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Nintendo's Wii Becomes Major Player In Console Wars

Friday, 6 Jul 2007 | 2:44 PM ET

As Microsoft continues to miss its unit sales numbers, Nintendo'sWii continues to soar. It's the "big elephant" in Barker Hangar in Santa Monica, California--the home of next week's E3 conference.

Funny though: that wasn't the competitor Microsoft was likely worried about during the opening salvos of last year's big console wars. It seems Microsoft was only concerned about what Sony's PlayStation III would do. Sony continues to stumble; Nintendo continues to soar; and now Microsoft has to figure out a way to take on an innovative console system that sells at half the price of the Xbox.

Continuing my interview from my earlier post with Microsoft's President of the Entertainment/Devices division Robbie Bach--Bach tells me Nintendo is still not a key competitor because of the kinds of games gamers can play on it. But maybe Microsoft should indeed go head to head with Nintendo since the company seems to be finding more and more new customers--while Microsoft can't. Worse, those new customers might be coming at Microsoft's expense whether Redmond chooses to believe it or not.

Bach says, "I think certainly for the casual gaming audience and the audience that is traditionally a Nintendo audience, it's a great product. They look at a younger audience, a casual audience, they'll do very well with them, particularly at that price point. Our audiences aren't actually the same. They overlap some, but they're not the same, so we compete with them, but we probably compete more directly with PS3."

Which is leading just about everyone to assume that part of Microsoft's big announcements next week at E3 will include some kind of price-break on Xbox to answer what's widely expected to be a price-cut by Sony--which is mired in last place in part because of the $600 price tag it carries. Look for both consoles to slash prices by a minimum of $100 each. But even after that, they'll both still cost twice as much as Wii. The real question is whether lower prices AND great new titles in the pipeline will be enough to staunch Wii's juggernaut.

Bach is looking forward to big name titles this year as Xbox's saving grace. If last year was about the console wars, and the past year has been about an industry in transition, then the year upcoming will be about software, titles, and the key catalysts that he says will juice xBox sales.

"You look at what we think we can do with the games coming out, whether that's Halo 3, or some of the exciting casual games that we have coming, I think we have a great line-up and games are what drives console sales," Bach says. "So as we get through the summer here, I think we're gonna see things picking up. Madden (EA) is obviously a launching off point for the summer and then Halo 3 follows that in September. I think you're going see great momentum for us on the console side," says Bach.

And not a moment too soon. Wii is here. Microsoft is beating Sony, which was part of its stated mission a year ago. Trouble is, investors are now desperate for the company's answer to Nintendo.

Look for our coverage beginning Monday with an E3 preview. And then we'll be at the show in Santa Monica, California, opening day on Wednesday, July 11th.

Questions? Comments? TechCheck@cnbc.com

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