They’ve got games

Gaming centers try to cash in on booming industry

Friday, March 10, 2006

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Charlie Shoemaker⁄The Gazette
Michael Feldman (left), president of X3O Gaming Center, and marketing manager Nick Fitzsimmons see the video hangouts as the next big thing. Last year, the video game industry reached $7 billion in U.S. software sales — about double from 1996.

Before a Starbucks appeared on most every corner, people sat around their kitchen tables drinking coffee. Then someone got the idea that an entire industry could be built around the concept that java drinkers liked to be around other people who enjoyed coffee and, well, you know the rest.

Entrepreneurs such as Biju Thomas and Michael Feldman think they are onto something similar, only it’s in the realm of video games. Last year, the industry reached $7 billion in U.S. software sales — about double from 1996, according to the Entertainment Software Association of Washington, D.C.

Worldwide, sales of video games and related services are expected to double to $65.9 billion between 2005 and 2011, according to New York market research firm ABI Research.

Most players glide their fingers through games such as Grand Theft Auto and Need for Speed on home Xbox or Playstation 2 sets. But many also seek a place to test their hand-eye coordination, strategy building, teamwork and other skills against a wider subset. Many want to be around others who enjoy the same pursuits.

And that’s where establishments such as Thomas’ Cyber ConXion in Rockville and Feldman’s X3O Gaming Center in North Bethesda come in.

Gone are the days of the dimly lit video arcades, Thomas and Feldman say. In their place are video gaming centers with cushy oversized beanbag chairs swallowing gamers in front of big-screen, high-definition television sets, each equipped with Microsoft’s new Xbox 360 system. They sell food, energy drinks and computer hardware and software. And they provide services, including computer training, repair and technical support.

‘‘We’re very different from what people think of the average arcade,” said Thomas, 35, who last June opened the 4,000-square-foot Cyber ConXion at 1321-A Rockville Pike.

Cyber ConXion features 30 computer stations, a theater room, four high-definition televisions and a 42-inch plasma TV in a lounge atmosphere. It sells food that is delivered from area restaurants, providing eating space for 20. Employees can repair computers and build custom ones, host private parties and even print T-shirts.

Last May, Feldman opened his 1,400-square-foot X3O down the road a bit at 11640 Rockville Pike. Featuring 23 gaming stations and three high-definition TVs, the center also provides food, energy drinks, computer training and technical support. A pro shop sells competitive gear for hardcore gamers such as special gloves, mouse grips and headsets.

Feldman admits to raising some eyebrows when he first talked about opening the center.

‘‘People would always say to me, ‘I can buy an Xbox and go home and play it, so why would I come to your center?’” said Feldman, 35. ‘‘My response is ... you can buy a six-pack of beer and you can go home and drink that beer, but chances are you’ll go to a bar. Why is that? Because of the social environment.”

A relatively new thing

Before he formed X3O, Feldman traveled along the East Coast to see what gaming centers had already been established. As expected, New York City was a key hub, and there weren’t many in Maryland, he said.

‘‘This is a relatively new thing in the United States,” said Feldman, who grew up in Rockville. ‘‘It’s huge in Asia. There are something like 20,000 centers in Korea and only about 1,000 in the U.S.”

Feldman cited iGames, a Mountain View, Calif., game center organization, for those statistics; iGames listed a few other centers in Maryland, including Cyberden, which opened last month in Columbia.

Thomas, who moved to Potomac from New Jersey as a teenager, co-owns one of the older centers on the East Coast, the 2,000-square-foot Cyber ConXion in Wayne, N.J., which opened in 2002. A 3,800-square-foot CyberConXion — in which Thomas does not have an ownership interest — formed in Pittsburgh in late 2004.

The only video gaming centers on this side of the nation that eclipse his Rockville one in size are in Buffalo, N.Y., and Florida, Thomas said. While Thomas and Feldman declined to release sales figures for their initial years, they said membership — which represents the number of customers, both repeat and one-timers — had grown nicely to about 2,433 and 2,000, respectively.

