Sony and Microsoft battle goes to E3 as Smartphones Dent Consoles

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Microsoft Corp. (MSFT) and Sony Corp the leading console makers are battling to sell pricey machines in the current age of cheap smartphones and tablets.

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Both the game console giants are present today at E3, which is the video game industry’s annual conference at Los Angeles, with $67 billion game market in grip of 2 year slump. Consumers have already cut purchases of game consoles and costly packaged games mainly due to inexpensive Web delivered games like Rovio Entertainment ‘Angry Birds’.

Sony’s PlayStation 4 and Microsoft’s Xbox One are set to be in stores in U.S. holidays. Sony is trying hard to coax hard-core gamers as well as casual ones and to line up early for the blockbuster titles and many smaller exclusives that can later develop into hits. Microsoft positioned the Xbox One as center of the living-room entertainment, with programming from the leading director Steven Spielberg, Hollywood and ESPN studios, leaving gamers to the question whether it is their best console choice.

David Cole, analyst at DFC Intelligence said that It’s going to be very much a challenge for both Microsoft Corp. (MSFT) and Sony Corp to capture a casual consumer who is planning to replace their consoles and buying a new system.

Nintendo’s Wii U player, which it introduced last November is selling below company’s expectations, Sony and Microsoft’s plans for selling of new consoles and fixing its prices have broad implications for the industry.

Since last E3 in which 50,000 gamers gathered change has accelerated. THQ Inc. (THQIQ) which is the maker of “Saints Row” and many other titles, sold most of its assets due to filed for bankruptcy , while the largest U.S. game company, Activision Blizzard Inc. (ATVI), lost over 1.3 million subscribers from its multiplayer online game storied “World of Warcraft” during the first quarter.

Even Zynga Inc. (ZNGA), the maker of casual games for social giant, Facebook Inc. (FB) which appeared to be the biggest threat to the traditional developers, missed a major shift to mobile play and ultimately has been forced to fire hundreds of its employees.

Spending on games alone in U.S that includes used games as well as rentals, declined by 9 percent to almost $1.37 billion in quarter ending March of current year as compared to a year earlier, according to the industry researcher NPD Group. Digital content delivered during the time period rose 8 percent to $1.59 billion.

Kazuo Hirai, Sony Chief Executive Officer, said in late May that the Sony’s PlayStation 4 is the first and foremost game console which must establish itself with all the players before assuming a broader living room role.

Michael Pachter, analyst at Wedbush Securities, Los Angeles said that at E3, Sony will probably unveil machine’s actual design specifications and elaborate its online strategy for the games and other entertainment. Both Xbox One and the PlayStation 4 uses computer architecture from Advanced Micro Devices Inc. (AMD). AMD chipsets are already designed for better game experience meaning developers won’t have to tweak the games for a particular system.

The PlayStation 4 will arrive with a support for free to play and episodic titles. Sony has already acquired a cloud gaming service called Gaikai which will allow consumers to browse the PlayStation Store and give try a game before finally purchasing it, said Dan Race, a spokesman.

Sony is also stepping up for financial support to independent developers through the use of its Sony Pub Fund, which was created in 2009. Most of these developers are currently creating games for Apple Inc. (AAPL) smartphones or Samsung Galaxy devices. Its companion Incubation Program offers office space, technical support and equipment, Race said.

Sony has already given very clear signs to different independent developers that if the developers support them then they will provide an easier time for developing on that platform, said Brian Choi, a junior at the USC’s Interactive Media and Games school.

According to Pachter smaller games generally offer less potential return than blockbuster titles. He said that indie development from Microsoft’s perspective is worth investing a lot of money, but Sony obviously thinks so.

Sony has also offered its $49.99 per year PlayStation Plus subscription, that is a premium tier of its PlayStation Network which comes with additional services like game demos, free content and automatic software updates.

PlayStation Plus which was introduced in 2010, has somehow lagged behind Microsoft’s popular Xbox Live.

Microsoft, is going to unveil the Xbox One on May 21, said its new game console will be centered around the living-room entertainment.

Microsoft said that its studios are spending much more than ever on the new content, working hard on 15 exclusive game titles, including 8 entirely new properties that will be unveiled during Xbox One’s first year of sales.

Microsoft plans to showcase some of its games this week, Letty Cherry, said in an e-mail. They company needs to close its sale to core gamer, said Doug Creutz, San Francisco based analyst at Cowen & Co.

Ahead of E3, Microsoft also clarified its position on Xbox One’s used-games policy. Developers have said that they are losing money worth millions of dollars through trade-ins at retailers such as GameStop Corp. Gamers like to resell titles that they have used, or even buy a used game rather than paying for $60 for new.

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