Web Games Threaten the Console

The annual Electronic Entertainment Expo is supposed to showcase the video game industry at its most dazzling. This year's E3, held in June in Los Angeles, felt more like a throwback. Taking center stage was the Wii U, the upcoming successor to Nintendo's game console, and the PS Vita, a new handheld gaming device from Sony (SNE). Major game developers showed all the daring and originality of Hollywood, touting sequels to sequels such as Gears of War 3, an eighth Call of Duty, a new Tomb Raider and, yeah, even a game called Donkey Kong Country Returns.

Amid the new hardware and endless franchise extensions at E3 was also something else—a glimpse into a future in which the 40-year-old console business slowly dies, and even hardcore gamers spend most of their time playing games over the Web. Hot gaming startups such as Zynga, maker of social games FarmVille and CityVille, and mobile phone game makers such as Rovio (Angry Birds) were mostly absent from the show. But there were other publishers and distributors of online games, which now feature all the action and graphical richness of traditional shoot-em-ups and strategy games. Their pitch: games that constantly update online, stream into the home, and free users from having to head to the nearest GameStop (GME) to get their fix.