Video Game Industry Betting On A Turnaround

In an effort to reverse the recent downturn in video game sales, industry players are betting that they can re-ignite consumer interest by investing heavily in new technology. Their hope is that new capabilities like 3D and controller-free motion sensing will transform the current game playing process into a truly compelling and even more immersive experience.

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Despite Recent Slump, Gaming Market Still Growing
This latest wave of innovation is driven by the ongoing competition between the big players in the industry like Nintendo, Microsoft (Nasdaq:MSFT) and Sony (NYSE:SNE) that continue to battle for their slice of the $60 billion world-wide market for gaming. Despite sales slipping 10% this year, the industry's long-term prospects continue to remain relatively bright with sales forecast to grow to more than $70 billion by 2015.

Microsoft's Gamble
Last month, Nintendo and Sony unveiled 3D related gaming offerings, while Microsoft demonstrated motion-sensing technology that allows players to interact with the game without the use of a conventional controller. Despite being the number-two seller of gaming consoles behind Nintendo, with over 40 million Xbox 360s in people's homes. Microsoft's gaming unit has lost $8.6 billion since its launch in 1999 according to one analyst's estimates. If, successful, Microsoft's new twist on gaming could boost revenues by $2 billion a year, and possibly turn things around for the gaming unit.

Activision Gets its Game on
For their part, the game publishers welcome the new innovations by the console makers. Activision (Nasdaq:ATVI) and Electronic Arts (Nasdaq:ERTS) are already busy crafting new games for Nintendo's new 3D DS console. But they are also continuing to seek opportunities outside of the console-based market, where sales have been flagging. Activision, which own's the blockbuster "World of Warcraft" online gaming franchise that generates healthy user fee-based revenue stream for the company, is seeking to extend its success here with the launch of a new version of its "Starcraft" franchise later this month. Management is optimistic that Starcraft can replicate the success of World of Warcraft and deliver between $500 million to $1 billion in operating profit over its product livespan. The Bottom Line
Motion-sensing and 3D technologies could just be compelling enough to draw a whole new audience into the gaming experience. That could be enough to push the industry onto an even higher growth path than what analysts are now projecting, and would be truly transformative for the industry. (Do you love playing video games so much you wish it could be your job? Read Play Video Games; Become A Millionaire.)

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