E3 2011: Nintendo, Sony, and Microsoft Strategies - News
by VGChartz Staff , posted on 12 May 2011 / 20,018 Views
E3 2011: An Industry in Transition...Again
The ever exciting E3 extravaganza begins in a month. VGChartz is attending in full force once again - we have thirteen people going to the big show. The 2011 show looks promising - new Wii, X360, PS3, DS, and PSP Christmas games will be shown, the next wave of 3DS games will be shown, and we'll get a first hand look at NGP (the PSP successor) and Project Cafe (the Wii successor). Some games for NGP and Cafe should also be playable.
Just from the paragraph above, it is clear that E3 2011 is a transitional event in the history of the industry. Stalwart platforms of recent years - PSP, DS, Wii, and arguably X360 and PS3 are all showing their age with weakening game purchasing rates. The PSP and DS are in fact fairly likely to have virtually no presence at the show as the average user for each portable now buys less than one game per year. Wii, PS3, and X360 will still recieve quite a bit of focus - but they are no longer the hot items to cover either. 3DS, NGP and Wii 2 are going to the main events of the show, barring new consoles from Microsoft and / or Sony, or mind-blowing motion games for Kinect or Move. With all of that in mind, the paragraphs below will examine what Nintendo, Sony, and Microsoft are likely to do at E3 from a strategy perspective.
Nintendo
Generally speaking, the objective of Nintendo's E3 is three fold: keep players and publishers on Wii in large numbers for another year, hype the hell out of 3DS and its games, so sales don't fall into the toilet over the next few months before Nintendo's Christmas "A-games" arrive, and finally to promote the features, launch games, and release date of Project Cafe. Since the Western release of Pokemon Black / White in March, the DS has begun to ride off into the sunset. Aside from a couple of 'core' niche games that will be brought over from Japan, Nintendo will be laser focused on its newer and future platforms.
3DS Problems to be Addressed
In 2005-2007, one of the major problems with PSP was that it had very similar games to PS2, graphically and in terms of game play. Nintendo may have created a similar problem with Wii and 3DS. Previously Nintendo's home consoles were 'one graphical leap' or more ahead of the contemporary portable. Wii had PS2 era graphics while DS had PS1 era graphics. GBA had SNES level graphics while GC had PS2 era graphics. NES & SNES had better graphics than GB, and N64 had better graphics than Game Boy Color. The point is, Nintendo had always, pre-2011, avoided similar console & portable graphical capability because graphical similarity on a portable and a console from the same company can lead to unwanted competition between the two devices. Nintendo's game line up for 3DS also suggests that the company is targetting the 'Nintendo fan' audience - which is probably diminishing the Wii as a software market since game play, other than for titles like Wii Sports, can be very similar on Wii & 3DS due to their horsepower. The first major issue for Nintendo to address at E3 then is how to push 3DS sales by releasing major software, while simultaenously maintaining Wii as Nintendo's largest software market in the March 2012 fiscal year. Nintendo and third parties will need to precisely target what audiences want on Wii and on 3DS to insure that the software markets do not compete with each other in the coming months. Games fully utilizing motion and 3D effects will likely be highlighted to push the message of differentiation.
The next issue for Nintendo to tackle is its own history. Every Nintendo system except for Mr. Game & Watch, Game Boy Advance, and GC has had a less successful follow up device. In 2011, with the costs of developing new hardware and the ever expanding video game market, selling anything less than 60m units of hardware, or 500 million games is likely to be considered a failure - particularly in the wake of Wii and DS. If we look back at Nintendo's history, we can see that SNES lost NES fans when fighting off the Genesis, Nintendo 64 lost some SNES fans to the PS1 and Saturn, and the GC lost some N64 fans to PS2 and Xbox. Nintendo does not face new competitors with Project Cafe, but the 3DS is likely seen by some consumers, or at least by some developers - as simply an alternative to not only NGP from Sony, but smartphones, tablets and other increasingly powerful and novel portable devices. Nintendo and third parties thus are going to have show off content on 3DS that not only is different from what is coming to Wii, but content that is not possible on smartphones, and well worth a $40 price point. Without differentiating 3DS software at E3, the device will perform fairly weakly during it first Christmas season.
