Five Video-Game Developments for 2010

BOSTON ( TheStreet) -- The story of this year in video games has been much like the game itself: Its ending depended on how you played it.

Price drops on all three major consoles at the end of the summer left Nintendo's Wii in the lead, where it had been for much of the year, but gave Sony's ( SNE) PlayStation 3 new life after being outsold by its PlayStation 2 predecessor in April. Microsoft's ( MSFT) Xbox, meanwhile, watched its exclusivity agreement with Netflix ( NFLX) evaporate and its percentage of overall sales dwindled to a one-point lead over the rival PS3 -- which relegated the Xbox's console sales to third place by year's end.

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Despite Activision's ( ATVI) Call of Duty: Modern Warfare 2 pulling in $310 million on its first day of sales, setting the single-day record and outdistancing the record $155 million three-day opening weekend for "The Dark Knight" in 2008, NPD Group predicts 2009 video game sales will be just below last year's $21.3 billion total. Will fortunes change in 2010, or will next year's score be just as much as 2009's? If you want some cheats, here are five developments to expect in 2010:

1. A huge first quarter: Much like in the movie industry, the first quarter is where video game companies usually dump their middling titles and ride it out. The first months of 2010, however, will see the release of potential blockbusters including Sony's God of War III, Square Enix's ( 9684) Final Fantasy XII, Take-Two Interactive's ( TTWO) BioShock 2, Capcom's ( 9697) Lost Planet 2, Take-Two's Mafia 2, Ubisoft's ( UBI) Tom Clancy's Splinter Cell: Conviction, Electronic Arts' ( ERTS) Dante's Inferno and Battlefield: Bad Company 2.

"The first quarter of 2010 is going to be the best Q1 ever in the history of video games," says Shane Satterfield, editor in chief of GameTrailers.com. "It's going to destroy last year in terms of sales." Why this year? Blame cowardly video game companies that pushed back their products' release dates and surrendered the fourth quarter of 2009 to the juggernaut that was Call of Duty: Modern Warfare 2, which raked in $500 million in the first four days of its November release. It was a questionable strategy at best, as games like New Super Mario Brothers and Assassins Creed 2 are reaping the benefits from gamers who aren't into military shooters. In the best example, EA's Left 4 Dead 2 looked the bully in the eye by sticking to its release date and popped it in the mouth to the tune of 2 million copies sold in its first two weeks. Zombies have no fear.

2. PS3 and Xbox motion controllers: Casual gamers would rather use Wii controllers to bowl or box than nest with a 12-pack of Mountain Dew and a giant bag of Cheetos while shooting at their online "friends" for 20 hours. It took months of staring at Nintendo's console sales numbers for Sony and Microsoft to figure this out, but both are planning to introduce motion-based control devices by the middle of next year. The Xbox's "Project Natal" is by far the most ambitious, with a camera that captures a player's full range of motion and eliminates the need for a hand-held controller. It's already been named one of Time magazine's "50 Best Inventions of 2009" and is expected to cost $50 to $85 when it hits the market. The more Wii-like "PlayStation Motion Controller" (a working title for the rumored "Sphere" device), meanwhile, looks like an orb-topped wizard's staff in its early appearances and has a rumored cost of nearly $100. Think they're kidding? Ubisoft and Capcom are among the software companies already committed to making games for each device. Nintendo, with a 51 million motion-controller lead, doesn't seem fazed, but don't be surprised if this contributes to ...

... 3. A winnowing Wii market share: The Wii is the industry's anomaly, attracting casual gamers with its first-party games and without offering perks like Wi-Fi or Blu-ray players. That said, it's been plagued by problems with its third-party offerings since its inception. According to NPD Group's monthly sales numbers, anticipated releases like Madden NFL 2010, Ghostbusters and Sega's Madworld failed to crack the Top 10 in sales. This, and the fact that porting a game to the low-powered Wii is far more difficult than for the hard drive-heavy Xbox or PS3, have moved companies like Ubisoft and EA to announce that they'll be scaling back Wii offerings. Meanwhile, the other consoles are starting to catch up. Nintendo's reported 550,000 Wii sales during Black Friday week are impressive, but so were Sony's 440,000 PS3 sales during the same period. Considering the Wii outsold the second-place PS3 by 180,000 for all of October, the gap between the two is narrowing. "Even now, Nintendo's Wii games are starting to look bad," GameTrailers.com's Satterfield says. "The games for the PlayStation 3 look stunning, while the Wii looks like an old piece of hardware bolstered by its controls."

4. The march to digital distribution: Even though Sony's digital-only PSP Go portable was a wretched failure (with sales drifting down to PS2 levels after it made PSP users' library of games useless), the push toward online networks and even "cloud" gaming continues. Though the numbers for 2009 aren't in yet, Microsoft says nearly 60% of its users paid a $50 annual fee to join its Xbox Live Gold online service in 2008. Meanwhile, Sony said last month that its PlayStation Network has 33 million registered users worldwide. At the same time, EA laid off 1,500 employees from its brick-and-mortar sectors last month, while GameStop announced plans to enter the digital arena after same-store sales fell 7.8% last quarter and Goldman Sachs ( GS) removed it from its "conviction" buy list.

5. The death of peripherals: What did we learn about plastic peripherals in 2009? If you have a Guitar Hero or Rock Band instrument set, you're not buying another one. Overall, peripheral sales are down 6% from last year, according to NPD, with music games like The Beatles: Rock Band and Guitar Hero 5 pulling in just $53 million in October, compared with the $137 million made by their predecessors during the same month last year. Activision salted the wound nicely when its $100-plus DJ Hero and turntable peripheral scarcely cracked 100,000 sales in its first month and its $120 Tony Hawk: Ride and skateboard accessory was roundly panned before its release last month.

-- Reported by Jason Notte in Boston.

Jason Notte is a reporter for TheStreet.com. His writing has appeared in The New York Times, The Huffington Post, Esquire.com, Time Out New York, The Boston Herald, The Boston Phoenix, Metro newspaper and the Colorado Springs Independent.

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