NEW YORK (TheStreet) -- Two weeks have already zipped by since 2014's E3 Electronic Entertainment Expo. While the excitement over new software titles have wound down, traces of disappointment still linger over certain missing elements from the show.
On the whole, E3 went rather smoothly for Microsoft (MSFT) and Sony (SNE). There weren't any dramatic technical glitches that plagued E3 in the past; there weren't any Internet outages, just a few grumbles here and there. Both companies made good impressions highlighting the exclusives or exclusive elements available to them as they awaited a more complete 2015 game exclusives offering. Among them, Microsoft showcased Halo: The Master Chief Collection and Sony presented Activision Blizzard's (ATVI) Destiny, which will have exclusive content for the PS4 and PS3.
Nintendo (NTDOY) however, was criticized for its dearth of featured content and no official conferences. The video game industry was expecting a bolder presence from a company desperately trying to turn its fortunes around.
Although E3 is a Big Three-dominated event, Steam Machines was supposed to bring more prominence to the PC-gaming side of the show, but largely underwhelmed. Alienware's take on the Steam Machine did however attract some attention.
Here's a recap of what was missing from the E3 show, and how these missing elements specifically impact Nintendo, Sony and Microsoft:
The missing element: Price cuts on current generation consoles.
What that means for the console makers: Many were surprised that there weren't any price cuts announced for current-gen consoles, though Wedbush Securities analyst Michael Pachter does note price cuts on the Xbox 360 and PS3 could still happen before the end of the year, with a slew of compelling bundles.
For now, the console makers have bought themselves more time to drive consumer spending and installed-base expansions for the new consoles by holding off on discounting current-gen consoles even with their ongoing weakness. The aim during this next-gen cycle is to a make a profit from the hardware, instead of just focusing on software licensing and PlayStation and Xbox Live subscriptions. "They need to stretch out the highest price they can for as long as possible," Enders Analysis' Heloise Thomson explained.
While Sony, Nintendo and Microsoft should benefit from delaying discounting, next-gen price cuts should be unnecessary for some time, at least for Sony and Microsoft. The PS4 is leading the industry in sales. Yet, if sales do need a boost, Sony would most likely bundle the console with a game rather than cut the price this soon, Thomson predicted.
Microsoft meanwhile only recently introduced its $399 Xbox One without Kinect, dropping the price of the Xbox One to match the PS4. It also revamped Xbox Live Gold by omitting the need for a $60 subscription to access video-on-demand services.
Nintendo executives say that the Wii U still has plenty of momentum ahead of it and won't need price cuts any time soon. Nintendo management did disclose at E3 that if and when the Wii U does get marked down, it's unlikely the discounted version will come without the GamePad, despite Microsoft's $399 ex-Kinect Xbox One.
The missing element: New installments of popular franchises such as Microsoft's Gears of War, Sony's God of War, and Nintendo's Super Mario series. The Last Guardian from Sony was also missing.
"You heard the term exclusive a lot, but there actually weren't that many full, exclusive games that were only available on one platform or another," said IDC research director Lewis Ward. "The independent studios all wanted maximum reach [pending the fuller rollout of games in 2015]."
What that means for the console makers: The absence of the new installments was disappointing to many fans, but the wait for the new games could lead to pent-up demand.
At the top of the list of disappointments was no additional detail on Gears of War even though it had been since January when Microsoft said that it acquired from developer Epic Games the exclusive rights to this popular, high-quality third-person shooter franchise. The deal has given the tech giant guarantees that Gears of War remains on the Xbox and the Xbox only, after making it big on Xbox 360 with its horde-mode enabled, multiplayer features. "I thought we would get more color about what Microsoft's plans were with the franchise moving forward, and I heard obviously nothing about it at the show," said IDC's Ward. "They just didn't want to share any details at this point. It was a little disappointing."
With God of War, there were low expectations that any new games would be announced for the latter half of 2014. The latest installment, God of War: Ascension, had just debuted in March 2013. However, many did expect that Sony would at least still provide some background on what the next adventure was going to be like, given that the exclusive, triple-A title as a whole has been one of the tent-pole franchises for the PlayStation brand over the years, selling millions of copies. "I thought Sony would sow the seeds or at least whet our appetites for what's coming in 2015," Ward commented.
On Nintendo, it was rare for the company not to have any Super Mario announcement, as it's had remarkable traction with the titles. So even though there are currently already a lot of Mario content available on the Wii U, with Super Mario 3D World released just late last year and Mario Kart 8's successful debut during the end of May, there still were expectations for some kind of fresh Super Mario unveiling. "Any news lacking about a new Super Mario experience is going to leave fans of those games a little disappointed," said Ward.
The delayed gratification of new Super Mario, Gears of War and God of War games could build into a sales boost for the console makers. "Each of these franchises has its own loyal base that really wants the next installment," noted Enders Analysis' Thomson. This increases the possibility of future system sellers producing a noticeable hardware lift at launch. One of the most recent examples of a system seller is the latest in the critically-acclaimed Mario Kart series. Wii U console sales reportedly quadrupled the week after the Mario Kart 8 release. "When you do exclusives right, you get a big hardware sales lift," Ward stated.
Big, installed bases are the key to console platform profitability over the long-term. Console makers can increase their chances of long-term success by positioning games for a decent life span with the new consoles and furnishing them with new experiences rather than iterative gameplay. With the generally successful track record of Gears of War, God of War, and Super Mario, there's little reason to believe that Microsoft, Sony and Nintendo can't repeat or extract further impressive sales from these games.
