E3 2013: Fighting the Console Wars One More Time

E3 is technically a trade show closed to the general public, but E3 apparently grants industry status to anyone who has ever worked at a Gamestop or Target (Target sells videogames, right?). As such, the show is more like Comicon than CES. Some attendees dress as their favorite video game characters, there are enormous props (World of Tanks had an actual tank parked in front of the convention center), and there are longer lines for free t-shirts than to try new game systems.

Oddly, E3 also does not evenly represent the world of electronic gaming. Exhibitors didn’t highlight the highest revenue platforms and genres or the biggest areas of growth. Instead, they skewed their exhibits towards a very specific audience: 25 year-old U.S. male console gamers. Fighting and role-playing genres were everywhere, while strategy, sports, dance, and puzzle games were not – even though more people play the latter category overall. E3 focuses more on living room consoles than PCs, even though PC gaming brings in more revenue, especially outside the U.S. PopCap was heavily promoting a new iteration of Plants vs. Zombies, but other than that, casual PC and web games were not well represented. A greater emphasis on consoles is to be expected in a year when a new generation of them is launching, but this pattern has held for several years, and the enormous growth in mobile gaming was almost entirely ignored. Last year, several major mobile game vendors from Asia had booths; this year they stayed home.

Finally, there was barely any mention of other forms of electronic entertainment at E3 beyond video games, despite the name of the conference (Electronic Entertainment Expo) and the fact that Microsoft reported consumers spend more time watching streaming media on their Xbox than they do playing games.

Sony and Microsoft both preempted E3 with previews of their next-generation game consoles. Sony held a large press conference in New York back in February, and Microsoft hosted a much smaller event on its Redmond campus in May. Just ahead of E3, Microsoft clarified its incredibly complicated policies on connectivity and used games, which allow consumers to play their games on friends’ Xbox One systems from the cloud, but restrict how games can be transferred. That left a lot less to talk about at E3 beyond pricing and extensive game demos.

The Main Event (Microsoft v. Sony: Fight!)

Sony’s decision to price the PS4 at $399 drew cheers, but mainly in comparison to Microsoft’s $499 Xbox One. Drawing even more positive feedback, Sony lampooned Microsoft’s move to DRM and connectivity mandate. Microsoft’s policies are definitely not consumer friendly – or easily understood – but are likely to be more significant to E3 attendees than average gamers. The E3 crowd was disdainful of the entertainment and motion gaming capabilities that Microsoft highlighted at its preview, and both Sony and Microsoft focused on traditional console gaming genres in their press conferences. Today’s motion games tend to focus on dance, fitness, and sports. However, the technology included in the Xbox One’s Kinect is truly astonishing, and the fact that every Xbox One will come with Kinect could lead to must-have game titles in the future.

The new Kinect is dramatically more sophisticated than the original. It works in low light and is not affected by concentrated light sources (like halogen lamps). It works in smaller rooms, enables a larger number of gamers, detects an incredible amount of detail – including gamers’ heart rates based on skin coloration! – and its microphones are more sensitive for voice commands. Sony does have a new PlayStation Camera (replacing the PlayStation Eye) for the PlayStation 4, but it is a $59 add-on, and Sony discounted its importance at E3. There were apparently Camera-equipped PS4 systems somewhere at the show, but I couldn’t find them. When I asked Sony about this, they were fairly dismissive about the importance of motion gaming. One rep noted, “you can buy the [PlayStation] Camera, and the new controller can be used with that if you want that type of game.” This could prove to be a big mistake over time as the Xbox One price comes down and developers design software that incorporate voice and gestures alongside the controller – even in traditional game genres. Sony is also behind Microsoft in cloud services; Microsoft has more Xbox Live subscribers than Sony has PlayStation Network accounts, and Microsoft is scaling up its servers further in anticipation of moving more gaming information to the cloud.

Console game sales are down ahead of the new hardware from Microsoft and Sony, but it isn’t clear that consumers are clamoring for new boxes that cost $400 – $500 before factoring in software costs and mandatory subscription fees for online play. I played a lot of games at E3, and the graphics on the next-generation consoles are better, but on many titles, that didn’t appreciably affect gameplay. There will be a lot devices fighting over limited consumer budgets this fall. Tablet and smartphone sales are exploding, and gaming titles for iOS and Android are either free-to-play or cost at most a few dollars a game. Some of these games are coming directly to the television. Ouya’s $99 Android game system was funded in record time at Kickstarter, and Apple is rumored to be opening its $99 Apple TV box to developers in the future as well.

Producing a winning living room game console is still a huge prize, but Sony and Microsoft seem focused exclusively on the living room, when gaming is clearly following computing into mobility. Sony execs were understandably proud of their performance at E3. However, Sony did not provide any more details on how the PlayStation will deliver on the larger vision of consumer-centric, location and device -independent gaming that it described back in New York. Microsoft is not doing much better in this regard. While a Halo game was finally announced for the Windows Phone, it will be an arcade-style top-down shooter, making it Halo in name only. The heavily promoted cross-platform game Spark impressed us by allowing consumers to design their own games on an Xbox One controller, an Xbox 360 controller, or a Windows 8 touchscreen, but it also lacks a Windows Phone version.


