E3 '07: Analysts size up big three

SANTA MONICA, Calif.--The E3 Media and Business Summit kicked off with press conferences from Microsoft, Nintendo, and Sony each dropping its own salvo of bombs (be they poorly told jokes or big announcements).

Microsoft showed off a slew of games, including Viva Piñata: Party Animals and an Xbox 360 edition of the trivia game Scene It. The company also dated Project Gotham Racing 4 and Mass Effect, and gave new looks at Call of Duty 4 and Resident Evil 5.

For Nintendo's part, the company basked in recent financial successes with a wealth of stats and showed off three new peripherals: the gunlike Zapper, a steering wheel meant for the new Mario Kart Wii, and the Wii Balance Board, which comes with the conference's main event game, Wii Fit.

At Sony's show, the electronics giant showed off a revamped PlayStation Portable, announced a deal with NCsoft for exclusive PlayStation 3 massively multiplayer online games, announced that Unreal Tournament III would be PS3-only for this year, and showed off Killzone 2.

With the show now in full swing, GameSpot stole a few moments from a handful of industry analysts to get their gut reactions to what was (and wasn't) announced during the conferences.

Wedbush Morgan Securities' Michael Pachter said before the show that he expected an Xbox 360 price cut by the end of the Microsoft conference as an answer to Sony's $100 PS3 price cut from earlier in the week. With no such cut materializing, Pachter admitted he was wrong, and said that Microsoft is in a tough position right now because of the recently announced warranty extension for the system. He said a price cut now might send the wrong signal to consumers about the quality of the hardware, and they could save the price cut until they can reassure consumers that whatever was wrong with the system has been fixed.

Nollenberger Capital Markets' Todd Greenwald said the lack of a 360 price cut was probably the right move. "A price cut in July or August probably doesn't do much," Greenwald noted, "especially when there still isn't a compelling reason to buy a PS3 (despite the big $100 price cut)."

As for Sony, Greenwald gave the PSP redesign a yawn. And while he called the company's conference "underwhelming," he said it appeared as though they were lining up a strong slate of games for next year.

Greenwald seemed most impressed by Nintendo, saying the Wii maker can basically call its own shots for now. "I think the Zapper looks great, really great," Greenwald said. "Wii Fit should expand the market even further for Nintendo, and maybe some nimble publishers like Ubisoft and Majesco can benefit from it. I don't think it will be as big as Brain Age or Wii Sports, though."

The Yankee Group's Michael Goodman thought Wii Fit was "really cool," but doesn't expect it to meet the same success as other Nintendo breakout hits like Brain Age and Wii Sports.

"The reality is that the Wii is not expanding the market as much as Nintendo wants us to believe," Goodman said. "According to a publisher I have spoken to, less than 10 percent of Wii buyers did not previously own a console. So basically, Wii growth is coming at the expense of other console manufacturers--mainly Sony--not by expanding the market. It is only once a Wii enters a household that others start using it. Wii Fit will require those 'non-gamers' to go out and buy the board and software, which I'm skeptical of."

Lazard Capital Markets' Colin Sebastian was perhaps a little more optimistic about Wii Fit, saying it "looks good and will appeal to the casual audience that Nintendo is tapping into." He still expects a price cut on the Xbox 360 to arrive later this summer, and overall he said the conferences went pretty much as he expected, "which probably favors Nintendo."