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Game On for E3

The giant Electronic Entertainment Expo, or E3, has been a great barometer for the electronic gaming industry. Five years ago, when console upgrades and blockbuster titles ruled the roost, E3 was huge, attracting 70,000 to the LA Convention Center. As the industry fell on hard times, along with the broader economy, the expo contracted noticeably.

Scenes from the E3 Expo
Getty Images
Scenes from the E3 Expo

This year, look for a quiet, but palpable renaissance. Sales figures last month on both the hardware and software side of the business were abysmal. And the plunge was an equal opportunity attack on the pillars of the gaming community with Sony, Microsoft and Nintendo all getting crushed.

Title sales were also awful, with Activision , Electronic Arts and just about everyone else scrambling.

Maybe that begins to turn around with this week's show. Organizers expect 250 exhibitors and 40,000 attendees, with both those categories up slightly from last year's show.

I'll be focused on the hardware side of things, headed to the Microsoft Project Natal event at LA's Wiltern Theater on Monday. We're all familiar with the motion sensing and body control Natal promises: what we haven't seen yet are some of the titles that'll take advantage of all this.

That should be an interesting bit come Monday. And let's not forget that Microsoft's Entertainment and Device Division has seen huge turmoil recently. President Robbie Bach and his top lieutenant J Allard are both out. I'll be sitting down with Don Mattrick for a look-see into the unit's future after his morning keynote.

There's a thought that Natal could usher in a kind of mini-console upgrade cycle, but it's going to come down to what titles are running on the platform and how compelling they might be. Make no mistake: there is big pressure on this event.

Likewise for Sony, hosting its big shin-dig the following day at LA's Shrine Auditorium. For Sony, it'll be about its Move technology, which like Natal, uses the body and an innovative controller for game play.

And Nintendo will have a big focus on mobile, with its new 3D DS device, which will be the cornerstone of the company's big event at the Nokia Theater on Tuesday. In fact, 3D will be big for all three gaming platforms. Just last week, Sony allowed for two 3D downloads for Playstation 3.

But this week will also feature a big focus on casual gaming, and there will be lots of talk about an enormous competitor who won't even be here: Apple .

Apple is kind of like the Fox Network for the gaming industry. Like the broadcast world, that was so completely dominated by ABC, CBS, and NBC, until Fox came along and dramatically upset that balance of power, Apple might be the biggest threat yet to the entrenched Microsoft, Nintendo and Sony.

In almost no time at all, Apple has established itself as a formidable competitor in mobile gaming with its iPod Touch, iPhone and now iPad. More than 50,000 game titles are now available on the Apple App Store, and just last week, Activision showed off a new mobile version of Guitar Hero designed exclusively for the iOS platform.

It's no longer about little companies trying to develop little games for iPhone. It's about the biggest players in the industry recognizing the power and influence of what Apple has created in the marketplace. EA, Activision, you name it. They're all practically falling all over themselves to get titles developed where the marketplace is mushrooming.

Apple is also giving developers what they want to be innovative as well. It started with the accelerometer on the iPhone. But couple that with last week's addition of a gyroscope and you could literally feel the energy that news created during the Steve Jobs keynote.

Sales of Nintendo's DS and Sony's PSP fell through the floor last month, according to market researcher NPD. I have to believe a key reason why is Apple's increasing momentum in the mobile gaming space.

And that could mean Microsoft, with no mobile gaming strategy of its own, could become an unlikely beneficiary of all this, by not being distracted by the Apple threat. Until Apple marries its iPod/iPhone/iPad gaming strategy to its nascent AppleTV technology and unveils its own console down the road. Wouldn't that be something?! But I digress.

All this boils down to a level of excitement that the gaming world hasn't enjoyed in some time. Turmoil and uncertainty can also mean opportunity. And I haven't even delved into what hot titles are on the horizon as well. That part of the story will have to wait for another post. Meantime, the pressure is on this entire industry to show a marked level of improvement. The pieces are certainly out there to usher in some recovery.

The question for these major players is whether they can get themselves organized in time to take advantage of them.

Questions? Comments? TechCheck@cnbc.com

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