Microsoft clearly felt the heat from Sony – and gamers – on the Xbox One’s DRM and connectivity policies. A week after the show, Microsoft reversed nearly all of them: the console will not require connectivity to play standalone games, games will not need to “check in” every 24 hours to remain playable, and it will be possible to share or resell Xbox One discs without restrictions. While some damage was done, the updated policies were received well by the online gaming community. Microsoft was forced to change due to its downright consumer unfriendly DRM, incredibly confusing rules for sharing or reselling games, and the fact that Sony didn’t follow Microsoft into cloud gaming. (Sony gleefully turned the knife in Microsoft with YouTube ads ridiculing Microsoft instead.) However, Microsoft’s original plans offered consumer benefits, too. Microsoft failed to articulate them, but the connectivity and DRM enabled sharing games among family members, and playing games locally or remotely without requiring a disc in the drive. Faced with a consumer backlash, Microsoft had to make changes. Microsoft could have made disc-based purchases work DRM-free, and downloaded purchases work with DRM restrictions but with all the cloud benefits. However, this would have been a more difficult message to deliver. Instead, Microsoft simply went back to the old way of doing things, and consumers will lose out.

Published by

Avi Greengart

Avi is the Research Director for Consumer Devices at Current Analysis. He is responsible for the Mobile Devices and Digital Home Devices groups, including CurrentCOMPETE (market, company, event, and device competitive analysis) and Wireless Tracking (pricing, promotions, availability, and device feature data and analysis) content.

24 thoughts on “E3 2013: Fighting the Console Wars One More Time”

  1. Consumers will lose out on what exactly? A sharing plan that was never officially fleshed out, and unofficially was nothing more than a demo mode aimed at selling more games.

    You have to love how, actually having competition, works as a hearing aid for criticism deaf corporations. Over a year of complaints about Windows 8, falls on deaf ears, but days after E3, Microsoft totally reversed course on XB1.

    The big difference: Microsoft has a monopoly on desktop operating systems and figures it can just bully that market into submission. But when selling consoles Microsoft has strong competition, and it actually has to pay attention to potentially alienating customers.

    1. Oh, I agree that the plans were confusing, ill-defined, and had some seriously anti-consumer aspects to them. Microsoft backed themselves into this corner, and they made the best of the bad situation they put themselves in. But in the process, they lost out on moving console gaming further into the cloud – and that would have brought some benefits, too.

      1. Console gaming is already in the cloud. Sony has Gaikai which can perform 100% of the game processing in the cloud and stream it to any device. Sony is positioned for the future just as well if not better than Microsoft.

        I’ve been reading articles all over the web that Microsoft’s policy changes are somehow a major blow to the “future” of gaming. Sony can deliver just as comprehensive a solution re: “the future of gaming” as Microsoft. At least in theory, Gaikai can be used to serve music, movies and games from one integrated infrastructure. Once bandwidth catches up, the next PlayStation will be the size of a hockey puck and every developer will enjoy the wet-dream of perfect DRM because ALL content will be hosted and served from the cloud.

        Sony just had the common sense to not drop-kick everyone into this utopian (dystopian?) future of partial-license non-ownership of content via physical media. It knows it’s going to happen regardless. Sony also knows that, considering the state of today’s broadband, physical disks aren’t going anywhere anytime soon. While Microsoft is building a hybrid model for the future of gaming, Sony knows that the next PlayStation will only need enough processing for streaming.

        As far as Kinect, I know someone who has worked on similar tech and there is no way in hell I would want it in my home. Yeah, just lump me in with the tin-foil hat set because it is downright scary the level of surveillance Kinect and similar technologies allow in the home. Some people will be able to live with the trade-off but I’m not one of them and I suspect their are at least a few more people like me. Privacy may be passe to some but not to me. A society cannot be free without privacy and I think much of today’s technology is crossing the line. Besides that, the UX aspect of full-motion gaming fails in relation to standard controller gaming re: efficiency. In other words, people will gravitate to the method of gaming that is most efficient or requires the least amount of physical energy. That’s why millions of Wiis ended up gathering dust after the first few months of use. If Sony integrates Oculus Rift before Microsoft, it’s going to make Kinect 2.0 look as useless as Kinect 1.0.

        Sony took all the risks to win its war with HD-DVD and now it more or less controls physical media for high-density content, like movies and games. It’s positioned well for the end of physical media with Gaikai. What can Microsoft offer that Sony can’t or won’t be able to offer? On top of that, Sony owns mountains of its own content.

        Sony and Microsoft are headed in the same direction. Sony is simply walking instead of running and tripping over its own feet.

        1. Thoughtful comments.
          We’ll see if Sony can execute.
          Leaving aside the creepiness/paranoia issues, I think the benefits of Kinect are tremendously undervalued by the gaming/tech press/Twitterati.

  2. “Microsoft went back to the old way of doing things, and consumers will lose out.”

    When a company messes up, the real loser is the company. Consumers have other options.

    1. Not in this case. If you want console quality games with family sharing plans and the ability to buy physical media (for fast install times and to support your local Gamestop) yet play them in the cloud… there isn’t an alternative. At least not yet.

  3. Fighting the console wars one more time… or
    Fighting the console wars one LAST time?
    Severely doubt this game-space will still exist in this form factor 4 years from now.

      1. I keep reading this but I have no idea why. There are advantages to purpose-built devices over general-purpose devices, particularly in UI and UX. I think consoles will evolve but I don’t think they will disappear.

    1. Very perceptive! My original title was “…One Last Time” but I changed it because I didn’t want to get into the argument of how the consoles will evolve and whether this is really the last time someone will sell you a box to connect to a TV for gaming. (It probably isn’t, but tomorrow’s boxes may be quite different, especially if the cloud or mobile trends continue.) This column really was about today’s fight, so I changed the headline. But you’re not wrong!

      1. This is almost certainly the last generation of TV game machines that deliver games via physical media. It will be at least 5 years before the next console refresh and by then most buyers will have grown up with an always on internet.

        Microsoft tried to jump the gun and restrict physical media like it was already digital.

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