IDSA President Says Future Looks Good

Yesterday, the Interactive Digital Software Association (IDSA) announced their projections on the future of the industry in a report entitled "The State of the Entertainment Software Industry: 1997 - An IDSA Report." Today, GameSpot News talked with Doug Lowenstein, president of the IDSA, to get his thoughts on the marketplace and the growing trends that will propel the industry into the 21st century.

In the past, there has been buzz in the press that video game consoles as we know them would cease to exist, and that a single "black box" would sit atop our TV sets and deliver not only movies on demand, but also double as a PC that could perform productivity applications as well as play computer games. The IDSA report says that the feeling is that consoles and PCs will exist side-by-side, at least for a while longer.

Lowenstein says that when they asked industry members how they think people will access entertainment, "the responses were fairly evenly split between consoles, PC CD-ROMs, PC DVD-ROM, the Internet, and a ‘convergent box' that sits atop the TV, through which you can watch movies, play video games, and access the Internet."

The report also contains interesting figures on the demographics in interactive software, which includes a broadening audience among older males and the hard-to-reach female market. "I think the older male issue is simply the fact that we now have an entire generation in their twenties that grew up on 8-bit and 16-bit games," Lowenstein said. "And they continue to find video games and computer games to be an enjoyable outlet for their leisure time."

Regarding the expanding female audience for interactive entertainment, he says "certainly there have been some efforts recently, through products like Barbie and even through video games where you tend to have a little bit more female character options, that are helping to give an identity to girls and women in entertainment software."

He says that companies aren't setting out to make games designed for women, but rather adding features that might appeal to them into existing games. He points out that there are also smaller software companies designing software specifically for younger women and girls, but most of them will be PC-based, and are as yet untested in the market.

What does it take for a new software company to break into the market? "It all starts with having great content. This is a very unforgiving market. One could say that mediocre games in this market do not sell, generally speaking. It is unfortunate that the converse is not automatically the case - that good games do sell. Second is that marketing - finding a way to get mindshare, to get a buzz - is critical. There is so much product in the channel now that one of the great challenges for anybody, large or small, new or old, is to creatively use marketing so that your title and your company can be seen above the din. Third is distribution. Shelf space is very tight, retailers are being extremely aggressive about terms that they're insisting on to carry product, and it's vital for any company to maximize distribution to get the kind of sell-through numbers required, given the development and marketing costs, to have a profitable product."

Turning to the structure of the market, we asked him about the current trend toward affiliated labels and the focus on development. "Many executives believe that this industry is headed toward a studio model structure, which for our business means that affiliate label-type relationships are going to continue to be an important way for a small or midsize company to access the distribution channel. I think it's very, very difficult for a new company to move into this business and achieve any kind of critical mass in distribution and marketing without some sort of affiliated label type of relationship."

Last week, Acclaim cut 15 percent of their workforce, mostly administrative staff. Before that, Disney cut personnel from their in-house development staff. Of that, Lowenstein comments that "the consolidation and restructuring going on in the industry is a trend that is predictable, necessary, and desirable. Every company in this business is looking at their cost structure, looking to minimize expenses and maximize return. Announcements like Acclaim and Disney's a week ago are all part of this process of companies retooling to compete successfully given the realities of the market today."

Finally, we asked him how he thought the interactive entertainment software industry of today differs from that of ten years ago. "Ten years ago, the entertainment software industry was essentially the console-based software industry. PC gaming was really a niche business and a fraction of the total market. Today, PC gaming makes up nearly 50 percent of the total entertainment software market on a dollar basis, and more than 50 percent on a unit basis.

"Secondly, there's the Internet, which wasn't even a glimmer in anybody's eyes ten years ago and is creating opportunities, possibilities today that couldn't possibly have existed a decade ago.

"Third, I think that today there are far more players in the market. Ten years ago, the notion of having 2,500 PC titles released in a single year would have been absurd - not just because the market didn't exist, but because you just didn't have the number of players in the business. As I said, we're in a position now where we're starting to consolidate that number, but we still have far more companies involved. Ten years ago, we didn't have 16-bit gaming. We had one video game company, effectively - Nintendo. Practically speaking, you had one major player on the hardware market. Today, there are no fewer than three, and you have the PC as well. I'd also say that the cost of product development is much higher than it was ten years ago, because the technology is much more advanced; I think the demographics are different - broader and deeper than they were a decade ago. This is an industry that ten years ago was looked at with a little bit of disdain - it was just 'toys.' I think it's now understood that entertainment software is a mainstream business in America, and a major part of the entertainment landscape, and has an impact on our popular culture in ways never imagined."