The gaming center trend has attracted the likes of Nolan Bushnell, the inventor of the classically ancient video game Pong. Bushnell plans to open a restaurant, uWink Bistro, where patrons play video games and order food on consoles at their tables, this summer in California, according to a recent news release.

Some centers have come and gone in Maryland and elsewhere. opened early last year in College Park and received a boost from a lengthy feature in USA Today.

But it closed within five months, with owner Ala Amimi citing factors such as problems with parking spaces and high rent. ‘‘We may come back,” Amimi said.

There is a learning curve for the general public, because many people view video games as mostly violent contests played by younger males, Feldman said. Market research has shown that only 15 percent of the games sold are rated for ‘‘mature” players and 43 percent of the players in the United States are female.

‘‘It’s not an easy business,” Feldman said.

Word of mouth

Word of mouth is the advertising of choice for the gaming industry, Thomas said. Cyber ConXion has a marketing partnership with area stores EB Games and Gamestop.

‘‘We have a very good referral program,” said Thomas, who owned an information technology company before getting involved with the New Jersey Cyber ConXion. ‘‘Anyone that refers someone else gets a free half an hour. Some people have [earned] 10 hours from just referrals.”

The cost of playing the games at the local centers varies from $4 to $6 an hour, based on age and day of the week. All-day passes range from $15 to $25.

Before opening his center, Feldman ran a computer technical support business, X3O Emerging Technologies, that he started in late 2003. He merged the businesses and gets about 50 percent of revenues from the gaming center and the rest from the training and tech support side. Most of the technical clients are individuals, with between 20 and 30 business customers.

Feldman’s goal, and the inspiration behind his company’s name, is a business entity with three divisions — gaming, technical support and training — that will each earn one-third of the revenues.

‘‘When I thought of X3O I thought of a molecule of water,” he said. ‘‘What is it made up of? It is made up of three completely separate entities which come together to sustain each other.”

Being near the White Flint station in a racially and ethnically diverse region will help draw customers, Feldman said. He attracts people from as far as Waldorf, Baltimore and Manassas, Va., who compete not only with other players at the center but online against people from around the world.

Both X3O and Cyber ConXion sponsor tournaments that attract players from out of state and special events. ‘‘We’re very community-focused ... We do camps with the city of Rockville,” Thomas said. ‘‘Every other weekend, we have an overnight party, a 24-hour supervised lockdown.”

Thomas said he hopes to open another center in Northern Virginia and one in either Baltimore or Philadelphia within the next two years. Thomas has an even more ambitious goal of opening six more in the mid-Atlantic region in the next two years, spread out from 50 to 70 miles from each other.

While the U.S. market for moviegoers stagnated in 2004 at about $9.5 billion annually, according to the Motion Picture Association of America in Los Angeles, sales of video games are climbing.

The games are so sophisticated it’s like being in a movie, Thomas said. ‘‘They’re movie-quality productions, and they have movie-quality budgets,” he said.

It’s the growth industry of this century, Feldman said. ‘‘You can sit in front of the TV, which is a passive thing. You can go to a movie, which is not only ridiculously expensive, but most people can bring that into their home now,” he said. ‘‘Or you can go into this world where you’re the protagonist.”

Growth ofvideo games

U.S. computer and video game software sales grew by 4 percent in 2005 over 2004 to $7 billion and doubled the sales in 1996, according to the Entertainment Software Association of Washington, D.C.

In 2005, more than 228 million computer and video games were sold, almost two games for every household in America, according to the ESA.

Women over age 18 represent a larger percentage of gamers (28 percent) than boys ages 6 to 17 (21 percent), according to a survey released by the ESA and conducted by Peter D. Hart Research Associates of the District.

In 2004, 19 percent of Americans older than 50 played video games, an increase from 9 percent in 1999, according to the ESA.