This is E3 week which is interesting because most of the folks I’m watching on Twitter during the event seem to be more interested in the inability to pre-order the new 4th generation iPhone.
I think this speaks to a serious problem with gaming in that the buyers seem to be losing interest in the traditional approaches and are increasingly looking at multi-function products like the iPad and iPhone for their entertainment needs.
Ever since Apple started targeting games the gaming industry has been anemic. Typically, when an industry faces an outside threat, like the one Apple represents, the competitors in the industry band together on common themes to combat this threat.
That isn’t happening here.
Apple’s threat is a universal product that can provide all of your entertainment needs, including gaming, wherever you are. However, with compelling enough products, existing companies can hold off a threat like the one Apple represents. I think Microsoft owned the battle of the press events at E3 by the skin of their teeth but that Apple likely is the true winner of the event.
Let’s explore that this week.
Each of the vendors showcased compelling new games and games drive the sale of consoles. The combination of high profile games like Halo Reach and availability in the current year went to Microsoft early on and they seemed to hold this lead throughout the major launches.
They were the only one to refresh their console at E3 their new offering looks modern and fits in with current generation TVs than the other players. This game update was Microsoft’s "one more thing" at the show and, in my view, it did a better job of filling that role than the crippled video conferencing application that Apple showcased at their iPhone launch.
The big hit was Kinect and this was a hit with the audience, however Sony apparently saw the videos and was prepared to strike back. We’ll get to Sony’s response in a moment but Kinect was the early hit of the show allowing a full body motion capture similar to what they do for new generation animation movies but you are in the movie.
On media, they did integrate the Zune with the Xbox and create a more compelling music and movie experience in a solid shot at Apple’s core without actually mentioning Apple. Zune gaming is still light however and wasn’t really discussed at the event.
Nintendo also led with games but there was no new console and no new controller for the Wii. They focused on the 3D capability of the 3DS however and appeared to be the only one of the players taking Apple on directly in gaming with this offering.
Given the 3DS plays to a relatively young audience and parents will likely be reticent to pay for an iPhone, iPod Touch, or iPad for this audience the moves with the 3DS could be effective at holding off sales losses in this young group.
The Wii is known for its sports games but Nintendo seemed to focus more on action titles which fall into Microsoft and Sony’s areas of competence. This, coupled with a lack of anything really new on the Wii, suggests that this console will fall off in favor of the other platforms. So, a solid hit against Apple, albeit in a market that Apple doesn’t care about much, and a miss against Sony and Microsoft.
Sony started light with games that won’t make the 2010 cut. I think this is a mistake because it sends the initial message that Sony won’t be competitive this year. This is likely because they too had a focus on 3D and good 3D console games won’t be coming until next year or until there are enough people with 3D sets to play them.
This may be a repeat of the mistake Sony made with Blu-Ray where they tied the console to this emerging platform which made the initial PS3 too expensive and knocked them down from 1st to 3rd place in just a few months.
They pulled an Apple however when they spoke about their Motion controller and took solid shots at both Microsoft’s Kinect and Nintendo’s controller.
On Kinect, they pointed out the need for a button, something that has bothered me a bit with Microsoft’s approach, and on Nintendo the lack of precision and range of motion. I thought this was well done and showcased the advantage of going last in that you are then free to take solid shots at what your competitors have focused on.
PSP coverage seemed to be light and the PSP overlaps with the challenging Apple products sharply, unlike the DS. I see this as a much more competitive choice and it didn’t feel like Sony stepped up to it with the PSP and the full power of the PS3 is gated by 3D TV roll outs.
3D gaming on TVs I think is vastly more compelling than 3D movies because 3D movie titles will be few and far apart and 3D games should come faster, plus you don’t get killed by the cost of the glasses if you just buy one pair. So, Sony’s 3D push could help 3D TVs a lot but it will also slow PS3 sales. Kind of a smaller repeat of what happened with Blu-Ray.
Wrapping Up: Winning Battles while Missing the Common Threat
Microsoft moved strongly to push new interest onto their platform by uniquely refreshing it, layering on Kinect, and showcasing compelling games that will be available this year. Nintendo felt like they missed a meeting on the Wii but did protect and refresh their DS platform effectively.
Sony likely did more damage to Microsoft and Nintendo then they helped themselves and showcased solid competitive pricing and competitive positioning but unfortunately much of the great content won’t arrive this year and they appear overly dependent on 3D TV roll out.
But after watching all three presentations I was left with the feeling that neither separately nor together did they do any real damage to the inroads that Apple is making into the segment with their increasingly capable general purpose products.
In short, at the show, Microsoft took the high ground first and held it barely, Nintendo didn’t step up with much of a challenge, and Sony mostly did damage to Microsoft but due to 2011 titles and 3D didn’t do themselves as much good as they could have. Sony could be the company to beat in 2011 but the battle was for 2010.
My read is that Microsoft came in 1st, Sony 2nd, and Nintendo 3rd at E3 however I think Sony did enough to hold off Microsoft from taking much share while Nintendo will likely lose share to both Microsoft and Sony.
In the end I think the Apple risk remains largely unabated and that may define the future E3 and gaming in general than anything else we saw this week with the possible exception of OnLive.
Given a budget for yourself or for your kids and a choice between an iPad, Xbox, Wii, or PS3 which would you buy? How about a PSP, 3DS, or iPod Touch?
I’m worried most would still pick the iPad or iPod Touch after this show.
Rob Enderle is one of the last Inquiry Analysts. Inquiry Analysts are paid to stay up to date on current events and identify trends and either explain the trends or make suggestions, tactical and strategic, on how to best take advantage of them. Currently, he provides his services to most of the major technology and media companies. The opinions expressed in this commentary are solely those of the writer.