New players join the game: with new contracts from Microsoft, a couple of small Valley-based video game developers may give THQ and Electronic Arts a run for their money.

Ask anyone. For the last year, the only two players in the video game business have been Calabasas-based THQ Inc. and Santa Monic-based Electronic Arts Inc.

But a couple of Valley video game makers, Novalogic Inc. and Tremor Entertainment Inc., who have both signed licensing and partnership agreements with Microsoft Corp. for new console games, may be in a position to make it a small crowd at the top.

"We could be seeing the start of what could be competition for THQ, EA (Electronic Arts) and some of the other game makers out there," said Crispin Boyer, features editor of Electronic Gaining magazine.

"This is an industry where one game can bring phenomenal growth."

Burbank-based Tremor figures to score big with its one new game for Microsoft's Xbox console, Boyer said.

"It could really propel the company into a larger market than it has ever seen before," Boyer said. "The game for Xbox could become big just by the sheer demand for games for that console."

With the Microsoft deal, Tremor, which also develops games for Sega Corp. and Sony Corp., will develop games under its own label for the first time.

Andrea Miloro, vice president of production at Tremor, said the horror-themed "The Unseen" should prove to be the company's most successful game yet.

"The platform is a real attention-grabber and it represents an unbelievable advancement in terms of graphics, which is what this game shows," she said.

Boyer, who has seen a game demo, agreed.

"It looks like it will be a big seller, just from the looks and feel of the game," he said.

Under the deal with Microsoft, the company will receive $4.5 million for developing the game, expected to be ready next year, plus royalties figured on a per-unit basis.

But more importantly, Tremor will develop other games for that platform which could be ready by 2003 or 2004.

Last year, the two-year-old company lost $321,883 on revenues of $1.7 million, compared to a year earlier when it lost $351,099 on revenues of $1.2 million.

John Black, a fund manager with Spellman Investments Inc., said, if "The Unseen" develops into the major hit many expect, it could be the franchise Tremor needs to propel itself into a league with THQ and EA.

Black said, as the video game market continues to grow, now-small companies like Tremor could grow rapidly without significantly impacting game makers like THQ and EA, which produce games based on wrestling, sports and popular films.

"They can cater to people who like horror and still find a big audience in that realm," he said.

Calabasas-based Novalogic is banking on its new "Delta Force Black Hawk Down" game for the Xbox to fuel its push into the console market.

The maker of PC-oriented games is moving into consoles for the first time and its president, Lee Milligan, projects improved revenue for the company as a result.

"Obviously, we believe the game is a breakthrough product for us, and the graphic flair and overall structure of the game is going to make it a top title," he said.

The game is an extension of the company's popular "Delta Force" PC series, its biggest seller so far.

Novalogic's "Delta Force 2" game, for instance, was so realistic that the U.S. Army adopted it in 2000 to train soldiers in using battlefield communications systems.

The privately held company, whose revenues last year were about $10 million, according to Electronic Gaining Magazine, could see a 30-percent revenue jump due to the new Xbox Delta Force game, Milligan said.

Milligan said the slow growth in PC games forced the company to consider a move into the popular Xbox console after it licensed its Delta Force game to Rebellion, a British game maker last year, which developed the popular "Delta Force: Urban Combat" for the Sony PlayStation.

But developing such high-end games means higher costs for more sophisticated graphics and more realism.

Already, the company is considering developing games for the Nintendo Co.'s GameCube, but no decision has yet been made.

Likewise, Tremor has begun assembling a second team of game designers for a next-generation series of yet-untitled games geared for the Xbox, while its current designers complete work on "The Unseen" game.

"If Tremor sells just 100,000 of those games, they'll have a hit on their hands, but they'll probably sell a lot more than that," Boyer said.