The Divnich Debrief: E3 2010: The Most Important Event in Gaming History?

The traditional video game market, comprising of home consoles and handhelds, has been under considerable pressure for the last 16 months. This pressure is mostly attributed to declining sales among traditional games, and a rise from emerging markets such as mobile and social gaming. The decline in sales and the rise of other cheaper alternatives for interactive entertainment has raised serious concerns among investors and industry professionals about the long-term viability of the traditional console market. Additionally, the elongation of the current cycle and lack of visibility for the next set of hardware only reinforces the negative sentiment in the industry.

With so much negativity in the air, the entire industry will be on watch during this year’s E3 convention taking place in Los Angeles, CA.

Previous E3s have been focused on games that will drive our industry for the next 6 -12 months; however, this year the primary focus will be on new technologies that are supposed to drive industry sales back into the black over the next three years. Natal, Move, 3D gaming, and the 3DS are just some of the more important technologies that will be on display at E3 2010.

Of course, there have been previous E3 events that have focused on long-term technology, specifically the events that displayed the first set of games for the PS2 and the Nintendo Wii. However, what is different this year is the sentiment going into E3, and never has investor and public confidence been this low about traditional packaged interactive media. Near the end of the previous cycles, such as the PS2/XBX/GC, the biggest debate was who would win the next round. This year, with no-end in sight, many have questioned how the next-generation consoles can survive past 2012, and of course, whether there will ever be a “next round” for someone to win.

Simply put, if the Natal, Move, or 3DS fail to excite the industry at E3 2010, our industry could face additional derailment as both public and private funding may continue to focus on other more promising markets such as mobile, MMO and social networking. Of course, one may ask how their non-Move or non-Natal title is affected by the success of technologies it doesn’t rely on. But it does, greatly, as the failure or success of any new technology, especially one that is supposed to drive hardware sales (or is hardware itself), creates a ripple effect for the entire industry.

Two years from now we will all look back at E3 2010 as being the inflection point for the industry; either E3 2010 acts as a positive catalyst and boosts industry confidence, or it reinforces the negative notions about the long-term viability of traditional gaming. My bet is on the former. I believe there is no chance that we walk away from E3 2010 this year with a simple shoulder shrug saying, “Yeah, it was alright.” The results will fall on either extreme, and my vote is that E3 2010 will be the best industry event in the history of modern gaming.

Whatever the outcome or your own personal opinion, one thing is for certain, E3 2010 is a must attend event for anyone with any vested interest in the video game space.

E3 Predictions

Grand Theft Auto V?

I was originally quoted at the beginning of the year predicting an announcement of Grand Theft Auto V at E3 2010, likely just a date and name confirmation. However, I originally assumed that Rockstar would have already hard-dated their expected 2010 releases, L.A. Noire and Max Payne 3, making E3 a perfect time to announce a new product (GTA V). Both L.A. Noire and Max Payne 3 still have no hard street date. Given that Rockstar has now evolved to being more than just a one-property AAA publisher, it may be wise that they hold off on any Grand Theft Auto V announcements as it may steal attention away from L.A. Noire and Max Payne 3, two titles that are crucial to the success of both Rockstar and Take-Two. Although I wouldn’t be surprised to see some teasers at the show, just don’t expect any hard street dates or official announcements regarding the fictional in-game location.

Nintendo 3DS Name & Date

While Nintendo has not formally announced a timeframe for project 3DS, their financials speak a different story. According to their expected Nintendo DS and 3DS sales (they combine both sales into one category) our estimates indicate that Nintendo is expecting the 3DS to sell 5 million units by March 2011. Given historical sales of the Nintendo DS, which coincidently sold 5 million units through March 2005, Nintendo is likely to announce that the 3DS will be available in at least two regions beginning in November 2010. Additionally, they are likely to reveal the project’s actual name.

However, don’t expect any official pricing strategies until September, at the Tokyo Game Show, and that's likely to be in Yen.

Other Announcements

1. Like past E3s, Microsoft, Sony, and Nintendo announce at least 2 AAA first-party titles, each, for their respected platforms.

2. Nintendo will probably reveal how the Vitality Sensor will actually work, and for which games.

3. Take-Two/Rockstar will likely give the industry an updated teaser on The Agent.

Other than that, it is hard to predict any additional surprises at E3 2010. With Move, Natal, and the 3DS already being pre-announced, it is hard to imagine the three-day event could handle any additional major surprises.

Publishers under Pressure

Ubisoft

Ubisoft is under the greatest pressure to deliver an appearance beyond expectations. Over the last 12 months negative sentiment towards Ubisoft has increased as the casual and mainstream markets that boosted Ubisoft to record sales in previous years is slowly in retreat. With the Natal and Move launching this fall, many wonder if Ubisoft will have an impressive line-up to reel in those casual and mainstream consumers. Additionally, their biggest release so far in 2010, Splinter Cell: Conviction, has faced numerous hurdles with game glitches and a lackluster retail performance, putting even greater pressure on the French publisher to deliver a worthwhile show.

Additionally, many have questioned whether Assassin’s Creed can be annualized and whether Ghost Recon: Future Soldier can hold up against a monstrous holiday release schedule within the Shooter category (Halo Reach, Call of Duty, Medal of Honor). Ubisoft’s success at E3 2010 is vital to the company’s short and long-term success.