Sony, Microsoft Aim to Upstage Nintendo at E3

LOS ANGELES (TheStreet) -- Nintendo's still on top heading into the Electronic Entertainment Expo (E3) on June 15 to 17 in Los Angeles, but plans by Sony (SNE) and Microsoft (MSFT) to knock Mario off the mountain are in motion.

The state of gaming in 2010 is oddly similar to that of last year -- sales down, with Nintendo products crushing all opponents. At the end of 2009, video games generated $19.7 billion in U.S. revenue, according to figures from NPD Group. That's not as big as the amount Americans spent on personal computers ($28.3 billion), but it's similar to revenue from flat-screen TVs ($21.7 billion) and dwarfs U.S. box-office receipts ($10 billion) and the market for MP3 players ($4.8 billion). It's also, however, down 8% from the $21.4 billion generated in 2008 and down more than 10% in the first four months of this year.

video games

Nintendo, meanwhile, closed out 2009 by selling nearly 9.6 million Wii consoles in the U.S. -- more than the combined sales of Microsoft's Xbox 360 (roughly 4.8 million) and Sony's PlayStation 3 (more than 4.3 million).

Even after the base prices of the three consoles dropped by $100 last fall, lovers of the Wii's motion-based games kept the Wii ahead of its competitors by putting six of Nintendo's first-party Wii games (Wii Sports Resort, Wii Fit, Wii Fit Plus, New Super Mario Brothers, Mario Kart and Wii Play) among the top 10 games of 2009.

Half of those games were still in the top 10 in April, joined by third-party titles by publishers like Ubisoft -- which gave up on Wii titles for hardcore gamers like the Red Steel shooter series in favor of lighter fare including the more casual Rayman series and the best-selling Just Dance.

As a result, the Wii has topped console sales every month until February, when the Xbox outsold the Wii 422,000 to 397,900 before the Wii bounced back and crushed Xbox sales by more than 200,000 in March. By comparison, Sony execs last month announced that the PlayStation 3 is expected to turn a profit for the first time later this year after racking up losses since its November 2006 release.

"Nintendo's hit critical mass already with the Wii and really, for all intents and purposes, the battle's over," says Shane Satterfield, editor in chief of GameTrailers.com. "Nintendo's won the battle."

To avoid losing the war against the Wii, Sony and Microsoft will use this year's E3 as a launch pad for their own motion-control devices. Microsoft used last year's E3 to give gamers a sneak peek at its Project Natal motion analysis device and to leak development partners including Electronic Arts ( ERTS) (read: Madden titles and Grand Slam Tennis), but is increasing the device's visibility this year with a June 13 demonstration broadcast by MTV and featuring Cirque du Soleil.

Sony, meanwhile, unveiled its Wii-meets-sorcerer's-wand PlayStation Move controller-and-camera system at the Game Developers Conference in March, but will likely debut software from avowed Move-backing developers including Activision ( ATVI) and Konami ( KNM). Microsoft's motion device is expected to fetch between $50 and $200 this holiday season, while PlayStation plans to debut the Move for $100 this fall.

That doesn't mean Nintendo will be idle, as it plans to introduce the glasses-free 3D version of its popular DS handheld device to the E3 throngs. Considering that all incarnations of the DS outsold the Wii last year by more than 2 million systems -- the amount of units sold by Sony's competing PSP handheld -- and outsold the Xbox, PlayStation 3 and PSP combined in April, there's nothing small about the new handheld's debut.

-- Reported by Jason Notte in Boston.

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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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