The second quarter started with some slick news for gamers: A new Def Jam title, hints of a "sexier" PS2 in the works, and a study that concluded that surgeons who play video games make straighter incisions and generally perform better under the bright lights of the operating room provided a lift in the early part of the quarter.

In the months leading up to E3, the industry seemed to further wake up from its slumber. Nokia did its darndest to reinvigorate N-Gage sales with a new model, Ubisoft strutted its stuff with the majors and announced a deal with Universal to bring King Kong to gamers, and Capcom excited gamers with news that a sequel to Viewtiful Joe was coming for the GameCube and PlayStation 2.

"Nice incision, Frank. You up for some Xbox Live after we clean up?"

Other industry news was a mixed bag. Midway began its acquisition binge with the purchase of The Suffering's Surreal Software. Meanwhile, LucasArts fired a slew of employees and then revamped its executive suite with the appointment of a new president, Jim Ward. At E3, Sega surprised many with news it would publish The Matrix Online--though the news wasn't as big as some had hoped. E3 also saw the formal unveiling of both the Nintendo DS and the Sony PSP, whose rivalry would increase as the year progressed.

Unsurprisingly, money was at the core of much of the news generated this quarter. Mobile game publisher Mforma was giddy with the news that it had raised $44 million from the venture-capital community, and Sony was busy counting the take from having sold its 100-millionth PlayStation. Unfortunately, the cash wasn't enough to keep the company in the business of publishing sports titles: 989 Studios formally exited the sports game fray by ceasing development of its football and basketball games.

Sega and Take-Two tried to tackle EA's football crown with a $19.99 ESPN NFL 2K5. Little did they know...

Indeed, the sports genre was an unexpected source of drama this year. Microsoft's Q1 announcement that it was "resting" its XSN games was followed by an E3 announcement that EA Sports would support Xbox Live for the first time. This, unsurprisingly, led to a Q3 announcement that said the "rest" would be permanent for most XSN developers. Then, just before Christmas, it got out of the sports game altogether, selling the internal studio behind Amped, Links, and Top Spin to Take-Two Interactive.

But the real news came in Q2, when Sega startled the industry by announcing that Take-Two would copublish its long-standing sports line, ESPN Videogames. At the end of June came an even bigger shocker--that ESPN NFL 2K5 would only cost $19.99. With ESPN NHL 2K5 and ESPN NBA 2K5 following suit later in the year, the announcement set off a months-long offensive by ESPN for EA's sports crown, one of the prime factors in the top third-party publisher's record-breaking $2.96 billion in revenue. The struggle between the two would take several sharp turns throughout the year, ending with a most shocking conclusion.

April Electronic Arts president resigns John Riccitiello relinquishes the reins of industry's biggest publisher to start a "private equity business." Nokia unveils new $99 N-Gage The N-Gage QD drops MP3 and triband phone support to produce a cheaper, more usable device. Electronic Arts reports $2.96 billion in revenue Thanks to The Sims, FIFA, Madden, Need for Speed, and The Lord of the Rings franchises, the world's biggest publisher had a record-breaking year. THQ to acquire Relic Entertainment THQ announces that it has entered into a definitive agreement to acquire the developer of Warhammer 40,000: Dawn of War. Rumor of the Month Sega getting back into the console business? That's what was suggested by the vaguely enticing pre-E3 pitch to journalists: "Learn about Sega's 2004 lineup and hear big news you'd never guess," read the invite. Turns out the "Segaton" was only an E3 announcement that the company would publish The Matrix Online.

May 989 Sports benches football and basketball franchises Sony's first-party sports development house announces that NFL GameDay, NCAA GameBreaker, NBA ShootOut, and NCAA Final Four will sit out the 2004-2005 season. PlayStation 2 reduced to $149 At Sony's E3 event, Kaz Hirai announces that Sony's console will now be the same price as the Xbox. Nintendo unveils DS, new Zelda at E3 The hotly anticipated handheld will ship with Wi-Fi, Bluetooth, and strong third-party support, and the widely beloved game franchise will get two more installments. 100 million PlayStations sold Sony's first foray into the console arena hits a McDonald's-worthy volume milestone. Rumor of the Month The film rights for Grand Theft Auto have been bought by DreamWorks, or so it said on Ain't-It-Cool-News. We sniffed around the secured a denial from Rockstar. But after digging deeper, we weren't so sure. Until the AICN page was suddenly wiped from the Web.

June Interplay offices closed by state officials California labor investigators shut down the publisher--something CEO Herve Caen disputes. Take-Two announces Sega ESPN deal Take-Two signs copublishing and exclusive worldwide distribution deal for all of Sega's ESPN-branded sports games. Iwata names next Nintendo console Satoru Iwata promises that Nintendo's next console, code-named Revolution, will deliver new ideas for entertainment. ESPN NFL 2K5 officially $19.99 A new budget price for the latest installment in Visual Concepts' acclaimed football franchise is announced. Rumor of the Month When Atari boss Bruno Bonnell talks, people listen, so when he commented in June that the then-upcoming PSP would cost $500 at launch, we perked up. After soliciting a "no comment" from SCEA reps, we deemed it "bogus," and were validated later in the year.

Next: Year in Review 2004 Q3 >>