LOS ANGELES (CNN/Money) – Every few years, a rumor starts to spread around the gaming industry. The PC, it is said, is a dying games platform. The future is consoles.
Like many whispers, this has little basis in fact – and it's one of the quickest ways to stir the hornet's nest of outspoken hardcore gamers. But Phil O'Neil, president of North American operations for Vivendi Universal Games, loves it when the rumor pops up, as it might scare away his competition.
"We are absolutely committed to our position in the PC business," he said. "We'd like to grow that business, in fact."
As the head of North America's No. 2 PC game manufacturer [behind Electronic Arts (ERTS: Research, Estimates)], O'Neil is optimistic. "The PC games business has actually stayed very stable in the last few years," he said. "It's down 2.8 percent versus five years ago, but there's a nice business being done there."
VU Games will showcase some of its big PC games at this year's Electronic Entertainment Expo (the annual trade show of the gaming industry), many of which are expected to be among the show's hottest titles.
|Half-Life 2 is once again expected to be one of E3's biggest games.
"Half-Life 2", the follow-up to one of the gaming industry's top selling games of all time, will have demonstrations running in two theaters.
"World of Warcraft," a massively multiplayer game from Blizzard Entertainment (makers of the "Diablo" games and "Starcraft") will be on display, trying to steal the thunder from archrival "EverQuest 2."
And developer Monolith will be showing an unannounced PC exclusive game behind closed doors.
"Half-Life 2," which was originally slated to be released last year, is "still realistic" for a 2004 launch, said O'Neil. "World of Warcraft," he said, will launch in North America in November and in Korea the following month.
Closing some studios
Despite O'Neil's stated commitment to the PC, VU Games last week closed two of its better-known development studios, both of which had a strong history in the PC gaming space.
Papyrus Studios (makers of Sierra's "NASCAR" games for years) and Impressions Games (makers of strategy titles such as "Zeus," "Cleopatra" and "Lords of the Realm III") both had solid track records in the industry, but had not been living up to corporate expectations of late, said O'Neil.
"With Papyrus, the primary product they'd been making for years was the NASCAR product" he said. "We lost the rights to that a year-and-a-half to two years ago. We made the decision that without NASCAR, [racing games were not] a genre we were going to be competitive in.
"With Impressions, we looked at what's selling in today's market," he added. "We decided we were going to focus on, quite honestly, making money."
O'Neil said he does not expect the company to close any more studios and added that it is actively looking at acquisitions in both the developer and publisher space.
Looking to purchase other studios is a pretty radical shift for VU Games. Just last year, parent company Vivendi (V: Research, Estimates) was working hard to sell the gaming division. Unable to attract a bid it considered sufficient, Vivendi eventually decided to retain the division and make changes.
In January, it appointed a new chairman, CEO and CFO to the North American unit. O'Neil was named president last week.
A hit to the reputation
VU Games' reputation in the gaming world has taken something of a hit over the last year. But O'Neil said things should begin to turn around soon, with the potential sale no longer looming and the adoption of a new, "fewer, bigger, better" philosophy toward game development.
"This is a simple business," he said. "Content is king." That king has looked a bit weak recently.
"We had a horrible 2003," O'Neil admitted. "We lost $250 million. We had too many low-quality products. We spent too much money developing them, producing them and marketing them."
In response, VU cut some titles previously planned for 2004 -- "probably in the neighborhood of five to ten," said O'Neil.
Among the cut games were the console title "Malice" (which has since been picked up by a smaller publisher) and "Treason of Isengard," a Lord of the Rings game the company said wasn't shaping up as expected.
Despite the fondness for the PC gaming market, VU Games has no plans to ignore the console or other spaces. O'Neil said the company is closely evaluating Sony's (SNE: Research, Estimates) PSP handheld gaming unit as well as the upcoming Nintendo DS. It's also looking at the next generation of home consoles as well as the wireless market.
But when it comes to the bottom line, the company will always have a soft spot for the PC.
"The PC is far more profitable for us than the console," said O'Neil. "You're not playing platform fees to manufactures, for one thing, which range ... from $7-$10 [for each copy of the game that is sold]. The console business is very high volume and very low margin."
Morris is Director of Content Development for CNN/Money. Click here to send him an email.