As Gaming Turns Social, Industry Shifts Strategies

SAN FRANCISCO — Even before Electronic Arts roiled the video game world on Sunday with its billion hostile takeover bid for Take-Two Interactive, even before Phil Harrison, president of Sony’s worldwide game studios, announced his resignation on Monday, one could plainly see the creative and financial disruptions underlying the industry’s explosive growth.

Last week more than 17,000 artists, writers, designers and executives convened here for the annual Game Developers Conference. On the surface there was little news: few major announcements of new games, few major deals. But in private it was easy to read the sea changes reshaping what is now an billion domestic industry as it grows from niche pastime to mass medium.

Those themes emerged perhaps most clearly during talks with executives from each of the industry’s three titans: Reggie Fils-Aime, president of Nintendo of America; John Schappert, a vice president in Microsoft’s games business; and, certainly not least, Mr. Harrison himself. Mr. Fils-Aime was riding high, while the others appeared to be trying to figure out how to catch up. And this was just days before Mr. Harrison announced his resignation and before Electronics Arts effectively conceded that it too feared being passed by.

The big story in the game industry’s tremendous growth over the last few years is that the smartest companies are finally designing games and game systems that appeal to the broad public, not just a small cadre of tech-savvy youngsters. Nintendo’s fabulously popular Wii console is Exhibit A, but is also joined in that vein by games like Guitar Hero, Dance Dance Revolution, World of Warcraft and even casual office games like Spider solitaire, Bejeweled and Peggle. In short, companies that are making games more accessible are growing like gangbusters, while traditional powerhouses with a traditionally limited strategy of building around the same old (if you will) young male audience have stagnated, both creatively and on the bottom line.

It just happens that the roster of old-school industry laggards includes big names like Electronic Arts, Microsoft and Sony. The leaders of the new wave include companies like Activision, Blizzard, Nintendo and PopCap. This is the dichotomy that became so clear here at the Game Developers Conference.

Of all the dozens of presentations, receptions and parties, by far the most revealing event of the week was a private lunch held by the developer David Perry. Pretentiously (but accurately) titled “Lunch With the Luminaries,” the session included some of the true visionaries of interactive entertainment, including the designers Peter Molyneux of Populous and Black & White fame, Raph Koster (Ultima Online, Star Wars Galaxies) and Chris Taylor (Dungeon Siege, Supreme Commander).

But Mr. Harrison blatantly stole the show by baldly admitting that his own bosses at Sony’s brain trust in Japan completely misgauged the direction of the entertainment industry. In designing its latest console, PlayStation 3, Sony focused on delivering high-tech single-player experiences, while Nintendo has dominated the market with the Wii by identifying and delivering casual, social games. Mr. Harrison tried to emphasize casual play with products like Buzz, the EyeToy and SingStar, but he said he was not supported by the corporate mother ship.

“It’s a very interesting and frustrating thing for me to experience because I have been banging the drum about social gaming for a long time,” he said. “And our Japanese colleagues said that there is no such thing as social gaming in Japan: ‘People do not play games on the same sofa together in each other’s homes. It will never happen.’ And then out comes the Wii.”

It is clear now that Mr. Harrison felt emboldened toward candor because he knew he was leaving. It is rare to hear an executive from a Japanese company admit a major strategic mistake, which is what makes Mr. Harrison’s comments so interesting. Microsoft, however, has a different culture. Self-criticism is demanded, and the company has shown that it excels over time at adapting to and perhaps even co-opting its rivals’ best ideas.