Page last updated at 07:45 GMT, Monday, 14 July 2008 08:45 UK

Consoles look to hit their stride

Console logos

This year's E3 comes at a crucial time for the three big console makers. Difficult and expensive launch periods have been completed, developers have got to grips with the demands of new hardware and a growing market of gamers is hungry for new content. But what lies ahead for Sony, Microsoft and Nintendo?

MICROSOFT XBOX 360

Eight years after Bill Gates first announced plans for a Microsoft games console, called the Xbox, the company has yet to lead the market significantly in any territory.

Xbox 360

And for all the billions of dollars invested in Xbox the company has yet to see any financial return.

So has the Xbox project being a failure?

Analyst Nick Parker, who has worked for all the console firms, said: "One could look at the maths and say yes, from a business point of view you would not have made the same moves seven years ago.

"But in terms of what they have achieved they have certainly built up the best online gaming console for the masses."

He added: "It hasn't been an easy ride for them; they made some early mistakes with the brand and the product itself."

The ugly black box of the original Xbox, its oversized controllers and noisy fan turned many gamers off.

"There is a lot of negative heritage from the previous model," said Mr Parker.

Determined to get to market early, the Xbox 360 was the first of the current generation devices to reach eager gamers.

Piers Harding-Rolls, an analyst with Screen Digest, said: "They had a head of steam built but didn't deliver on it.

"Despite their early launch and success of Xbox they didn't build up a successful brand on continental Europe."

The Xbox 360 has become synonymous with hard-core gaming, fuelled by the success of action titles such as Gears of War and the Halo franchise, and across continental Europe it is an image which turns many gamers off.

Mr Parker said: "Their issues are still with the brand in Europe. They are fighting a very robust legacy brand in PlayStation."

But Microsoft is preparing a major re-branding exercise to overturn many consumers' preconceptions about the console.

"Europe is the true competitive front; they see it as the tipping point," said Mr Harding-Rolls.

He added: "They realise now that the European market is not the US market."

An industry insider told BBC News that Microsoft had a "considerable war chest" to invest in re-positioning the image of the Xbox 360 to mainland Europe.

And software titles that appeal to a wider demographic will be a large part of that strategy.

At E3 Microsoft is expect to place a large amount of emphasis on family and social games, through software and peripherals.

In many ways Microsoft is attempting to wrestle away some of the success Nintendo has had with its Wii console.

But the job of re-inventing the Xbox 360 for a whole new market of gamers was "a big gamble", said Mr Parker.

"But," he added, "they have got to do it."

NINTENDO WII

"No-one predicted how successful the Wii was going to be," said Mr Harding-Rolls.

Nintendo Wii

After failing to deliver the success it had hoped for with the GameCube, Nintendo surprised many by taking a completely different route with its follow-up, the Wii.

"Nintendo was really astute to recognise the potential of social gaming and to see its popularity on platforms like the PC, translate it to the console space and have it on primary screens in the living room," explained Mr Harding-Rolls.

Sony may have helped to pioneer social gaming on PlayStation 2 with Singstar and EyeToy, but Nintendo took the genre on and turned it into a global phenomenon.

"It's almost a parallel games market," said Mr Parker.

"There's been a lot of talk recently about whether what they do is games or lifestyle assistants," he added.

But that success has brought its own challenges.

"There are still question marks over its longevity," said Mr Harding-Rolls.

"Of those people who go out and buy hardware and Wii Fit, how many will buy follow-up software?"

But he added: "But it's not a fad. It's a legitimate product with legitimate customer base."

There are also question marks about some developers' commitment to the platform long term.

"They are not investing huge amounts of cash into the market and letting Nintendo alone drive hardware sales," said Mr Parker.

Developer David Braben, whose firm Frontier produced Lost Winds for the Wii, said the console was a key part of its plans.

He said: "There has been quite a lot of differentiation between the consoles, which hasn't happened before with console generations.

"The type of people who buy Wii contrast with those who buy the other consoles. That lets us develop something new and fresh for the console, instead of just another sequel."

SONY PLAYSTATION 3

Delays, resentment over its high price, confusion over differing models and features around the world; the birth of PlayStation 3 was anything but smooth.

PlayStation 3

But all the signs point to Sony steering the PlayStation 3 into smoother waters.

Mr Parker said: "They are pretty much on track. Analysts and journalists were expecting too much too quickly on PlayStation 3.

"It was always going to take a long time. But they are very loyal to PlayStation in Europe and now that the big games are hitting the shops people are buying the machine."

Mr Harding-Rolls added: "To analysts, Sony's launch figures were very good."

For Sony, the next 12 months is about maintaining its momentum and trying to differentiate the PS3 from its direct rival, the Xbox 360.

At E3 the company is tipped to push connectivity between the PlayStation Portable and the PS3, as well as growing the use of user-generated content in gaming through the use of peripherals like EyeToy.

The company's plans for the device as a multimedia hub are also expected to take shape at E3, with reports of a movie download store and confirmation dates for the launch of peripherals like Play TV and its virtual world, Home, expected.

Long-awaited games such as Killzone 2 and LittleBigPlanet are now on the near horizon and Sony will be keen to flex its first-party development muscles.

Mr Harding-Rolls said: "Their key differentiator from rivals is their internal development capability. The potential is there but they haven't fully delivered.

"Nintendo may be more prolific but they don't have as many staff as Sony."




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