E3 Recap: Console Wars

E3’s over, and I’m back. First, a quick kudos to the ESA for keeping noise levels under control this year. It was actually possible to make a phone call in (parts of) South Hall. Not to say “big audio” was eliminated — you could feel your torso rumbling with the bass in the EA booth. Love it.  🙂

So much to say; I hardly know where to begin. Let’s start with Nintendo:

Nintendo Wii

By now you’ve probably read about Nintendo’s triumph; people literally stampeded past the Sony booth in their rush to experience the Wii. Of course, as many others have already pointed out, “winning E3” doesn’t mean a whole lot in the long run (re: Dreamcast), but it certainly doesn’t hurt, and it sure must feel good.

My personal experience with the Wii was (mostly) a blast. I couldn’t get enough of Wii Tennis; it feels so natural using the controller as a virtual racquet, and there’s something too cool about delivering a vicious overhead serve in the comfort of your living room.  🙂

I played Red Steel and Wii Golf as well. These games illustrated both the great promise of the platform, as well as the current problems facing it. For example, in Red Steel, the sword-fighting action was flawless, but I found it difficult to aim as precisely as I would have liked during the gun-phase of the demo. I took the time to pick a spot on the wall and repeatedly attempted to shoot it (starting from half a screen away) — without success. That’s a shame, because the Wiimote could finally be the device that makes FPS gamers enjoy the console as much as the PC. On a lighter note: to open doors in Red Steel, you have to jiggle the nunchuck in your hand. Most people hold the nunchuck around the vicinity of their waist while standing or sitting. Add the name “Wii” and it seems a bit, err, perverse. *grin*

I also found it almost impossible to predict the strength of my swing during the putting phase of Wii Golf. Having spoken with a few developers, I suspect that these motion problems were a failure of the software, not the hardware, and there’s time between now and the holiday season to work the bugs out. So I remain optimistic that the Wii will be an absolute delight (and a commercial success) when released this fall, but Nintendo really needs to take accuracy issues seriously. Otherwise, the Wii is at risk of turning into a mere gimmick, as opposed to the interface revolution it should be. People have little tolerance for frustrations caused by interface failures, perceived or otherwise.

Fortunately for Nintendo, the PS3’s controller does not fully duplicate the Wiimote’s functionality, so expect plenty of original, exclusive content for the Wii.

Numerous industry executives and analysts (including myself) are predicting that the Wii will be a smash hit in Japan, where the game market has been shrinking for almost five years (from $14B to $10B). The Nintendo DS has triumphed over the PSP in Japan in part by catering to a broader audience, reversing the trend and reinforcing Nintendo’s brand message. (See similar comments from the Chief Strategist for Square-Enix, Ichiro Otobe.) The Wii’s innovative features, “something for everyone” marketing, relationship with the DS, and price (1/3 to 1/4 of the PS3 price in Japan) should serve it very well.

I also remain convinced that the Wii will perform very well in the US and Europe, where it is likely to be the second console in a very large percentage of homes, and perhaps the first console for many first-time console buyers. (See my January post on the same subject). For a bit of flavor, see the comments on this digg.com article. I think the following sums them up: For the first time in years I’m thinking about getting into games again. I grew up with Nintendo and now I’m 27 and have not played games in years. This, to me, is a true rebirth to gaming. (Btw, that comment has gotten more diggs than most digg stories do.)

Lastly, some last interesting Wii facts revealed during the show:

• Wiimotes will support a personal attachment that store their owner’s gaming preferences and settings. Great for multi-user families, and/or visiting friends.
• The DS can, in fact, function as a controller for the Wii (so add the touchscreen and microphone to possible game interfaces.) Wii content may be downloadable to the DS, edited, then transferred back to the Wii. Just a few possibilities.

Sony PS3

Things seemed to go downhill the moment that Sony announced a $600 price point for the high-end version of the PS3 (it’ll be more like $750 in Japan.) Bloggers started using the term “P$3” and began referring to Ken Kutaragi as “Krazy Ken”, thanks in part to his comments that “[the PS3 is] probably too cheap” and “[consumers will think] ‘I will work more hours to buy one‘”.

In all likelihood, Sony is simply trying to capitalize on early hardcore demand for the PS3 during its first few months on the market, when supply will be tightly constrained. It is reasonable to assume that at least two to four million people out there are willing to pay an extra $100 for a PS3. That’s a boatload of cash… something Sony could definitely use in its war against much-wealthier Microsoft. Ultimately, I bet that Sony drops the PS3’s price soon after a few million units have been sold.

