Game Time for Sony, Nintendo, and Microsoft

The Big Three peel back the curtain on their latest round of their next-generation console war

For one, it was news of exclusive access to the controversial, runaway hit game Grand Theft Auto. Another offered the surprise unveiling of its classic game controller -- with an unusual twist. The third demonstrated its tiny controller being used as a baton to conduct an orchestra, a tennis racket in a doubles game, and a steering wheel in a racing game.

These are the latest weapons in what's expected to be a bruising battle for dominance of the multibillion-dollar computer-game market in the next few years. Sony (SNE), Nintendo, and Microsoft (MSFT) took the wraps off their defenses on May 8-9.


  The media briefings before and during Electronic Entertainment Expo, or E3, which runs in Los Angeles May 10-13, are watched closely for clues to the tactics that technology and traditional consumer-electronics makers will employ to gain control over your living room.

The Big Three console makers did not disappoint. Nintendo is betting it can create games using a controller that looks like a TV remote. The goal is to make the game play itself interesting and different enough to entice core gamers and people who may never have played a game in their lives. "Playing is no longer just about the looks, it's about the feel (of the game). We're not looking for the next generation of gaming, we're looking for the next leap in gaming," said Nintendo Executive Vice-President Reggie Fils-Aime.

For its part, Sony's PlayStation 3 aims to be the most powerful game console on the planet, with a next-generation DVD player for high-definition movie playback thrown in as a bonus. Company execs promise their console will run circles around the competition, though they may be hampered on the content side as developers make better-looking and better-playing games in Microsoft's second year on the market.


  And, highlighting the increasing emphasis that Microsoft, in Redmond, Wash., is putting on gaming, Chairman Bill Gates made his first-ever E3 appearance. He outlined his vision for how the company's Xbox 360 console will seamlessly connect to personal computers based on Microsoft's next-generation operating system, Windows Vista, as well as Windows Mobile cell phones. Users will be able to transfer game content among the three systems. "Microsoft is probably the only company on the planet that can pull this off," Gates said.

The game now is Microsoft's to lose. Xbox 360 debuted last November, but its launch was hampered by a weak game lineup and production snafus. Even so, Gates said, Microsoft expects to sell 10 million consoles before Sony rolls out PlayStation 3 and Nintendo debuts its Wii console, both expected in November. The software maker has a shot at doing just that, thanks to a surprise deal where game developer Take-Two Interactive (TTWO) will sell Grand Theft Auto IV, the next installment of the blockbuster game, on the Xbox 360 as well as PS3 beginning in October, 2007.

Such news puts increasing pressure on Sony, which has been seen as the main competitor to Microsoft for the title as top console maker. The PS3 will debut a year after Xbox 360 and be priced at a console-record $499 and $599, depending on the size of the hard drive.


  Sony until now has dominated the games industry, but the PS3, even at its high prices, is expected to be a financial drain on the company because it includes the next-gen Blu-ray Disc player and other early, expensive technologies.

Trying to strike a middle ground between Microsoft and Nintendo to entice a mainstream audience, Sony Group President Ken Kutaragi at the company's May 8 media briefing unveiled a surprise of his own. In a nod to Nintendo's strategy, Sony announced it will add motion-sensor chip technology to its game controllers that will let players use gestures instead of their thumbs to move around on the screen in some game play. "I'm looking forward to seeing some exciting game applications and innovations with this controller," Kutaragi said.

The move stole thunder from Nintendo's decision not to develop high-priced hardware in favor of its innovative remote-like controller. Nintendo aims to make games easy to use for everyone, with the controller as the centerpiece of that strategy.

Nintendo President Satoru Iwata made the best of Sony's surprise move by pointing out that games using such technology for the Nintendo system are much further along in development, with more than a dozen titles expected to use it at launch this fall.


  Even so, Sony may have delivered enough punch to dent Nintendo's risky strategy, says electronics industry analyst Richard Doherty at researcher Envisioneering Group. "It's going to be a challenge for Nintendo because the PlayStation 3 now may have greater appeal to the same older people and non-gamers Nintendo is going after," he says.

With all the maneuvering, the showdown on retail shelves this fall may be won or lost on pricing and availability of console and content. Internet message boards lit up with gripes from fans after Sony execs unveiled their pricing structure, confirming longstanding rumors that the PS3 would be the most expensive console ever. The less tech-laden Xbox 360 sells for about half the price, and pundits believe Nintendo may try to undercut both its competitors when it releases a price later this year.

Now that each side has revealed a raft of secret weapons, expect a marketing slugfest over the next six months as they take their battle to the moms, dads, and young adults looking to satisfy holiday wish lists. With billions in development costs to recoup, it's going to be a hard-fought tussle -- and a victory for only one.