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E3 is dead. Long live CGDC?

OK, that may be an exaggeration, but wow, what a difference a year makes. The giant Electronics Entertainment Expo that rolled into Los Angeles every year, with 60,000 crazed gamers, will be dramatically scaled back this year to an intimate 5,000 attendees. And that means the Computer Games Developer Conference in San Francisco this week, with its 16,000-plus conventioneers, now ascends to the top spot as the industry's biggest gathering.

And it didn't disappoint.

The lines were long, but not too long. The number of companies significant, but not overwhelming. And it gave me the unusual opportunity to wander the show floor and actually see and hear the cool stuff on display.

That's a first.

For a $30 billion dollar industry beset by the wrenching console and platform upgrade shift last year from Sony , Microsoftand Nintendo -- simultaneously, the message at the Developers' Conference is clear: Innovation is alive and well and kicking; and screaming and crashing and exploding and everything else good video games are supposed to do.

And while the console wars continue to rage with all three of those big boys battling it out for market share, I decided to focus on innovation elsewhere. It was easy to find.

One company getting a lot of attention: Emotiv and its brainwave controller. The San Francisco/Sydney, Australia based company got a nice write-up in the Wall Street Journal, but we got a chance to actually show it to you first on CNBC yesterday, and this is truly technology you have to see to believe. It relies on "electroencepholography," which is a lot easier to write than it is to say on television, as I had to do over and over again on Thursday. The science-fiction-looking headset picks up brain activity and uses it to control the action on the screen.

I think, therefore I game!

"Being able to interact with a game using your thoughts or the game understanding how you feel is a way for those experiences to be more personal and more enjoyable as a result," says Randy Breen, Emotiv's chief product officer.

It could also be a way for game developers to offer a customized gaming experience that players really haven't seen before. The same game could be completely different from player to player just because they think differently. No time-frame for when this might hit the market, but the company is making the technology available now to some developers so they can, well, keep the capabilities in mind when they're designing their next titles. No price tag either; at least not yet.

Immersion is also unveiling some nifty software, seizing on the casual and mobile gaming trend. IDC says by 2010, 50 million consumers will be buying games for their mobile devices. So Immersion is jumping on board. Big time! The company is a real pioneer in forced-feedback, haptics technology that was originally designed for surgeons doing telemedicine, so they could "feel" their way through a surgical procedure even though the patient might be hundreds of miles away.

We've seen this kind of capability in big console controllers, using two big motors that simulate motion or explosions, letting players "feel" the action instead of merely just seeing and hearing it.

Now, that same kind of game-play is coming to a cell phone, using the cell phone's vibrate feature. It's been in the Samsung a930 phones, but now it'll start appearing in new handsets from LG, Nokia and Motorola as well.

"We're able to make the motor start, stop, ramp up and ramp down in very precise ways to create explosions, an AK47 firing, a heartbeat, if you want to say 'I love you' to your girlfriend in a text message, raindrops, and any other vibration effect you can think of that exists in the real world, you can create it on the handheld device here with our software using the very same motor that comes in every cell phone, just about, shipped on the planet," says Immersion VP Mark Belinsky.

Another cool technology comes from Mova, a Steve Perlman (remember WebTV?) start-up in San Francisco. Using high-resolution cameras, texturized make-up and special software, computers can capture extremely precise 3-D representations of your face and then create beautifully detailed avatars that you can then insert into games. Right now the technology is designed for game developers to create better-looking, more realistic characters, but a consumer version of the technology will let you and me create versions of ourselves and then we can become characters in the game. No longer just playing the game, but actually being "in" the game instead.

A big trend this year is also something the gaming industry really hasn't seen before. In year's past, gaming has been a very isolating experience. Me against the machine. xBox Live and Sony's PS3 linked to the web turned gaming into a more social experience. But now, Sony's Little Big Planet and "Home" initiatives, as well as Microsoft's new tools to let consumers create their own games and then post them online, could turn the industry on its ear. YouTube and MySpace? Meet the gaming business! Very cool stuff.

"We saw it in music, we saw it movies, but the key is you have to enable people with easy to use tools and we provide the very best tools for people to use. If you don't have those tools, you really can't spur that creativity," says Chris Satchell, a Microsoft gaming VP.

Console wars may grab the headlines, but it is very clear that a lot of innovative development continues behind the scenes. A lot of pundits worried the simultaneous console upgrade cycle could spell "Game Over" for the industry. But it's very clear that this is "Game On" instead! Have fun!!!!

Questions? Comments? TechCheck@cnbc.com

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