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Between Christmas 2006 and March 2007, all-out war will erupt between the three leaders of the home game system industry; Sony, Nintendo and Microsoft. By the end of March 2007, the industry leaders Sony Computer Entertainment (SCE), Nintendo, and Microsoft, will all have arrived on the market. At a time when demand for home entertainment is becoming increasingly diversified, and the needs of home gamers are changing, what direction will the fight for supremacy over the next-generation gaming market take?

A change is occurring in Sydney resident Natsuko Nakamori's Bondi Beach living room. Recently, her 10-year-old son Gaku, who would stay up all night to play games on his PlayStation 2 (PS2) has lost interest in it. And it's all because he's currently obsessed with his new Nintendo DS - the hand-held game released in February 2005 that is now enjoying major popularity with gamers. On weekends, Gaku's friends come over to play with their different coloured consoles and the children compete with each other via wireless connection.

The DS has two three-inch, 26 million colour LCD screens, one of which is a touch screen via which players interact by touching the screen directly with a stylus or their fingers. Cutting edge concepts such as this touch screen and voice recognition technology are the DS's main features, but additional software products such as the educational 'DS Training for Adults' (Nintendo), and games which enable players to raise their own virtual pet puppy, Nintendogs (Nintendo), are also proving to be huge hits.

These original concepts have been extremely successful for Nintendo, capturing the interest of users young and old who previously weren't attracted by the old consoles. In Japan alone, sales figures for the last 20 months have already broken the 10 million unit mark. Demand is outstripping production levels and supply shortages are continuing.

But there is a downside to this amazing success. The success of the DS and the PlayStation Portable (PSP) has diminished the demand for non-portable game consoles. And this ironic situation is also unfolding for their creators, Nintendo and Sony, in the Australian market. According to 2006 January to July figures, in the Japanese market hand-held game consoles have overtaken non-portable sales. If this trend continues we may see the popular image of kids glued to the television or ensconced in video games become a thing of the past.

High capability breeds difficulties
Consoles are making the transition from household to individual use. However for Sony and Nintendo, it's also the case that their current non-portable models (PS2 and the GameCube) aren't selling as well because they are each reaching the end of their circulation period before the release of the new models.

By far the most significant factor in the decline is diversification. With the spread of the internet, mobile phones, PC games, and the dominance of hand-held game consoles, the style of kids' indoor play has become richer and more diversified, detracting from time spent playing on non-portable consoles.

Problems have also arisen regarding the manufacture of non-portable game systems. The new high capability consoles have been beefed up, with processing specifications far surpassing those of the super computers of a decade ago. Processor speeds are much faster and screens can display high-definition images that seem almost real. Compared to the black and white Invader and PacMan games of the children of the 1980s, it's a whole new world.

But as a result of the rapid improvements in hardware capabilities, game system companies are now faced with the dual dilemma of a trend away from non-portable consoles and the rising costs associated with software development. And the software itself is becoming increasingly complicated as a result.

Improved capabilities impress game enthusiasts, but for basic users more complicated software is intimidating. The trend of more complex software has given rise to a trend away from non-portables, and as a result the number of popular software games has dropped. This is because higher capability machines require more complicated software, which means that software development and production is more time consuming and more expensive. As a result, software makers' profit margins have been reduced, causing the games that are produced to be less interesting to consumers. The ultimate outcome is that fewer games are sold. This unfortunate cycle has already begun.

Wii - increasing the gaming population

Nintendo Wii, with a completely new controller, will be launched on 7 December 2006 in Australia.
Against the backdrop of lower non-portable game sales and lower software production, Sony and Nintendo announced the launch of their next generation of non-portable game consoles at the May 2006 Electric Entertainment Expo (E3) in Los Angeles. While Sony indicated that it would continue to develop products in the same vein as the PS2, Nintendo proposed a total overhaul of its controller feature, taking a totally different approach to its counterpart with a radically new concept.

Following its North American release on 19 November, 2006 and Japanese release on 2 December, Nintendo will release its next generation non-portable console, Wii, in Australia on 7 December, 2006. Wii's stand-out feature is its elongated, slim Bluetooth-capable remote controller. Until now Nintendo console controllers have featured an increasing number of buttons, which are necessary so that the controller is compatible with the now overly-complicated software. As a result players have had to hold the controller with both hands. But on the Wii, the number of buttons on the remote controller has been significantly reduced, so that for the first time in gaming history games can be played with one hand.

