Today, at the Electronic Entertainment Expo in Los Angeles, Sony will show off its next-generation handheld device, code-named NGP. Then on Tuesday, Nintendo is widely expected to unveil the successor to its best-selling Wii console.
The question is whether those devices will resonate with consumers, who have shifted their gaming to two hot areas in technology: phones and Facebook.
The rise of devices running on Apple and Google's operating systems has driven many to play games on their smart phones and tablets. Meanwhile, San Francisco's Zynga has built a gaming empire on top of Facebook, leading a wave of companies that are building games for social networks.
And given the promise of games someday being delivered wirelessly to televisions, observers question how long consoles built primarily for gaming will survive.
"The general view, particularly in the mainstream investor community, is that the console generation is dead and not likely to come back," said Eric Kress, an analyst with Bay Street Research.
But Kress said that in his view, the best way to experience high quality content is still a dedicated console. He noted that the devices now serve a range of functions beyond gaming, making them a central part of many living rooms.
At E3, which is expected to draw up to 45,000 people over three days, the big gaming companies will get a shot at proving naysayers wrong.
Wii successor
Last month, Nintendo confirmed it would demonstrate its successor to the Wii, codenamed Project Café, at E3.Little is known about the console, which is expected to ship in 2012. The device is rumored to output video in high definition, a feature that has been long supported on Microsoft and Sony consoles, and to have a controller that includes a touch screen.
Nintendo, which declined to comment on its E3 plans, faces much higher expectations this time around than it did when unveiling the Wii in 2005.
At that time, Nintendo was coming off the relative failure of the GameCube, its worst-selling console. Since its release in 2006, the Wii has sold more than 86 million units and reintroduced Nintendo to mainstream audiences.
"Before, Nintendo had no expectations to exceed other than 'don't die,' " said Ricardo Torres, who tracks the industry as editor in chief of Gamespot.com. "This time it's like, well, you have the most successful piece of home hardware you've ever produced. You've broken all kinds of records. Now what's your second act?"
Historically, the company has attracted fewer third-party developers than Microsoft and Sony, in part due to the perception that Nintendo reserves most of its marketing support for the titles it produces in-house. And Nintendo has also been slower to embrace online collaboration and other Internet services than its rivals, raising questions about whether the new console will feel relevant in an era of ubiquitous Internet connections.
But most still expect the company to make an impressive showing this week.
"Nintendo has the most to prove," Kress said. "But they're also the most likely to win among hardware manufacturers, as they have the most impressive lineup of software and hardware at the show."
Sony's challenge
For Sony, the challenge is to persuade gamers to purchase a device whose core functions are rapidly becoming integrated into phones.But executives say a large market remains for a handheld device that does things a phone can't. The NGP's predecessor, the PlayStation Portable, has sold 68 million units worldwide since its introduction six years ago, according to industry tracker VGChartz.com.
Scheduled for release in the fourth quarter of this year, the NGP will feature innovative controls, including front and rear touch screens, that executives say no phone can match.
"When you look at what NGP can bring to the market, it's much different than what exists in mobile or on other handheld devices," said John Koller, director of hardware marketing for Sony.
The company is also hedging its bets. This year it announced PlayStation Suite, a forthcoming software framework that will allow PlayStation games to be played on devices running Google's Android operating system.
Given the convergence of gaming and smart phones, Gamespot's Torres said the NGP and 3DS - Nintendo's new handheld, which went on sale in March - may be the last devices of their kind.
"Given the way consumer electronic devices are moving, a single-use device is quickly becoming not a good idea," he said.
That's why the NGP is expected to perform a range of functions beyond gaming: streaming music, playing videos, and interacting with games on the Playstation 3 console.
Kress said titles Sony has promised to introduce at launch, which include an installment of its best-selling "Uncharted" franchise, delivered great visuals in demos. But the audience for handheld devices like the NGP is shrinking, he said.
While video game giants worry about where their customers are going, publishers may have less to be concerned about: The profusion of gaming platforms means better business opportunities.
Laurent Detoc, North American president of Ubisoft, is developing games for nearly every current platform. The company, whose U.S. headquarters are in San Francisco, is best known for console titles like "Assassin's Creed." But it also plans to bring its popular "Ghost Recon" series to Facebook.
Wherever customers are willing to pay for games, Detoc said, Ubisoft will be there.
"We'll go with what the consumers want," he said.
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