Project Cafe / Wii 2
For the Wii successor, Nintendo has to nail four points successfully to build up a lot of hype for the device. First, motion controls must be not only improved, but expanded in some way. Graphically, the device needs to be on par with X360 and PS3, but probably slightly improved in at least some fashion. Launch titles that are shown at E3 2011 will need to expand on both what has been done on Wii for motion control gaming, as well as what has been done on X360 and PS3 for core gaming. A diverse launch lineup, including a big shooter or sandbox game, in addition to Wii-ish titles from third parties and Nintendo's properties would go a long way to synthesizing the pre-Kinect & pre-Move HD market with the Wii market. Finally, depending on what is revealed for Wii, PS3, and X360, Nintendo has to time and price the Wii succcessor just right. A staggerred launch sometime between June 2012 and November 2012 at $250 to $400 would probably be pretty strong if the feature set and games gel right as X360 and PS3 begin to start declining quickly. Without nailing at least three of these points - time / release date, launch games, features, and graphcs - Nintendo will risk losing a) the motion audience to Kinect, b) the core audience to the next Xbox / PS4, or c) the mainstream gaming audience on pricing , graphics, and features. A strong launch line up for Project Cafe, grounded in correct strategy will go a long way towards reversing Nintendo's history of general hardware declines.
My hunch is that Nintendo is fairly to likely to nail three, if not all four of the Project Cafe success criteria if it learns from the lessons of DS, Wii, and 3DS. Going by the pace Wii is declining in various regions, the Wii 2 launches July 2012 in Japan, with three or four major games, at $300, possibly with a bundled title or application, and then arrives in the West during October 2012. Just about every major third party publisher has had at least some success on Wii, so Nintendo will probably be somewhat successful in convincing some third parties to move big properties to the launch window of Cafe. The biggest challenge will actually be the feature set - as motion controls will be difficult to expand in a way that satisfies both the core and the newer motion audience.
The Cafe and Wii parts of Nintendo's show should be relatively easy to nail. Wii is cheaper than ever, Zelda, Just Dance 3, Mario & Sonic, plus whatever else is announced should assure another fairly good Wii Christmas - so there isn't much that can go wrong. Cafe launches 10-18 months after E3, so any game play, feature, hardware, or buzz / hype issues can be theoretically be dealt with in the months between the show and the launch. The way Nintendo handles the modest 3DS start, pricing issues, and overall trajectory will be the most important element of Nintendo's show.
Sony
Sony, like Nintendo is premiering a new system at E3 2011, known as NGP (Next Gen Portable), the PSP successor. As PSP and PS2 are almost completely irrelevant as software markets to the Western markets, the focus of E3, Sony is going to be only promoting NGP & PS3. Sony has some of the same issues to deal with as Nintendo, but it also has a couple of unique issues to try to address at the show.
NGP
The PSP was an interesting device as far as video game platforms go. By the end of its life on the market, Sony will sell about 80m PSPs globally. That is comparable to Game Boy Advance, and by no means a bad figure. On the other hand, PSP launched at the twilight of Sony's video game industry strength, and despite having overwhelming third party support initially, and maintaining good third party support even now in Japan, the device did not perform well as a software market overall. Without Nintendo taking 35-50% of the software market, PSP should have been able to be a far larger software market than GBA as more companies could make money on the device. Instead, PSP largely proved it was not a traditional "Playstation" capable of supporting 100s of million-selling titles, as few "Playstation console" like games or "Playstation portable games" franchises really broke out as major hits.
The question then is how will Sony position NGP? As with 3DS, developers and players increasingly see smartphones and other portable devices as gaming options. NGP and PS3, like Wii & 3DS, and PSP and PS2 also have similar graphical horse power, which might damage PS3 usage rates on annual basis at a time when PS3 is by far Sony's lead platform. For Sony, the issues surrounding NGP become even more convoluted since Japan is likely to continue supporting PSP pretty strongly through at least early 2012, and Sony's Xperia smartphone is also likely to catch on with some of the PSP audience. Finally, Nintendo is gunning for the PSP audience to some degree with 3DS. None of these issues matter if Sony can expand NGP usage rates substantially in the West, as 28m Western NGP users buying a DS-like six games lifetime would be better than the 40m Western PSPs users that have bought four games lifetime. The question is how Sony will get Western gamers to buy more games on NGP than on PSP when most Western publishers have had a lot of difficulty on PSP since 2008. For the NGP to launch strongly in the West, no matter how compelling its features are, Sony is probably going to need to rely on Japanese publishing houses to achieve strong Western penetration initially. Some good Japanese support, given the strength of PSP in Japan is all but assured, but its not like that support pushed PSP to dramatic heights in the West.
