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April is the coolest month for video game sales.

Sales of the U.S. video game industry grew at a red hot 47 percent in April to $1.23 billion, up from $839 million a year earlier. Brisk sales of “Grand Theft Auto IV” at the very end of the month helped drive sales upward despite a recession that has hurt consumer spending in other areas, according to market researcher NPD Group.

Year-to-date sales are up 31 percent over a year ago at $5.47 billion. During the month, hardware sales grew 26 percent to $426.2 million, software grew 68 percent to $654.7 million, and accessories grew 39 percent to $154 million.

The console war saw little change. The Nintendo Wii sold 714,200 units, more than its rivals combined. The Microsoft Xbox 360 edged out the PlayStation 3, selling 188,000 consoles compared to the PS 3’s 187,100. The PlayStation 2 sold 124,400. In portables, Nintendo dominated with the DS selling 414,800 units versus Sony’s 192,700 for the PlayStation Portable.

Microsoft announced yesterday that it was the first console to hit 10 million consoles sold in the U.S., but analysts shook it off as an irrelevant number, since unit sales of the Nintendo Wii have dominated worldwide sales. More significant, however, is that Microsoft says Xbox Live membership has now topped 12 million worldwide. And to date, consumers have spent $9.7 billion on Xbox 360 overall to date.

Anita Frazier, an analyst at NPD, said that normally at this stage in the hardware cycle, more sales should be coming from hardware. But software sales were hot thanks to GTA IV and other big games. The pipeline of content continues to look good, with big games coming on all the consoles. Read the rest of this entry »

Call it Funware. That’s the name for applications with game-like mechanics and game-like behavior that really aren’t traditional video games. And Funware just might steal the thunder from video games, which may no longer have a monopoly on either interactivity or fun.

With new places to play — such as the iPhone, on Facebook, or even with Google mash-ups on personlized web sites — web-based social interaction is changing the way that many people entertain themselves.

While the term may be new to you, you can readily grasp it, particulary if you’ve heard the phrase, “Facebook is a game.” Tossing sheep at your friends on Facebook certainly qualifies as Funware. So does competing to get more followers on your Twitter account than your friends. And so does filling out your profile details on LinkedIn, the professional networking site that gives you a little reward if you fill out the otherwise tedious online form in full.

The name “Funware” was coined by that Gabe Zichermann, CEO of New York-based start-up rmbr, to classify his own company’s photo-based fun application. Funware examples are proliferating, giving Zichermann plenty to blog about. But he’s not the only proponent of this new kind of threat to traditional web sites and game companies alike. In a recent panel discussion of the subject at the Web 2.0 Expo, the panelists concluded that Funware is something every social media and gaming company should embrace.

“Unequivocably, for the first time, games have direct competition for user time,” Zichermann said in an interview. “Until now, we’ve been [like] Pac-Man eating the cherry of television and the printed word. Now, a new type of application has emerged that, in the long term, could be more engaging and sticky than what the game industry produces.”

Zichermann, who posted his first Funware title today at rmbr,  has a vested interest in espousing this view that game companies are lagging on Funware, as he plans to raise money soon for his own Funware company. But he has a decade of experience in games (he was founder of game downloading firm Trymedia, which Real Networks bought) and so he has some credibility in claiming to be ahead of the curve. And other industry veterans back him up.

Funware includes applications such as eBay, which made it fun to earn rewards as a competitive buyer or seller on its auction site. The term may also be applied to alternate-reality games such as “ilovebees.com,” where masses of players collectively solved a mystery about an invasion of earth. The site I’m in like with you uses game-like behavior to radically reshape a typical dating application.

The Google Image Labeler, created by Carnegie Mellon University researcher Luis von Ahn, is built around an “ESP” game where two people try to simultaneously label an image and, without being able to communicate, try to come up with the same label for the image as the other person. If they correctly identify a person in a picture as a man, they can get some points; but if they correctly identified the man as Bill Gates, they would get more. The game helps Google improve the accuracy of its image searches.

Flickr traces its origins to game industry veterans Stewart Butterfield and Caterina Fake, whose team stumbled upon photo-sharing while they were trying to make a game. Bunchball has made a tool, dubbed Nitro, that makes web sites more engaging by instilling them with reward-based activities. Entellium has built game principles into its customer relationship management software and Seriosity has a game-like email program.

