Analyst picks winners at E3

LOS ANGELES--With E3 winding down, everyone that matters in the industry has been privy to guided tours and behind-closed-doors presentations of next-generation games, generally providing them with a lot more perspective on the business than your average gamer.

GameSpot had a chance to sit down Thursday night with Yankee Group senior analyst Mike Goodman to get his blunt take on the industry as a whole, the unveilings (or lack thereof) of the next generation of consoles, and just who walks out of this week's expo having gained the most ground since Monday.

"They're all going to say they won," Goodman said of the companies on the show floor, "but I think in general, publishers are going to win here."

"There's a lot of smoke and fire about the (new) hardware, and that will probably be the leading stories, for the most part. But realistically, in my mind, it's a lot of hype. The hardware counts right up until the day the product launches into the market. Then it's all about the software. And I think those publishers that at least showed some of their next-generation titles, they're the farthest ahead. EA with Need for Speed, Activision...those titles showed really well and showed real potential."

Back to the hardware, Goodman had the most positive things to say about Microsoft's position with the Xbox 360 launch.

"I think it's extremely important that Microsoft is launching first, and has the holiday season to itself, for several reasons," Goodman said, "not the least of which is they get to set the market in terms of pricing."

Goodman said he would be shocked if the Xbox 360 was released for anything other than $299 and went on to explain the strategic advantage this would give Microsoft over Sony's PS3, the pricey components of which could demand a $500 retail tag.

"If Microsoft sets (the Xbox 360 price) at $299, like I expect them to, that puts an awful lot of pressure on Sony in terms of how they price their console," Goodman said. "Remember, by the time Sony comes out, at least by its first holiday season, Microsoft will have been out for about a year. It would not be entirely unexpected if they really wanted to put the squeeze on Sony to drop their price to $249."

Goodman expects a $399 asking price for the PS3, but said that still could lead to a "nightmare scenario" for Sony.

"Let's say they launch in August (2006), and let's say they come in at $399," Goodman begins. "Microsoft turns around in September, drops the price to $249 and launches Halo 3. Now that's a nice little double whammy. You've got $150 gap between the two, and you've got Halo 3 coming out. And you've got probably close to 100 titles in your library at that point and a couple of good solid franchises to help build. If you're Sony, it's a very difficult decision, and there are market forces out there that come in to play as well, 'market forces' being Microsoft in this instance."

In the meantime, Goodman expects Microsoft to have a very successful rollout by virtue of having the biggest and baddest system on the block around Christmas.

"For this holiday season, whatever Sony or Nintendo want to say, it's going to be 360 competing and comparing against the PS2 and the GameCube, and it's going to show better every single time. And retailers will want to highlight it because it's going to help them sell HDTVs."

So should Sony and Nintendo have held off on unveiling their next systems to better promote and push their existing console products for the next year? Maybe not.

"It's a Catch-22, particularly for Nintendo and Sony," Goodman said. "On the one hand, because Microsoft did [unveil a new system], Sony can't cede the floor to Microsoft and just allow them to have carte blanche as the only next-generation console this season. On the other hand, by making their announcement now, when the product isn't going to hit the marketplace for another 12 to 18 months, they do run the risk of diluting interest and diverting interest from their current offerings, which is all they're going to have this holiday season."

While Goodman said he expects whatever head start Microsoft gets in this console war to eventually be overcome by Sony, he was not so bullish on the fate of Nintendo in the coming years, going so far as to name the venerable publisher when asked who he considered to have lost the most ground during E3.

"Bottom line (for Nintendo) is, you're number three in the marketplace," Goodman said. "Your console is not offering all the capabilities of your competitors' consoles. You're relegated as being the kid's platform. There's just a series of missteps on behalf of Nintendo, and I haven't seen anything in Revolution that corrects those missteps. Nothing. And being third to market just exacerbates the problem."

Not even the Game Boy Micro won points with Goodman.

"I first saw it, and yeah, it was kinda cool," Goodman admits. "Then I got to look at it, and it's hard to read the text on it. It's actually hard to use, at least for anybody over the age of eight. Your hands are too big. Just because you can do something doesn't mean that you should do something, and this is a product that fits into that category."

On less inflammatory topics, Goodman said he expected publishers to seek more ancillary revenue from advertising and directly downloadable content (the extra content Microsoft wants to sell over Xbox Live with micropayments, for example), as next-generation hardware sends development costs skyrocketing.