These potential issues leave two solutions that Sony can use to try to persuade developers that NGP will be a big hit. First, Sony's internal developers can push NGP with existing franchises. Given that Sony seems to be learning in the portable space, we could also see Nintendo-like franchise announcements for NGP developed by Sony, as well as Smartphone-ish game franchises announced for NGP to try to get future buyers to play more short games between the "console-like" experiences that PSP had - which will presumably continue on PSP. If Sony only has fairly complicated games like Metal Gear and Monster Hunter for the Western launch, they're going to be in some trouble, as the device would be better served with pick up and play / multiplayer games at launch in the West as those are the major trends in portable gaming. In Japan however, NGP should launch pretty well, as many publishers will likely see it as their future lead platform, and thus bring big titles to the launch window.
Given better online feautres and horsepower, and at least initially stronger Japanese third party support, the NGP could launch fairly well in the West too, despite the various headwinds the device faces. With PSP essentially irrelevant in the USA and Europe now, look for a launch of the NGP globally by mid-2012. Japan should see the launch by year end 2011 to prevent 3DS from building too big of a lead.
PS3
When the PSP launched in 2005, PS2 had a pretty substantial drop off in games purchased per year. A similar drop on the PS3 base would be fairly devestating to Sony's gaming margins right now, even with NGP to be growing, since the PS3 base is so much smaller than the PS2 base was at the time of its first big purchasing rate drop. To try to combat this issue, Sony will likely try to determine what games publishers should put on NGP and PS3, to keep both bases active. Games announced for each platform should highlight why the platforms are different despite similar graphical power.
PS3 sales are also slowing somewhat. Since Nintendo has just cut price, and since Sony has gone ages without a price cut for PS3, the system will likely get a $50 / 16% global price cut. In Europe, where PS3 launched later than Wii and X360 and the cost of a PS3 is by far the most of any major region, this price cut should cause a substantial hardware lift and fairly big software lift. The performance of Move, which has started to really lag in recent months, should revitalize with a global price cut, once again particularly in Europe. The USA and Japan should see good lifts as well, but with Move pushing less hardware than in Europe, the impact will not be nearly as big.
'Move' as a general item, probably will not get a ton of support at E3 from Sony and / or third parties. The pace of Move to date has been lower than that of the Wii, and also lower than Kinect. Given the fairly limited range of motion titles that are proven to work on Wii and Kinect, even with much larger bases, it is still difficult for publishers to experiment much on Move from a financial perspective. So while Sony will surely lock up / help fund some interesting Move titles, the overwhelming focus of the PS3 portion of its conference should be on the strong lineup of traditionally controlled games. With Microsoft to focus on Kinect, and Nintendo trying to woo major core games to Cafe, Sony will likely try to pitch PS3 as the best platform for "core" games in the here and now to both players and developers.
Piracy / Hacking
Sony will not address this directly in its conference, but the background to many announcements at Sony's show will be about how it has learned from the PSN / PSP / PS3 hacking / software piracy situations of recent years in developing NGP. Developers who are spending increasingly massive amounts of dollars on a single title simply can not risk having their path to profit blocked or disrupted. When discussing NGP, don't be surprised if Sony addresses how it will have a far more secure pnline interface than previous Sony platforms. Some information regarding how hacking NGP will be far more difficult than hacking PSP should also be revealed to appease Western developers who saw PSP rapidly shrink as a software market once it was hacked. Sony has simply lost too much money on PSP and PSN to not try to more fully address piracy and hacking with the NGP.
Microsoft
X360 Core Games
Microsoft is in an interesting position with the X360 as far as core games are concerned. Since Kinect launched, most X360s that have sold have been bundled with Kinect. The implications of this are visible in publisher financial results. Generally speaking, publisher performance on X360, even with steady or growing support, is barely growing or starting to decline now - at a time when X360 is having its best sales ever. The reason is simple - most publishers don't have a big Kinect hit yet, and that is where the major X360 software growth has been for the past half year. For publishers not interested in Kinect, the 'core' market on X360 is not really expanding any more, as declines in game purchasing rates are about even with 'core' hardware purchases now.