One of the ominous things for the video game industry is that almost none of these Funware ideas or businesses have come from game companies, which are now failing to catch on to an expansion opportunity. It’s an odd situation, given that game designers are the ones who best understand how to keep consumers addicted, Zichermann says. What’s more, it’s possible that social networks that use fun game mechanics may actually be robbing games of their audiences, he adds. Read the rest of this entry »

It’s a big day in video games.

Take-Two Interactive said worldwide sales of Grand Theft Auto IV have surpassed $500 million in its first week on the market. More than 6 million games have been sold at a retail value of at least $60 a copy. And id Software announced “Doom 4.”

On its opening day, GTA IV sold 3.6 million units with a retail value of $310 million. Strauss Zelnick, chairman of Take-Two, said in a statement that the game made entertainment history, surpassing the first-day sales of any music title or movie or game.

Microsoft claimed the same thing with the launch of “Halo 3″ last year, a game that sold more than $300 million worth in its first week and $170 million in the U.S. alone in its first week. But that game was notably available only on the Xbox 360, while GTA IV is selling on the Xbox 360 and the Sony PlayStation 3.

From a business view, such sales are astounding and they suggest that the hardcore market for gamers is healthy, regardless of the shift toward casual titles on the PC and the rise of the Nintendo Wii, which appeals to broader audiences beyond young male gamers. GTA IV represents the high tide of the crowd that loves to kick back, defy authority, and play extremely violent crime games. The resiliency of this franchise is amazing, given the U.S. and other parts of the world are stuck in a recession.

That’s great news for Take-Two and its Rockstar division that launched the game. It might force Electronic Arts, which has made a hostile bid for Take-Two, to rethink its $26 a share, or $2 billion offer. Analysts have said that GTA IV sales are baked into the current Take-Two stock price (TTWO: $26.26 today) ; but on the other hand, some analysts have increased their estimates for Take-Two in the past week or so based on higher expectations for GTA IV sales.

Meanwhile, id Software of Mesquite, Texas, announced that it is working on “Doom 4,” the latest series in another high-octane billion-dollar franchise in the video game industry. Judging from past hits, the next Doom game should push the bleeding edge graphics to a new level and present a test as well. Gamers are getting increasingly picky about their games. GTA IV has upped the ante for expectations of a great game. Read the rest of this entry »

I made a trip to the local Game Crazy store at midnight to pick up a copy of Grand Theft Auto IV for $60. There were 39 people in line, including a few under-age kids who got stopped at the door because they weren’t old enough to buy the game. There was a lot of bluster, as we waited in the cold. One guy said he heard they were going to sell 9 million copies. Another said he wouldn’t go to the bathroom until he was done. We previewed Take-Two Interactive’s GTA IV here.

The video game “Grand Theft Auto IV” is likely to be a cultural, business and technological milestone.

The game targets 18-34-year-old males who are hardcore, or play a lot of games all of the time

I’m on the hardcore fringe, part of the aging male demographic — and so not really part of the target group. I’m also wary of the violence and sexual material for which GTA games are known (more on this in a sec).

So I guess it speaks volumes then that I am ready to play this game. I think GTA IV is going to define state of the art for the leading edge video game business.

In the past, I have drawn the line at playing bad guys in crime games. I just didn’t get a thrill out of playing games where I don’t have much choice but to kill cops and score with prostitutes. I’d rather be a hero, not an anti-hero. Maybe there is a generational gap between people like me — who grew up with the innocence of Pong and graduated to opera of violence in “Call of Duty 4: Modern Warfare” – and those youngsters who grew up with the sex and gritty street violence of the GTA series. In the past GTA games, you could do anything. They had open worlds where you could explore, wander, and discover. But it wasn’t fun unless you were bad. Nolan Bushnell, the father of video games, shares this opinion that video games lost a lot of their audience and innocence when they took a turn toward violence. We can blame Rockstar Games, the company that developed GTA, for being part of an industry where game companies constantly try to one-up each other, resulting in a race toward new lows.