Gears of War 4 is widely suspected by industry analysts to be in concept stage at the moment, so fans can expect it to hit the market in 2016. In the meantime, after it was on rare occasion skipped this year, it also wouldn't be surprising to get a Super Mario announcement next year. But the next God of War game is the exception amid the timeline predictions. The timing of a release is uncertain due to some recent project reboots that have led to staffing changes at developer Sony Santa Monica. "The layoffs at Sony Santa Monica are sure to have people worried," says Thomson.
Finally, the elusive The Last Guardian. In development since 2007 and with Sony saying it still needs more time to publish, its omission was largely expected. On the back of it's now legendary status, there will certainly be a lot of consumer interest welcoming The Last Guardian upon its release, though it's unlikely to become a mega blockbuster hit like Grand Theft Auto. "The game has a very indie-feel about it," exclaimed Thompson."The artwork is stunning from what you can see in the 2010 trailer, and I imagine it will be an incredible next-gen game, graphically."
The missing element: A strong Steam Machines presence.
"That ten foot big-picture mode experience in the living room isn't where it needs to be to make the platform reach its potential," Ward said. "So Valve's gone back to the drawing board."
What that means for the console makers: Steam Machines was supposed to be the centerpiece for PC-gaming at E3 2014, but this promptly fizzled after developer Valve announced in May it delayed its Steam Machines project to next year, pending the perfection of the included Steam Controller.
More than a dozen hardware manufacturing partners counting on the Steam Machine vision were affected by the decision, though Alienware decided to move ahead with a modified version of the Steam Machine that continues to model itself after Valve's Steam Machine prototype and incorporates Valve's Steam Big Picture mode for PC-gaming in the living room. It will run on Windows 8.1 and come with an Xbox 360 controller. The Alpha will hit the shelves this holiday season starting at $549.
After showcasing the product at E3, Alienware's ultra-compact Alpha received some good reviews, encouraging a bit of speculation that Valve's goal of bringing PC gaming into the living room and competing against the console incumbents with the Steam Machine was still very much a possibility despite all the delays; that the gaming industry was getting a peek into Steam Machine's disruptive potential against the console incumbents. Alienware said that Alpha is SteamOS- and Steam Controller- ready, and will be able easily integrate with each upon their launch.
"Alienware's Alpha Steam Machine already shows incredible promise, besting Microsoft and Sony's current-gen consoles in performance, but preserving a simplified controller-friendly UI (user interface)," according to entertainment web site IGN Entertainment.
IGN added, "and, best of all, [the Alpha is] bundled with a [Xbox 360] controller you'll actually enjoy using."
While the Alpha generated a number of good reviews, it sparked the debate of whether it is a real Steam Machine. With Xbox 360 and Windows, it mixes in competitive elements that undermine the original Steam Machine purpose of challenging the big console manufacturers in the living room. Valve co-founder and head and former long-time Microsoft employee Gabe Newell has famously criticized Windows 8 as being a threat to the openness of the PC gaming space, and is known to despise the walled garden tactics of the Big Three console manufacturers.
Steam Machine makers may need all the help that they can get to convince Xbox, Wii U or PlayStation users to switch over to the full Steam Machine product complete with the Steam Controller and SteamOS, and may even have a hard time persuading existing users of the Steam software platform to adopt it.
Steam Machines are essentially gaming PCs in a different shell, but sold at a lower price than the typical gaming rig. Still, even the cheapest Steam Machine at $500 will be more expensive than the PS4, Xbox One and Wii U. At these loftier prices, there's little incentive for PS4, Xbox One and Wii U users to switch over, especially factoring in that the Steam Machine right now is only in the sphere of knowledge of the games industry. At the moment, it probably only means anything significant to those already working with or playing on Steam. On the other hand, games consoles are sold on several key factors consisting of price, services, brand loyalty or recognition, and games.
Existing Steam software platform users also may require a hard sell. Given that SteamOS can be downloaded on any PC, there wouldn't really be a need to buy a Steam Machine to play the games on SteamOS unless the player played many hours on MMOs such as Dota2, which actually recently peaked at less than 800,000 players, according to Enders Analysis data."There is no appeal if the player plays indie or casual games, since most standard laptops can cope just fine with these," says Thomson.
Furthermore, more proof yet is needed that there will be an expansive enough library of games running on SteamOS. According to Steam, the Steam software platform had 75 million active users and 3,000 games available as of January, an uptrend that most certainly refutes the notion that PC gaming is dead, and at first glance seems to point to a favorable environment for Steam Machines enter into. However, many of the 3,000 games that have helped attract the close to 80 million active Steam users are unlikely to become Linux-supportive until developers are much more certain about the market for Steam Machines. News reports suggest that only a small percentage of the total Steam catalog runs on Linux today. At least for now, an Alpha-type machine that runs with Windows would provide more game choices than a full-on Steam Machine running on SteamOS.
Another issue undermining the Steam Machine's competitiveness is now that it's trickling out in bits and pieces before the full and complete Steam Machines product is ready, with Alpha playing a role in this, some of intrigue surrounding the machines has taken a hit. "There is the relevance of product enchantment," Thomson points out. "This is what creates the hype around products before they release."
Currently there are key parts of the overall Steam Machine concept that aren't quite fitting together as nicely as they should in order to become a serious challenger to Nintendo, Microsoft and Sony.
-- Written by Andrea Tse in New York
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