Nintendo Aims to Zap Its Rivals

The company unveiled its "Zapper" controller at the E3 gathering, but Sony and Microsoft had their game on as well

Nintendo's (NTDOY) Wii has looked like a winner in the latest round of the gaming console wars. So the pressure was on Sony (SNE) and Microsoft (MSFT) at this week's Electronic Entertainment Expo (or E3) to prove that their PlayStation3 and Xbox 360 have plenty of fight left. Both companies needed to pull out the big guns.

Yet it was Nintendo that pulled out the biggest gun of all. At the annual gamers conference, the company showed off a new Wii controller shaped like a ray gun, and tentatively named "the Zapper." The device, which will arrive in stores later this year, looks like a cross between a rifle and a remote. It'll run $19.

Nintendo also unveiled a wheel-shaped controller for racing games, and pressure-sensitive balance board for use with the Wii's hula hoop games, as well as its other sports and exercise offerings. The wheel will be included for free with racing games, while the exercise board is expected to go for more than $50.

Calling All Yoga Fans

Nintendo is clearly betting that it can keep up its momentum with an unusual blend of the electronic and the physical. The Wii's original controller became a hit because it let players swing wildly to smash a tennis ball or delicately tap in a put on a virtual golf green. The new offerings are designed to expand the company's reach with nontraditional gamers, like yoga buffs and other new players. The Wii's appeal with such audiences is one of Nintendo's strengths and a reason it was able to sell more than a million units in the two months it was available last year. (see BusinessWeek, 1/22/07, "Who's Winning the Console Wars?"). "In less than eight months Wii has proved itself the video game system for everyone, and we're not letting up," said Nintendo of America President Reggie Fils-Aime in a statement.

Microsoft and Sony aren't letting up in their efforts either. Both companies arrived at E3 armed with plenty of new reasons for gamers to choose their respective systems.

Microsoft put on the glitz, holding its E3 event at a sunken ampitheater at a Santa Monica high school. Its Xbox console benefits from being the only device that can play some of the most anticipated games this year. Gaming sites have been buzzing about Halo3, the final installment of the popular battle trilogy made exclusively for Microsoft.

Halo3 is scheduled to debut Sept. 25 and should give Microsoft a much needed sales boost. After grabbing an early sales lead by getting to market first, the Xbox 360 suffered from high return rates. On July 5, Microsoft announced it would extend the warranty coverage on repairs and replacements, a move that it said would result in a charge that could total more than $1 billion. (see BusinessWeek, 7/06/07, "Microsoft's Billion-Dollar Fix").

Sony Makes Strides

Sony was no slouch at E3 either. The company began its event at Sony's Culver City, Calif., studios with a presentation from President and CEO Jack Tretton—or more precisely his avatar. The virtual Tretton talked up the company's PlayStation Home, a 3D virtual community similar to Second Life. "The interactive content-sharing features of PlayStation Home, combined with the library of innovative downloadable games and entertainment, truly push the boundaries of our customer's imaginations and deliver on the promise of an integrated content and community service," said Tretton, in a press release. Users will be able to launch multiplayer online games at home, and watch Blu-ray discs.

Sony also unveiled a new game, Haze, which is similar to Microsoft's popular Halo in many ways, including the name.

With the flurry of new games and products, it's not clear which company will be the most successful console maker in the years ahead. Can Nintendo keep up its astonishing momentum? Can Sony and Microsoft fight back effectively? Certainly, the battle will be waged for a long time. Perhaps there's only one clear winner who will emerge from this year's E3: the growing community of gamers.

Before it's here, it's on the Bloomberg Terminal.