Microsoft will be counting on the annual fete to build buzz for its upcoming Xbox game console. The company is set to announce a price and a sale date for the Xbox, the last two major pieces of information to emerge about the device. Analysts expect the company will match Sony's $300 price tag for the PlayStation 2.
"They've got to come in equal to or less than the PS2," Gartner analyst P.J. McNealy said. "They're a new entrant in this market, and they have a chance to make a first impression only once."
Nintendo, meanwhile, will try to prove it's still a serious contender in the console market with its upcoming GameCube. (Not to mention the video technology company promising details on "Britney Spears' first foray into the interactive entertainment industry.")
Top representatives of the three console makers will make their cases in a keynote address set to kick off the event Thursday morning, but specific plans will be revealed in press conferences the day before.
While gamers will be focused on Microsoft's announcement, the price picture could get fuzzier if Sony decides to shave $10 or $20 off the PS2. By the time the Xbox hits the market, PS2 will be celebrating its first anniversary.
A price cut could further pressure Microsoft. Because of the standard video game practice of counting on software royalties to subsidize hardware costs, Microsoft is expected to lose up to $125 on every Xbox it sells, making the company less likely to match Sony on any price cuts.
"If you're selling millions of units, cutting $20 off the price is a big deal," IDC analyst Schelley Olhava said.
While Microsoft has to establish its credentials in the game industry, Nintendo may face an even bigger challenge convincing gamers it's serious with the GameCube. The console, once dubbed "Dolphin," was originally scheduled to be on shelves more than a year ago as the successor to Nintendo's long-in-the-tooth N64. Persistent delays mean that if the GameCube comes out late this year, as planned, it risks becoming a sideline attraction to the war between Sony and Microsoft.
"They really need to show everyone that this product is going to come out as promised, Olhava said. "As it keeps getting delayed, they're losing windows of opportunity."
But Nintendo's competitors don't have a lock on handheld gaming, as Nintendo does with its Game Boy line. The new Game Boy Advance--available in Japan and set to go on sale June 11 in the United States--will connect with the GameCube to transfer game data, act as a spare controller and perform other functions.
It's the first time Nintendo has tried to transfer its handheld dominance to the console market. Combined with a few strong franchise titles, such as a new "Mario" game and a selling price expected to be below $200, Nintendo should at least be able to maintain its grip on gamers 12 years old and younger, long considered the company's key demographic.
"All they have to do is market the GameCube to the people who own a Game Boy Advance, and they've got a pretty good audience," McNealy said, adding that the beefier hardware in the Xbox and PlayStation 2 shouldn't be much of a barrier for Nintendo.
"They're marketing to a different audience," he said. "The 12-and-under crowd doesn't care about processor speed and hard drive size. They care about Pokemon and what will it do with my Game Boy."
While prices and hardware specs are important details in positioning consoles for the market, the biggest challenge at E3 is to deliver on software. Demonstrations of lots of good-looking, high-quality games are essential to convince gamers that a new console has the right stuff.
"I think it's critical to have some games that really show off the platform," Olhava said. "And that applies to all of them. Sony needs to show some games that really push PS2 forward."
E3 is important for building buzz around a new console, McNealy agreed, but not critical, especially if you have Microsoft's $500 million marketing budget to throw around.
"It certainly helps to get a good response at E3, but it's not a make-or-break proposition," he said. "If Microsoft absolutely bombs with their demos at E3, they're still not slitting their throats."
Sony had a pretty weak response to the PlayStation 2 at last year's E3, McNealy noted, but by the time the console went on sale, consumers were lining up for blocks and paying huge premiums to get their hands on one.
E3 "is significant to the hard-core gamer; it's not significant to the general consumer," McNealy said. "The general consumer doesn't even know what E3 is."