Tuesday, June 2, 2009

Why Microsoft (MSFT) Will Dominate the Video Game Market (and Your Living Room) in 2010

First off, sorry for the recent lack of updates to the three people that read this every now and then. Life caught up and I've been too busy with more serious (read: no fun) work projects to bother writing a good, blog-worthy article. Some interesting events have been happening over the past two weeks, mainly involving GM filing for bankruptcy protection, the continued spike in Treasury yields, and the feeding frenzy in commodity markets. However, I'm not talking about that today because the most anticipated yearly event in every videogame nerd's calendar, E3, started this week! Rejoice!

I do not have any particular bias towards Microsoft, as in I do not own any stake in the company. While I do own an Xbox 360, I have never participated in any acts of Xbox fanboyism. Having said that, and having watched both the Sony and Nintendo press conferences closely, I really think that Microsoft is making the other two members of the videogame Big Three look like total n00bs. (Yeah, I went there.)

Early during their press conference on Monday, Microsoft revealed a brand-new motion sensing control system that has been garnering more attention from international news sources than all other news releases coming out of E3 put together. Codenamed Project Natal, the system is a “fully hands-free control system that will use face recognition and motion sensors to allow users to play games." (Watch BBC Project Natal coverage here.)

Natal will be compatible with the current generation Xbox 360 and will be fully integrated into the system’s online component, Xbox Live. According to respected insider news sources (i.e. nerd blogs), Microsoft is planning to extend the life cycle of the 360 through the use of technology that allows them to expand on current generation hardware without the need to release an updated, more expensive system such as the oft-rumored Xbox 720. The version of Natal demoed at E3, which Microsoft confirmed is still in early stages of development, already looks far more advanced than the current king of motion sensing technology, the Nintendo Wii.

For instance, Natal does not require an input device a-la Wiimote, it maps every inch of the players body and reads every movement without the need for a controller. Because of this, Natal allows for multiple input sources to be read simultaneously. If a player delivers a punch and a kick at the same time, Natal registers both. This is one area where the Nintendo Wii is severely limited, as it only allows for a single input per Wiimote. Natal also integrates voice and image recognition in real-time. During a video showcased on Monday, a young woman interacts with an AI personality named “Milo” who replies to voice cues in an eerily realistic fashion. Near the end you can see the woman’s reflection on a pond of water being rendered in real-time through Natal. Microsoft claims that the voice recognition software is going to be advanced enough to detect changes in a person’s tone and mood, and react accordingly. Ambitious, yes, but definitely promising.

Natal wasn’t the only sign that Microsoft is aiming for total living room dominance by next year. In an effort to improve and expand on the growing success and user base of Xbox Live, Microsoft will be adding integrated Twitter, Facebook, Last.fm, and BSkyB connectivity to their service. According to a press release, the Live network will pull in status updates, photos and friend lists from Twitter and Facebook. Users will have the option to display tweets to their Xbox friends, while Facebook Connect will “allow players to post game footage, high scores and achievements directly to their profiles.” (source: TechTicker)

Last.fm will offer free streaming radio to Gold account members, while Silver members will likely have to pay a fee.

Integration with BSkyB, the UK-based broadcaster, will allow UK users to stream on-demand and live TV shows and movies much in the same way that US users have been doing since Netflix was integrated into Live some three months ago.

In addition, Microsoft plans to expand the Xbox’s Netflix service this fall by improving network connectivity and adding features such as a full browsable database and the ability for user to add movies and TV shows to their queues directly from their Xbox.

The big announcements from Microsoft did not stop there, either. In a separate, smaller press luncheon, Microsoft revealed plans for Games on Demand, a service that will allow games to be bought from Xbox Live for direct download onto the system’s hard drive. The service is expected to begin in August with 30 games with more added on a regular basis. Even though the announcement was swallowed up in the media frenzy following the Natal demo, it was big enough to cause shares of GameStop to plummet 6.6% in Tuesday trading, and with good reason. If Games on Demand takes off as a viable and accessible digital distribution medium for games along the same vein as iTunes, it could take a substantial chunk out of the brick and mortar videogame retail business.

On the subject of Sony and Nintendo, I have to admit I was a little underwhelmed by both their press conferences.

The Sony conference was typical E3 fare featuring the announcement of big-name exclusive titles such as God of War 3 and the new Team Ico game, The Last Guardian. The lack of a PS3 price drop was somewhat surprising considering that Sony has been hinting towards a cheaper PS3 for some months, and the unveiling of the PSP Go was met with mixed reactions. In addition, Sony showcased its own take on motion sensing technology, which uses both a camera (the Playstation Eye) and a controller setup very reminiscent of the Wiimote. While interesting in theory, the setup looked awkward and outdated coming a day after the Natal demo.

As for Nintendo, their conference was met with confused reactions from journalists who claimed to feel like they accidentally fell through a wormhole to last year's E3. On display were the new updated WiiSports and WiiFit, a sequel to Super Mario Galaxy (shocker), and a new Super Mario Bros. game that looked like a straight port from the Nintendo DS version with added support for four players. The most exciting (almost exciting enough to make up for an otherwise meh conference) announcement was the announcement of a Metroid game under development by Team Ninja.

So there you have it folks! That's my take on Microsoft and the Big Three from E3 (no pun intended) so far. Stay tuned for more later.

-C

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