Fifteen-year-old Trevor Thomas really wanted a bunch of new video games for his Xbox console for Christmas.
His father, who is struggling to keep his finances afloat in the midst of the tech downturn, had other ideas.
He spent US$50 to buy Trevor an online kit that allows him to play the games he already owns against players from all over the world. The gift worked out cheaper, and gave Trevor a renewed interest in his year-old system and games, which in teenage time had become positively ancient.
The experience of the Thomas family reflects a nasty turn of events in the booming video-game industry. The sector grew by 43 percent in 2001, its US revenue of US$9.1 billion overtaking the value of box-office earnings for the first time in history.
But in 2002 the rate of growth slowed dramatically, and analysts now expect sales figures to be below the 26-percent increase they had originally forecast.
The figures could indicate that the end of the video-game boom is in sight. But they also portray an industry that looks ripe for consolidation as the power to create expensive blockbusters becomes increasingly concentrated among a handful of huge firms.
This trend has been exacerbated by a sense of ennui among the male adolescents who form the core game-buying audience. They traditionally buy games in abundance in the year following the release of a new console, but Sony's Playstation2, Microsoft's Xbox and Nintendo's Gamecube are all well past that mark.
That could change in the first half of this year when analysts expect all the three companies to revamp their lines and lower prices. The aim is to bolster enthusiasm well before the launch of genuine next-generation consoles in 2005.
* Figures indicate that the end of the video-game boom could be in sight.
* They also portray an industry that looks ripe for consolidation as the power to create expensive blockbusters becomes increasingly concentrated among a handful of huge firms.
These are expected to boast vastly more powerful graphics and super-realistic sound. Until then however, Microsoft and Sony are expected to tweak their existing consoles with upgrades that effectively turn them into personal video recorders. Nintendo, which is struggling with low sales of its Gamecube, is expected to drop the price to below US$100 and increase the portability of the console.
But that might not prove enough to save many of the video-game publishers who are struggling to compete in a harshly competitive sector. They are finding that with most big hits coming from just two companies, gaining the attention of retailers and consumers is becoming ever more challenging.
Electronic Arts, based in Silicon Valley's Redwood City, had 2002 fiscal revenues of revenues of over US$1.7 billion last year, and projected sales over the most recent quarter of some US$1.1 billion. The company, which sees itself as the Disney of interactive entertainment, has become the world's biggest video-game publisher by developing a roster of family-friendly and sporting titles such as FIFA Soccer, Madden NFL, Harry Potter and James Bond. It accounts for almost 20 percent of all games sold.
New York's Take-Two publisher is the other gorilla of video games. It dominates the guts and gore segment with its Grand Theft Auto 3 and Grand Theft Auto: Vice City, which were the No. 1 and No. 3 sellers through October 2002.
Besides these two, only Microsoft, Nintendo and Activision managed to get best-selling titles last year. Activision was one of three major publishers to revise earnings figures in late 2002, along with THQ and Midway. Meanwhile, specialty game stores like GamePro and Electronics Boutique also warned of reduced sales over the holiday.
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