say that every game is perfect," admitted Mr Brown. "But if studios don't deliver a high quality game, there is hell to pay internally."

Small fry

Looking to the future, EA expects further consolidation in the industry.

Screenshot from Burnout 3
Criterion has been working on a new version of the Burnout game
In the last year, a number of well regarded UK game studios have folded, such as Kaboom, Rage and Lost Toys.

Facing the future, the remaining ones may not have the time and money needed to develop games that harness the increasing power of computer processors and graphic chips.

"No, some won't survive," admitted Mr Brown candidly. "But the demand for content means that even big companies like EA have to go to these small developers."

Even some of the bigger fish, like the people behind Tomb Raider, Eidos, are in talks over a possible takeover bid.

EA's name has been mentioned as a potential suitor, but Mr Brown declined to be drawn on the speculation.

"I'm not going to tell you that we are not in the hunt for talent," he said, "but I would not make any assumptions."

EA recently snapped up the Guildford-based developer Criterion Software. It is the name behind the Burnout series of games and is working on a new first-person shooter known as Black.

"The first thing we wanted was the people who worked there," said Mr Brown, adding that EA was also after the studio's games.

But the purchase also gave EA control over a technology called RenderWare, which is widely used by its competitors to help make games.

"RenderWare is significant for EA in terms of getting ready for the next generation of console," he said. "It is quite a significant asset."

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