Nintendo Wii, with a completely new controller, will be launched on 7 December 2006 in Australia.
In Wii the console actually tracks the movement and speed of the remote controller itself. For example, in a baseball game the gamer holds and moves the remote controller in the same way as one would a baseball bat - the player's image on the TV screen moves the bat in a corresponding movement. In racing games, the player holds the controller like a steering wheel and steers it left to right as in reality. This is an interactive experience that, until now, games have been unable to make possible. In addition to the usual buttons and control stick, the controller features a speed sensor and the console also includes an additional Nunchuk controller with enhanced features that can be used simultaneously with the standard remote controller.

At 44mm in width, 157mm in height and 215.4mm in depth, Wii is the smallest Nintendo non-portable console yet. Nintendo has also kept the cost down by not including a DVD playback feature in the console. In Australia, the recommended retail price for Wii is $399.95 (in Japan it is エ25,000). The console is also wireless LAN and Nintendo DS compatible.

At a Wii press conference on 14 September, 2006, Nintendo's president Satoshi Iwata acknowledged that the success of DS has stemmed the fall in popularity of game systems. He also revealed that Wii was created with the intention of increasing the number of [Nintendo machine] users per household - as a game machine that people young and old, with or without gaming experience, could enjoy together as a family. The cutting edge design of the remote controller, he said, was a result of this strategy. He emphasised that Nintendo was now ready to take the next step in its plan of 'increasing the world's gaming population'. Following more than 20 years of Nintendo's history in the household gaming industry, it will be interesting to observe how the market responds to this bold new initiative.

PS3 continues on a familiar route
Playstation 3 console will be sold in Australia for A$829.95 (20GB) and A$999.95 (60GB).
In contrast to Nintendo, Sony - which currently holds the lion's share of the market - will aim to continue to trade off the popularity of the PlayStation with the release of its PlayStation next generation console, PS3. PS3 will be Sony's first release in seven years since it last released PS2 in 2000. The new game system contains a 64 bit, 3.2Ghz Cell CPU, which it developed in a joint venture with IBM and Toshiba. A step up from the capabilities of the PS2, it is an extremely powerful machine.

Players have a choice of two hard drive sizes - 20GB or 60GB. In Australia, the recommended retail price of the 20GB model is expected to be $829.95. The 60GB model is priced at $999.95. Compared to its biggest rival Wii, PS3 represents a massive difference in both price and concept. Unlike the Wii controller, which is a major conceptual change for Nintendo, aside from adding Bluetooth capability, the PS3 controller differs little from that of its predecessor.

Looking at the demo screen of a PS3 racing game, the high definition screen handles images even at high speeds with little stress, and the image is almost mistakable for real video footage. The reflections of the surrounding view on the car bodies are so realistic that the PS2 screen pales into insignificance against the high quality of the PS3 display.

Formula One cars look more realistic than ever on the new PlayStation 3 console.
Apart from the high capability aspect, another distinguishing aspect of the PS3 is its Blu-ray disc (BD) technology. With higher definition and more storage room than a DVD, BD, which is favoured by Sony and Matsushita Electric (Panasonic), is vying with the Toshiba and NEC-designed HD DVD to become the standard medium used in the game system industry.
At the time of its release, the current PS2 included a DVD drive, which at that time had not reached market saturation. This strategic move by Sony fuelled a rapid take -up of PS2s and DVD drives throughout the market. So a rapid take-up of PS3s throughout 2007 will also be a signal that BD is winning the struggle for supremacy over HD DVD as the preferred next-generation recording medium.

But there is a dampener; the sale date for PS3, which was set for early spring 2006, has now slipped back to November 2006. In addition, release in the European and Australian markets has just been announced as March 2007. For the Australian gamer, this means that the PS3 will not be on store shelves until after the Christmas trading period. This would seem to be catastrophic, but CEO of Sony Australia Michael Efraim insists that "The war for a generation of a console takes place over five or six years. We think this delay over Christmas is unfortunate and not ideal, but in the long run we don't think it will play a significant role at all." Only time will tell whether this assessment is accurate.

Who will have the last laugh?
The latest entrant into the battle for hegemony over the home gaming market is the giant of the software world, Microsoft. The maker of the Xbox entered the fray belatedly in 2001. In the Japanese market the Xbox trails in third place behind PS2 and Nintendo GameCube and is experiencing a depression in sales, but in the English speaking countries of North America and Australia it is competing vigorously with Nintendo for second place behind the holder of the biggest market share, PS2. Its successor, Xbox360, recently arrived on the Australian market.

The scene is set. Of the multitude game system manufacturers of the 1980s and '90s, only three remain: newcomer Microsoft Xbox; aiming to drastically increase the gaming community, Nintendo Wii; and steering the future of Sony, PS3.

A quarter of a century has passed since the pioneer of the genre Nintendo released its first machine, the Nintendo Entertainment System, in 1983. As the fundamental nature of home entertainment undergoes drastic changes, the struggle for control between the three veteran survivors begins.