The newest GTA IV game from Take-Two Interactive’s Rockstar could be one of the most controversial of all time, igniting a culture war that will play out in our political campaigns and courtrooms (sites such as GamePolitics.com write about it almost every day). Don’t even think about giving it to your kids unless you think that cold-blooded murder is good for them. Florida attorney Jack Thompson has already succeeded in getting public transit ads for GTA IV pulled in Miami and Chicago. Thompson has battled Take-Two for years on whether its violent games cause school shootings and whether the company intentionally targets its mature content at kids. The company says its games are mature entertainment targeted at adults.

Yet, either because of the controversy or in spite of it all, GTA IV is expected to be one of the best-selling games ever. Game sites such as IGN.com have given GTA IV a perfect 10 out of 10, an unprecedented game rating. On average, GTA IV has scored 99 percent on the Xbox 360 on GameRankings.com, which aggregates critic scores, and a perfect 100 on Metacritics.com. Microsoft’s “Halo 3,” which sold eight million-plus units since the fall, scored 93 percent on GameRankings.com and 94 on Metacritics.com.

The Nintendo Wii has taken the gaming market by storm with its much more casual fare that is fun for families and other gamers to play in a light social setting. GTA IV is more for the lone gamer who plays in the dark. But with sales projections so high, this game is a test as to whether the hardcore gamers — including the aging Pong veterans like me who only have a little time to play — are ready to strap on their six-shooters in such numbers to prove that hardcore gaming is still a mass market.

For business readers, this game is even more interesting because it has sparked a hostile takeover bid by Electronic Arts, which has offered to pay $2 billion for Take-Two. In the first two weeks alone, it could sell 5 million copies at $60 a piece or more on both the PlayStation 3 and the Xbox 360, according to analyst Colin Sebastian of Lazard Capital Management. Worldwide, he expects it to sell 8 million to 12 million. That’s as much as $720 million in sales at retail.

That leaves me in a quandary. Call me high and mighty, but in the past I just didn’t like GTA. I like to play the “good guy,” even though I understand that a whole lot of parents and peace lovers out there feel like there is no such thing in a violent video game. GTA pushes my buttons the way it does with the anti-violence crowd, but for different reasons.

I’ve lost a member of my family to gun violence. It was my one and only brother. And, I tell ya, the experience stinks. It was a long time ago. When that happened, I never really thought I would play violent games again. I was more likely to join the censors, anti-violence child advocates, and lawyers looking to blame school shootings on violent video games. And I remain appalled at the celebration of street violence that brings pain to so many families.

Somehow, though, I started to rebuild barriers in my brain that distinguished between fantasy and reality. I started playing military strategy games, enjoyed real-time strategy games such as “Age of Empires,” where the amount of blood in the game was miniscule and was hardly gratuitous. My tastes evolved as games did. I was enthralled with the march of 3-D graphics in the past decade. Graphics realism seems like it has no bounds, contributing to the rise of companies such as Nvidia and the allure of increasingly realistic 3-D worlds in games like the “Halo” series. I anxiously await the day when you can’t tell the difference between fantasy and reality. Over time, I have retrained my brain to realize that, after all, this is just a game.

The total recovery, or perhaps relapse, of my hardcore gaming habits became complete with the launch of Infinity Ward’s Call of Duty 4: Modern Warfare game last fall. The game’s graphics are outstanding and you really get the feeling that you’re part of a crack team cutting down scores of enemies in modern-day landscapes in the Middle East and Russia. Games are almost at the point where we can’t distinguish the realism of the violence and the characters from movies or real life. But the game didn’t make me feel besotted in any way. It was respectful of the sacrifice of soldiers. It had the highest production values I’ve seen in a game. And I still got to play the good guy, saving the world from terrorists. I’ve played little else in the past few months. On multiplayer, I am now a Colonel I rank on Call of Duty 4.

As a gamer, I’ve felt like I have still had some innocence left in me. Sure, I played other gritty crime games — clones of the GTA-style open worlds — where you could do a lot of bad stuff. “Saint’s Row” from THQ was one of those. But I didn’t really enjoy running down innocent civilians with cars, killing prostitutes at point-blank range, or mowing down gang members. It just wasn’t that fun. I wrote about my personal stand on playing only good guys in the past. I articulated it in one of the finest documentaries ever done on video game violence, Spencer Halpin’s “Moral Kombat.” I can deliver a powerful and personal message about video game violence. I don’t belong in either the pro-game or anti-violence camp.

