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Microsoft seeks winner with 'Halo 2'

The game sequel is the latest and perhaps the best indication of how the Hollywood mentality has pervaded the video game industry. Screen shots: Playing for keeps

By midnight tonight, as many as a hundred fans--mostly men in their late teens and 20s--will line up near Union Square in New York, eagerly awaiting their first glimpse of the sequel to a science-fiction blockbuster.

The line won't be in front of a movie theater but rather at the EB Games outlet on East 14th Street. Those who show up there--and at more than 6,500 other stores playing host to midnight events across the country--will be able to buy copies of "Halo 2," a video game for the Xbox system published by Microsoft Game Studios.

The anticipated release of "Halo 2," the sequel to Microsoft's best-selling 2000 game, is the latest and perhaps the best indication of how the blockbuster mentality of Hollywood has pervaded the video game industry. As development budgets for the most advanced games approach $20 million, the stakes for producers have risen accordingly. According to Microsoft, the marketing budget for "Halo 2" is "tens of millions of dollars," perhaps more than the cost of developing the game itself (which the company will not divulge).

And just as a splashy Hollywood premiere attracts attention for a film, a video game's first-week sales can be critical to winning shelf space and retailer support.

More than 1.5 million people preordered a $50 copy of "Halo 2"; if all of them pick it up in the first few days, the game's opening gross will be $75 million, almost $5 million more than the animated film "The Incredibles" did this weekend.

"For the first 24 hours, 'Halo 2' will blow past anything Hollywood has put out there," said Peter Moore, a marketing vice president for Microsoft's Xbox division. "I'm eager for the comparison."

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For Microsoft, the stakes for "Halo 2" are unusually high. The company, which dominates personal computer software, wanted the Xbox to be an entry into the living room and the expanding world of digital entertainment.

But the Xbox console, with sales of about 10 million in the United States, is still a distant second to its chief rival, Sony's PlayStation 2, which has sold 25 million, even though Xbox has made some impressive gains recently. Sales of Xbox increased 11 percent by volume last year, but revenue lagged as Microsoft cut the price of consoles and games.

Exclusive games can help sell consoles, and while there are several titles generating interest in PlayStation 2, the first "Halo" release has been the only exclusive game that has generated enough enthusiasm to result in significant sales of the Xbox. The company also wants to attract more players to Xbox Live, its online playing system, which already has more than 1 million subscriptions.

"The catalog of games definitely plays a role," said Rick Vergara, a merchandise manager for entertainment at Circuit City, the electronics retailer. "On the other hand, a lot of people who are excited about 'Halo 2' have Xbox already."

Microsoft is hoping for big hit out of the gate. "A significant amount of the life cycle is done in the first couple of weeks," Vergara said. For example, "Grand Theft Auto: Vice City," released for the PlayStation 2 in 2002 by Rockstar Games, sold 1.4 million copies its first week, according to data provided by the NPD Group. In the two years since then, it has sold just over three times its first-week total.

A sequel of sorts, "Grand Theft Auto: San Andreas," came out on Oct. 26 and is expected to do as well as Vice City, although sales numbers are not yet available.

"If you come out of the gate strong, buzz can build that helps the overall sales curve," said Mike Quigley, vice president of marketing at Electronic Arts. For that reason, the industry goes to great lengths to create interest among what it calls hard-core gamers, the sort of people who will line up in front of EB Games stores on a chilly evening. Their enthusiasm can bolster a few hits with significant marketing budgets behind them, often at the expense of other games.

"There's just so many choices that things get lost in the shuffle at some point," said Richard Ow, a director of the NPD Group who follows the video game business. "There's limited shelf space and if something doesn't perform, they'll replace it. A game like 'Halo 2' could take the space of three to five other games."

The "Halo" and "Grand Theft" series are still the outsize exceptions--the equivalent of Hollywood's "Star Wars" or "Lord of the Rings"--of a medium that is still maturing. But as video games move into the mainstream, the biggest games are getting bigger.

"We've never had a holiday with two games of this magnitude," said P.J. McNealy, a senior analyst at American Technology Research who follows the games business.

For companies marketing games on more modest budgets, sometimes the strategy is simply to get out of the way. "Publishers with games similar to 'Grand Theft Auto' and 'Halo' moved them to the first quarter," McNealy said. In a report this summer on the games business, a Banc of America Securities analyst, Gary L. Cooper, wrote: "We have very low expectations for games of publishers with less-known brands, including Acclaim, Midway, Atari, Eidos, Vivendi (except for 'Half-Life 2,' if released) and even Microsoft (apart from 'Halo 2')."

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But as many as half of all video game sales in a given year take place during the Christmas season, so a pileup of releases and a fight for shelf space are inevitable. To help "Halo 2" stand out, Microsoft is starting a campaign that includes billboards; commercials on Fox, MTV, SpikeTV, ESPN and others; as well as a movie trailer that ran before "Spider-Man 2."

To generate interest among hard-core games, it offered a glimpse of the game at E3, the annual game trade show that is widely covered by the fan press. Since then, as most game companies do, it has dribbled out details and screen shots to online sites, which post them for fans.

Partly because "Halo 2" has been delayed numerous times, anticipation has built to a fevered pitch. After hearing about it for months, it gets to a point where players just want to take the game home, said Mike Weig, an editor at GamePro magazine.

In August, Microsoft encouraged retailers to begin taking prerelease orders. In late October, the company announced that 1.5 million people had reserved copies by putting down a deposit of $5 or $10. To further court fans, the company is offering those who order the game early a chance to buy for $5 more a "limited collector's edition" packaged in a vaguely military-looking silver package that contains a DVD about the making of the game.

"It's like a director's cut," said Moore of Microsoft. "That's part of the preorder event."

Other publishers have released special editions as well. But lining up to buy a game on the day of release may be more related to what drives people to line up to see a movie after extravagant prerelease publicity.

Quigley of Electronic Arts, said: "Fans want to have bragging rights. And from a customer-demands standpoint, they appreciate how they can plan their lives around this."

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