Microsoft-Sony Battle Broadens to Romance Games at Show

Microsoft Corp. (MSFT) and Sony Corp. (6758) are battling more than just each other as they showcase new consoles at the Tokyo Game Show. They’re also fighting for the attention of players of romance fantasies like “Kiss of Revenge.”

Role-playing games, cloud-based gaming and vendors hawking products for costume-wearing fans are taking up more floor space as the show opens tomorrow in the birthplace of video-game machines. A record 342 exhibitors will attend the last major trade event before the holiday shopping season.

Sony and Microsoft are offering hands-on trials of the PlayStation 4 and Xbox One as they try to kick-start growth in a $63 billion industry by featuring consoles and software costing hundreds of dollars. The companies are pitching their machines as entertainment portals for games, music and films to combat the flow of players downloading free or cheap titles by Voltage Inc. and Nexon Co. (3659) for smartphones and tablet computers.

“Mobile is having a huge impact on the market and on these game shows,” said Ben Bajarin, an analyst with Creative Strategies Inc., a technology consulting firm in San Jose, California. “There will be so much competition for consumer dollars over the holidays that you just can’t bet that the console is going to be the big holiday purchase.”

Photographer: Yoshikazu Tsuno/AFP via Getty Images

Fans queue up for the newly released videogame software "Monster Hunter 4" in Tokyo on September 14, 2013. Close

Fans queue up for the newly released videogame software "Monster Hunter 4" in Tokyo on... Read More

Close
Open
Photographer: Yoshikazu Tsuno/AFP via Getty Images

Fans queue up for the newly released videogame software "Monster Hunter 4" in Tokyo on September 14, 2013.

‘Grand Theft’

Console makers including Nintendo Co. (7974) aren’t the only ones counting on the new generation of devices. Software companies, whose titles take years to develop and typically sell for more than $50 apiece, need the hardware to drive demand.

Square Enix Holdings Co., maker of the “Final Fantasy” series, and Electronics Arts Inc., developer of the “Madden NFL” games, will join Sega Sammy Holdings Inc. (6460) and Capcom Co. (9697) in taking booths. Nintendo, creator of the Mario and Zelda franchises whose Wii U console has had disappointing sales, is skipping the event.

Take-Two Interactive Software Inc. (TTWO), maker of “Grand Theft Auto V” released yesterday, isn’t attending. The game, featuring gangsters swimming with sharks, is forecast to generate $1 billion in sales in one month, four times the amount spent to make it.

The game is built for the older Xbox 360 and PS3 machines, and Take-Two hasn’t announced plans for the new consoles.

‘Angry Birds’

Consoles have struggled to win over casual players preferring to use Facebook Inc. (FB)’s website and mobile devices. Rovio Entertainment Oy’s “Angry Birds” has been downloaded almost 2 billion times and delivered $199 million in sales of games and merchandise last year.

U.S. retail sales of new video-game software fell 15 percent to $2.15 billion in the first half, to make up 33 percent of consumer spending on games, according to researcher NPD Group. Digital-format sales, including online subscriptions and downloads, mobile and social titles, rose 10 percent.

“The market is shrinking because the items to kill time have become diversified,” said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management Co. in Tokyo. “PS4 and Xbox One are not for light users.”

The Tokyo show has areas devoted to romance-simulation games such as Voltage’s “Kiss of Revenge,” smartphones, social networks, independent developers and “Asia new stars” from Vietnam, Singapore, Thailand, Indonesia, Malaysia and the Philippines.

Tokyo-based Sony, which has the largest exhibition space, will be one of two keynote presenters, showcasing the PS4 and exclusive titles. Masaki Tsukakoshi, a spokesman for Sony Computer Entertainment, declined to comment beyond saying the company has the same-sized booth as last year.

Hirai’s Plan

The other will be GungHo Online Entertainment Inc. (3765), maker of the “Puzzle & Dragons” mobile game whose market value briefly overtook Nintendo’s in May. GungHo’s elevation is a sign for “how the industry has changed,” David Gibson, an analyst at Macquarie Group Ltd., said in a Sept. 12 report.

Sony priced the PS4 in the U.S. at $399 -- $100 cheaper than the Xbox One -- when it goes on sale Nov. 15. Customers in Japan will have to wait until Feb. 22. Sony will be showing 50 games this week compared with about 30 for Microsoft, according to Macquarie’s Gibson.

The console has reported orders of more than 1 million units and is a central element of Chief Executive Officer Kazuo Hirai’s plan to revive Sony. The company has set a goal of being No. 1 in game consoles in the U.S., the biggest chunk of the $63 billion global market as estimated by DFC Intelligence.

Microsoft Returns

After skipping the Tokyo show last year, Microsoft returns to try to crack a market dominated by Sony and Kyoto-based Nintendo. Microsoft, the top U.S. seller of consoles for more than two years, plans to release the Xbox One in the U.S. on Nov. 22 while it will go on sale in Japan in 2014.

Global orders for the new console are ahead of the Xbox 360, Phil Spencer, corporate vice president at Microsoft Studios, said in an interview in Tokyo today.

The company will expand TV programming beyond a show based on its best-selling “Halo” game as Microsoft attempts to position the Xbox One as an entertainment portal and merge TV watching with video game playing. Microsoft is teaming with partners including the National Football League to offer features such as viewing highlights and game scores.

“We believe sports is a very interesting category globally,” Spencer said. “We’ll be expanding what we do in sports to bring more international sports into the mix. ”

The PS4 and Xbox One are each projected to sell 3 million units worldwide this year, according to Michael Olson, an analyst with Piper Jaffray in Minneapolis. By comparison, smartphone sales in the second quarter alone totaled 229.6 million, according to researcher Strategy Analytics.

Console sales are expected to jump 11 percent to 68.6 million units next year on the PS4 and Xbox One, according to market researcher IDC. That compares with 89.4 million units in 2010.

“It could be a turning point for the industry and there may be a chance for console makers,” said Tomoaki Kawasaki, an analyst at Iwai Cosmo Holdings Inc. (8707) in Tokyo. “There’s a possibility of regaining light users if they can produce amusing games that may develop into social phenomena.”

To contact the reporters on this story: Takashi Amano in Tokyo at tamano6@bloomberg.net; Cliff Edwards in San Francisco at cedwards28@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.