But that brings me to another branch in my emotional evolution as a gamer. Grand Theft Auto IV promises to be such a crowing achievement in video games that I am prepared to play it with the same relish as any 18-year-old kid who doesn’t give a second thought to issues that give me pause (even if I have a sense of guilt because of my personal experience). Read the rest of this entry »

Dan Houser is one of the rockstars at game development house Rockstar Games, which makes the controversial Grand Theft Auto game series.

The game is known for pushing the envelope on things like violence and sexually explicit imagery.

The Manhattan-based subsidiary of Take-Two Interactive will be the magnet of attention again during the next week as it launches the new title in the raunchy yet humorous GTA series: Grand Theft Auto IV.

Here’s an enlightening interview by Variety’s The Cut Scene with Houser on the making of the new title, which debuts for the PlayStation 3 and Xbox 360 on April 29.

Houser rarely gives interviews but talks about a wide range of topics from “sex and violence” to why he considers GTA IV to be the first truly original game in the series. I find it interesting what he doesn’t talk about: namely, the Electronic Arts offer to buy his parent company, Take-Two Interactive. Clearly, he considers himself an artist whose main occupation is creativity, not controversy. And his measure of success isn’t business but how a game takes root in the cultural fabric. Meanwhile, here’s a link to a GTA IV multiplayer preview.

I sat down at the noisy THQ Gamer Day party to speak with Bob Aniello, the senior vice president of worldwide marketing at the Calabasas, Calif.-based video game company. THQ has become a powerhouse over the past decade as it expanded into a variety of new markets, from casual games on consoles to mobile phone games. Its titles include games based on Pixar’s animated movies such as “Cars” and “Ratatouille,” as well as hardcore games such as “Company of Heroes” and the upcoming “Darksiders,” pictured here.

Aniello has some choice words about all of the casual game start-ups being funded, Hollywood studios moving into games, and his bigger competition, Electronic Arts and Activision Blizzard.

Q: I’m seeing so many casual games start-ups coming out of stealth. There are two or three a week. They’ve been funded by angels. Why is this happening?A few years ago, there were 100 mobile companies. Does it make sense to you?

A: We are very active in the casual games area and have a casual games group. Whether you are talking about the Nintendo Wii, the Nintendo DS, or casual games on the online PC, we’re seeing it explode. When you say the word “casual,” it can mean a lot of different things. We see a broadening of the gamer base. More females. They are up to 20 percent of the total gaming population. Going back a long way, that was something we always dreamed about (Editor note: yeah, remember how guy gamers couldn’t get dates?). Kids are gaming at younger ages. That’s opening a lot of opportunity in casual games. How many should there be? It should probably end up like mobile. There will be consolidation. There will be companies that are aggregators and those that create content.

De Blob (pictured, for the Nintendo Wii) and Construction Combat: Lock’s Quest (for the Nintendo DS) for us came from small indie development. We pay a lot of attention to the indie community. When we see something good, we grab it and blow it out across a lot of platforms. So we have to partner with those who make the great games.

Q: These casual start-ups are more like social networking sites, with games added. They would fit better with Facebook than with console game companies.

A: We’re seeing an explosion of community on console too. The whole community aspect is not limited to online, though online PCs have better functionality now than console online games.

WWE (pictured) is a fantastic example of community build around our games. What has been absent for a long time is that communities are now forming around games. Like Guitar Hero. We see that trend as platform agnostic.

Q: There are a lot of companies doing Facebook games. Is that attractive to you? Electronic Arts’ executives had a lot of slides with Facebook logos on them. It suggests there is value in getting their brand in front of Facebook users or getting them to play games on Facebook.

A: Facebook is a multiplicity of communities. We partnered with Oberon, which is doing light games on Facebook. We are making (retail) games of the Oberon titles that appear on Facebook. We are attacking that opportunity in a much more traditional way. It’s really about being platform agnostic. Read the rest of this entry »

Here’s the latest action (updated):

Struggling cell phone manufacturer Motorola announced it would split itself into two different companies. Under pressure from activist investor Carl Icahn, the company will divide itself into a cell phone company and a company with broadband and mobility equipment operations. The latter firm would create infrastructure equipment for wireless networks as well as build television set-top boxes. The company had said in January that it would consider a breakup, mainly since its stock has plunged in the past year amid loss of cell phone market share to Nokia, Samsung and Apple.