In time, particularly due to the fairly thin Kinect line up to date, some new X360 users who own an X360 because of Kinect will probably buy a 'core' X360 game or two. To make this process happen faster, Microsoft and third parties may try to create "bridge" games to move some Kinect-only users to core X360 game purchases, and vice versa. If Kinect users can not be enticed to purchase some 'core' games, then the traditional X360 software market will start to shrink quickly pretty soon. Depending on whether or not Microsoft and third parties believe that "bridge" titles can be made in 2011, we may see a $50 price cut for X360 at E3 to match Nintendo's cut (and Sony's if they do it).
At a $50 discount, some PS3 owners and budget 'core' gamers will buy X360, in addition to more Kinect owners - making it more likely that the 'core' market won't shrink quickly any time soon on the X360.
X360 Kinect Games
To date, Kinect has sold very well globally, but the biggest hits have been dancing games. Kinect is going to need either a lot more big dance games, or some new genres to keep expanding at such a rapid pace. Virtually no 'core' content has released yet for Kinect - but with an eight-figure base now some publishers will try to figure out what core content will work on Kinect at E3. Even so, with motion controls not fully proven as a market for core games, its hard to imagine more than a few core exclusives popping up for Kinect at the show. Realistic sports games, particularly soccer simulations to try to drive adoption in mainland Europe, seem like the safest bet for 'core games' adapted for Kinect, but those are unlikely to be exclusive.
Kinect will be getting some exclusive games though, as its a market that is growing rapidly. My guess is the exclusives will mostly be in the 'Wii genres' though - sports, party, fitness, and dancing games. Puzzle games from Microsoft or third parties would have some interesting potential on Kinect, but its hard to imagine that kind of title being a major focus at E3. A company with some moxie might try some kind of 'touch dating party' game, but otherwise it doesn't look like there will be a whole lot of experimentation, as the software market on Kinect is still going to be pretty small globally in 2011 - probably about 25m - 40m non-bundled games.
Contact VGChartz at jmazel@vgchartz.com
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GC was announced E3 2001 and launched Nov 2001. Wii was talked about E3 2005, and N64 was discussed at E3 1995. Each launched over a year later
@reidlosdog, Good point. Sony originated in Japan, but even their current CEO is European.
@ Jacob Mazel : Nintendo part : Can you tell me which consoles that were shown at E3 and did not launch before the next one ?! I doubt there is one...I clearly don't see Wii 2 launching after E3 2012.
From MS, I would love to see a Halo 4 announcement and trailer. Would be great. From Nintendo, nothing easier: a 200-250£ price, and a new 2D mario, and I'm practically buying it day 1.
M$ looks pretty weak (according to this article). I wonder how they'll step up.
@TC_Squared Sony is a highly European based company, and the Wii is a highly Japanese based company.
@Michelasso Thought I do agree with you, the PS2 had the quickest drop of in sales, and when you compare current generation console to the PS2, they are doing better than the PS2 (year on year). I must say, HD consoles have really made some money, well, at least M$. Sony might want to rethink everything they do. Make PSN pay to play, get exclusive right to all hardware accesories for PS3, things like this really did help the 360.
He's speaking as the 2 major consoles are dying already. I am pretty much sure the best has yet to come as it happened with the PS2.
all this guy did was talk about kinect
Now, we can say that FDR represents XBox 360 because they are both American, but which systems would be Stalin and Churchill?
I don't think Nintendo needs to be on par with the 360/Ps3, they need to clearly surpass it. Xbox 360 hardware is from 2004-2005, that will be 7 years old by the time Wii 2 comes out. If Nintendo only matches them again, they will be in a similar situation with Wii, getting last gen ports while all major developers work on the newer systems.
@reviniente - The difference is, both the Saturn and Dreamcast didn't have the overwhelming popularity of the PS2 and Cafe going into its next console. Dreamcast was indeed a great system, but was hurt because the PSX and N64 were far more popular than the Saturn. And you can even blame the games, as Dreamcast saw few games in its first year. While it did get some amazing titles like Soul Calibur and Shenmue, it just wasn't the flood of content (good or bad) that the other systems got. I mean, its hard to survive against Halo, GTA, MGS and Smash Bros Melee.
