A battle too close to call

Kristin Kalning Games editor • E-mail

SANTA MONICA, Calif. - At last year’s E3, the console makers rolled out their next-gen machines with great fanfare and promised that the future of gaming was nigh. And gamers waited with great anticipation for the titles that would take full advantage of all these new consoles offered.

A year later, nothing. No breakout titles.

So if gamers were waiting for this year’s E3, the industry’s showcase event, to tell them which of the new consoles to buy — and which one is going to be the dominant force in the marketplace — they’re out of luck.

But it's not likely things will stay that way for long.

A slew of new titles are on their way and growth in the gaming industry is picking up pace, to be sure. The NPD Group projects significant revenue growth in 2007, due in large part to the launch of these next-gen consoles — and the as-yet released marquee games that will follow.

"I'm very bullish about 2007," said Anita Frazier, an analyst with NPD Group. "We're already up almost 50 percent over last year. With an amazing slate of content coming out from first- and third-party developers, I believe it’s going to be a record breaking year by a significant margin."

But it’s not clear that we’ll have a runaway leader in this hardware slugfest anytime soon. No matter how cool or powerful or novel these new consoles may be, they’re little more than expensive paperweights unless they have a great catalog of games.

Microsoft’s Xbox 360 has a slight lead in the race for market share, and the demand for the Nintendo Wii is so strong that the company can’t make them fast enough. Even the beleaguered PlayStation 3, which lags behind its rivals in sales, can’t be counted out. All it takes is one hot exclusive title for the game giant to reclaim its lost glory.

(MSNBC.com is a Microsoft-NBC Universal joint venture.)

In terms of hardware sales, Microsoft does have the edge, but just by a nose. The company had a year’s head start with the 360, and for that reason, it has moved more units than its rivals — 11.6 million worldwide.

But what Microsoft doesn’t have yet is a breakout game. “Gears of War,” which showcased the machine’s impressive horsepower, sold well, but it was targeted squarely at hardcore gamers. Microsoft — and Sony, for that matter — need to cast a wider net if they hope to grow market share.

At a press briefing on Tuesday, the company rolled out a long list of titles due out this holiday season, including “Bioshock,” “Rock Band,” “Mass Effect” and “Assassin’s Creed.” But the three titles the company is pinning its holiday hopes on are “Grand Theft Auto IV,” “Madden 08” and of course, “Halo 3.”

Game site IGN predicts that these three titles could account for a third of all game purchases this holiday season, which would be great news for Microsoft. But the fact is, “Grand Theft Auto IV” and “Madden 08” are not exclusive to the Xbox 360. These blockbuster titles will also be available on the PlayStation 3, although the Xbox 360 will have exclusive downloadable content for “Grand Theft Auto.”

The “Halo” franchise is single-handedly responsible for putting Microsoft on the map as a console maker. But early previews of “Halo 3” have been tepid, which should scare the bejesus out of Microsoft. Another thought that should keep them up at night: What if the only people who buy “Halo 3” already own an Xbox 360?

Microsoft isn’t just courting the hardcore gamer market at this E3. The company is trying to position the Xbox 360 as a family-friendly machine too — most likely a reaction to the surprising success of the mass-market Nintendo Wii.

Indeed, one of the more interesting announcements at this year’s E3 is a partnership between Microsoft and Disney that will bring new feature films to Xbox Live members. Xbox Live is one of the things Microsoft did very right with the 360, and this partnership will beef up considerably the list of movies already available on the online network.

None of this matters if Microsoft can’t get past a recent patch of bad PR. Although the Xbox 360 has sold nearly 12 million units, the sales have fallen short of projections. And last week, before anyone had even touched down at LAX, the company went public with the console’s hardware-failure problems that have been the talk of the game forums for months.

Microsoft did extend its warranty on the Xbox 360 to three years — an unprecedented amount in the game industry. It caused the company to take a $1.15 billion charge against its earnings. And Microsoft is promising to refund any money gamers have laid out to repair the “red ring of death.” But will this be enough to convince consumers that the machine is a good buy this Christmas?

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