Comcast and Time Warner are talking about a joint venture in WiMax wireless Internet technology. The Wall Street Journal reported that the cable operators would diversify their business by setting up a WiMax company operated by Sprint Nextel and Clearwire. Under the plan, Comcast would invest as much as $1 billion in the venture while Time Warner Cable would contribute $500 million. Bright House Networks, the sixth-largest cable operator, would contribute $100 million. Gigaom called it the $3 billion WiMax Rescue Act. They’re plowing forward in spite of questions about the technology, including a failed trial in Australia.

Take-Two formally rejected an offer from Electronic Arts. As expected, the beseiged video game maker rejected EA’s $26 a share, or $2 billion, tender offer. Take-Two, the maker of the upcoming game Grand Theft Auto IV arriving in stores April 29, also amended its proxy statement to adopt anti-takeover measures such as a stockholder rights plan.That sets the stage for a grueling battle with EA, which could nominate its own slate for Take-Two’s board.

Yahoo! joins Open Social Alliance led by Google. The Internet company said that the move will make it easier for programmers to write software that can run on the pages of many social networks and other web sites. Meanwhile, David Morin, senior platform manager at Facebook, reiterated at the Snap Summit 2.0 conference that his company isn’t joining Open Social now but isn’t against it in principle. Google said Tuesday it would give up control over the alliance and turn it over to the nonprofit OpenSocial Foundation.

Facebook confirmed it lured away another Google executive. Ethan Beard, former director of social media at Google, will join Facebook. He’s the second high-profile executive to leave Google this month. Facebook now has more than 500 employees.

$19 billion deal to privitize Clear Channel Communications nears collapse. The Wall Street Journal reported that the private equity deal is a victim of the credit market crunch. The leveraged buyout apparently is imploding as private equity firms and banks failed to work out differences over financing terms.

Imeem, the playlist company, opens up its platform — The company has opened to third-party developers, giving them tools to integrate their applications into Imeem. Imeem says calls itself the third largest social network, with more than 24 million unique visitors a month, though its users are mostly checking out each other’s music, and its not considered by most to be a full-fledged social network. The API lets developers access its users’ music tracks, which is a powerful thing because Imeem lets users run complete tracks for free (it got rights to do this from labels, after Imeem said it wanted to try an ad-based model). Developers can also access any videos and photos on imeem, access the social graph of users, modify the metadata for the content and customize the imeem video player.

A week after Electronic Arts hired an outsider for its No. 2 job, the video game giant announced that its chief financial officer Warren Jenson is resigning.

Jenson, 51, had worked at EA for six years. In a statement, he said, “It’s time for me to write the next chapter in my career.” EA said it would be announcing a successor to Jenson shortly.

On the surface, this move isn’t hard to interpret. Last week, EA CEO John Riccitiello announced that he was going outside the industry to hire John Pleasants as his chief operating officer and president of global publishing. Pleasants, the former CEO of Revolution Health Group, had no experience in the video game industry. If I were Jenson, I wouldn’t like being passed over for such a job, particularly since the one who beat me out won’t have much to contribute to EA for months.

Jenson joined EA in 2002 after working as the chief financial officer for Amazon.com for three years. He will stay on EA’s board to assist with the year-end closing and to help with the CFO transition.

EA is in the midst of a hostile takeover bid for Take-Two Interactive. It has offered $2 billion to take over the publisher of games such as the upcoming Grand Theft Auto IV. Given the sensitivity of the timing, I’m not sure I would call Jenson-Pleasants a fair trade. Jenson is an experienced game industry executive.

You could say that EA’s financial performance hasn’t been stellar in the past few years. But that’s not necessarily something you lay at the feet of the CFO. EA already had a change in management — Ricitiello came aboard as CEO just a year ago, replacing Larry Probst — to address the performance problem. But as EA navigates turbulent waters, I would rather opt for someone with experience.

Update: EA spokeswoman Holly Rockwood said that the COO job has been in plans since Riccitiello came on a year ago. She said that Jenson had never been mentioned in the past as a candidate for that job. She also said that Jenson is support of the Take-Two bid and his departure has no bearing on the bid, which will continue.