@NightDragon83 - Both the Saturn and the Dreamcast were marginally superior to their peers, yet they failed miserably and spelled doom for SEGA. The Wii2 needs games!
TomHoang, which is who? Incidentally I named my PS3 "Joseph Stalin." But I think that title would better apply to the 360.
Nintendo needs 2 key things for the Wii 2 to be successful... it has to be more powerful than 360/PS3, even if its just marginally powerful, and they need to easily display that in their software lineup. No "core" gamer is going to want to pay $300 or more for something esseintially the same as what they already own. 2nd, and just as (if not more) important, Nintendo needs an online infrastructure to compete with XBL/PSN. Online gaming and features is a HUGE selling point for consoles these days, and if it's a crippled mess or a joke like the Wii's online infrastructure, just say bye-bye to any chances of reclaiming the "core" audience.
Not to disagree with this article, but I'm sure Sony and Microsofts main strategy is just going to be talking more about Netflix, obsessing over multi-platform FPS and CASUAL CASUAL CASUAL! Nintendo has a major chance to take back a chunk of the 'core' gamers if they show off a system designed for that.
this seems to be the most exciting e3 in years, i remember nintendo putting me to sleep since the wii came out. Now they have something i am interested in. sony and m$ always interest me. I really would like to see something really cool be done with the kinect, hopefully m$ has taken note on all the ideas that people have used with the kinect in a game.
Roosevelt, Churchill, and Stalin. I love it.
I think this years E3 will be awesome. Microsoft will focus on Kinect and few Hard Core Games, MW3, GofW 3 and maybe another core title. They may talk SKYPE and some new feature. Nintendo will give us few new games for Wii, but nothing spectacular beyond what we already know. Wii 2/Project Cafe should be great, I am really looking forward to see what will it have to offer. We should see few game demos for Wii 2 and rest will be all about 3DS and new great games. Sony will have to address PSN if by that time they have not brought it back yet. They will have a LOT of new MOVE games 'Sorcery' and a lot of new PS3 games that we already know about Uncharted 3, Resistance 3. And big finale NGP with all its glory. IT will be awesome.
Quick note, you called the "Game and Watch" system "Mr. Game and Watch."
Sony will probably have to deal with the PSN outage issue alot, hopefully it wont overshadow the NGP......Nintendo better move up a notch with the Wii2 console, better graphics, better online, better motion control.......Microsoft, nto sure what they may have up there sleeves, maybe something , maybe nothing , its anyones guess
Got to rate NGP as the only one doing anything different, Nintendo has likely lost its USP unless it can do something awesome in social gaming while also attracting some core attention
It sounds like Sony and Nintendo will have many people expecting big. Microsoft has many people expecting small. My guess is we will see something unexpected from Microsoft, but will still be difficult to top the big stuff coming from Sony and Nintendo
Actually, the problem with Ninty and Sony is that we have something to expect (new HW), while MS is in the exact position to impress and suprise us with something totally unexpected.
Calling it, this year or next year's E3 will have SEGA revealing their next console. INSTEAD OF ACHIEVEMENTS, YOU GET CHAO!
Wow MS looks to be in a very bad position. Compared to the other two company's new hardware, MS will be left eclipsed. So either they are gonna announce a shit-ton of amazing games or they will announce their next console. If not, they have to fear being left in the dust.
@Pokemanic You sound butthurt.
PS3 sales slowing?? Its down less then 7%, with this year being its 2nd best year ever so far. I don't think any price cut will happen until the fall,so would be dumb to mention at E3.
to fattydingdong dude no stop being a troll ok? how will sonys e3 suck we actually have more then 1 exclusive comming out this year ok?? and there releasing an ngp i know you know microsoft will come last but stop being a troll
I have a feeling Microsofts e3 will the worst out of the three because it will be al about kinect games and skype.
sony E3 better release NGP price and release date or its gonna suck. and i will be seriously dissapointed if theres no GTA title in production for it.
I have a feeling that Sony's e3 will suck
Great article. I always look forward to E3. It never fails to impress me even with all the expectations going in.
So there won't be a new XBOX at e3