This is, at best, a risky strategy. A high price may drive consumers that have been waiting patiently for the PS3 into Microsoft’s arms. And if the PS3’s price is cut soon after launch, it may offend those people who paid top dollar. All that said, I can understand a decision to reap greater profit from the first few million buyers, even if I’m uncertain that it makes the best sense in the long-term.

The PS3’s price wasn’t the only thing people were talking about this week. I heard more than a few people muttering about the fact that Grand Theft Auto will not be a Sony-exclusive. The size of the PS3 also caught some by surprise, though I suspect it won’t make any difference; Japanese consumers aren’t likely to abandon Sony for Microsoft just because their consoles are equally beefy. This might give them yet more reason to notice the Wii, though. Lastly, several developers I know privately confirmed what Microsoft has been publicly trumpeting: Sony’s online strategy is a complete disaster (i.e. does not exist.) I’m sure they’re racing to cobble something together, in much the same way they slammed tilt-sensitivity into the PS3’s controller at the last minute. Unfortunately, I doubt they can pull something truly competitive together in time for launch.

As for my personal experience with the PS3: it was mostly positive. Some of its games didn’t look (or play) up to my “next-gen” expectations, but some of them really did look spectacular, in the “holy cow” kind of way. And I had plenty of fun playing Warhawk, despite all the “me too” sniggering everyone (myself included) indulged in when the PS3’s tilt functionality was first announced. But I didn’t see anything that made me think I absolutely had to own the PS3. In short, the PS3 will be a good platform (there was never any doubt of that), but it isn’t clear that power and brand strength will be enough to preserve Sony’s leadership this time around. Atari, Sega, and Nintendo can all tell sad stories…

I’d be remiss if I didn’t mention blu-ray. Ever the point of controversy. Nothing at E3 would help an observer determine whether blu-ray will be successful or not. I met skeptics who didn’t see the value, and I met optimists who felt that high definition, large screen TVs benefit tremendously from blu-ray (or comparable technology). Personally, I find it hard to believe that large screen, HDTV penetration will reach significant levels in the next four years. Yes, I know prices are dropping, but they aren’t dropping quite that fast. So it seems unlikely that blu-ray will be a huge driver of PS3 sales, since most people won’t benefit from the picture quality improvement. The extra movie content might capture the hearts and minds of consumers, but nobody can guarantee that as of now.

Long story short, I’m less optimistic about the PS3 than I was three weeks ago. But don’t count them out yet. This is a powerful platform with a lot of fans (let’s see how many of them are willing to get second jobs to stay fans).

Lastly, some interesting notes:

• Check out this interview of Will Wright — he unceremoniously dismisses the PS3, then says he’s “rooting for Nintendo” and talks up the Nintendo DS in the same breath. Ouch.
• Sony is permitting homebrew Linux development on the PS3. Very interesting stuff, though unlikely to substantially change the market dynamics. But you never know what could come of it.

Microsoft Xbox 360

Last, but not least, Microsoft. Regular readers of my blog know that I haven’t been overly optimistic about the Xbox 360 in the past. That is changing now, but not necessarily because of anything I saw in the Xbox booth at E3.

True, Gears of War looked great. And Xbox Live! had plenty of nice stuff on display (for all the doubters out there: I saw a surprising number of people having a blast with Rockstar’s ping pong arcade title. They were really getting into it!)

It was also announced that 5M Xbox 360s will have been sold by end of June, and up to 10M by the fall, when the PS3 and Wii launch. Microsoft expects to have up to 6M Live users at that time. (I expect attach rates to fall as less hardcore buyers enter the market, but at this early stage it is still possible to see rates this high. Possible, but not absolutely certain.) Regardless, impressive numbers all around.

Microsoft also discussed “Live Anywhere”, which will allow computer, mobile phone, and console gamers to play the same games simultaneously (mobile phones users will, of course, not enjoy the same experience.) A “Live Vision” camera was also announced — about time, too.

But of course, much of this is besides the point. The real story is: the PS3 is much more expensive than the Xbox 360, and consumers won’t (at least initially) have many good reasons to overlook price. There will be 160 games for the 360 by the time the PS3 hits the market. Blu-ray content is an unproven driver. Xbox Live is a compelling service. Etc, etc. And since the 360 doesn’t really compete directly with the Wii, Microsoft’s fortunes are basically inversely proportional to Sony’s. As of now, that might not be such a bad thing.

Lastly, regarding power: it seems true that the PS3 has greater graphical capabilities than the 360. Games on the PS3 looked better in general to me. But a couple of important developers told me that they don’t even intend to take full advantage of that extra capability (at least anytime soon) because it simply costs too much. The likely sales payoff doesn’t justify the expense. That’s not good news for Sony.