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Gaming Companies Search for Next Big Thing

As the video game industry prepares for its annual trade show, known as E3, it's carrying a lot of baggage.

Nintendo 3DS
Photo: nintendo3ds.com
Nintendo 3DS

Social networking and mobile games continue to eat away at the market share of traditional publishers. A crucial Supreme Court decision, which could fundamentally change the way the industry operates, looms over its head. And many companies find themselves at a critical juncture in their evolution.

Microsoft is riding high on the strength of Kinect, its motion sensor controller that has sold over 10 million units— but as initial excitement about the peripheral fades, the company needs to maintain its momentum.

Nintendo is looking to the future as Wii sales drop off. And Sony is still struggling to move past an enormous data breach that sidelined its online network for three-and-a-half weeks and rattled consumer confidence.

Independent publishers, meanwhile, hope to deliver a shot of adrenaline to their stock by adopting a less-is-more publishing philosophy after two years of disappointing sales.

Here's a look at what to expect from the industry's biggest players:

Nintendo: After the somewhat disappointing launch of 3DS handheld system earlier this year, Nintendo has found itself on the defensive going into this year's show. It will attempt to combat that by unveiling details about its next generation console system, which is scheduled to hit store shelves next year.

There are plenty of rumors about the device, but nothing concrete. It's even a mystery on whether this new system will be a revolutionary step forward—in other words, a true next-generation device—or simply an evolution of the Wii to put it on relatively equal footing with the Xbox 360 and PlayStation 3.

While the new console will get the most attention, investors are just as interested in how the company will salvage the 3DS. Look for Nintendo to pull out its big guns, offering details on a Mario game for the device and perhaps a Mario Kart racing game as well.

And expect plenty of Zelda news, as the 3DS version of "Legend Of Zelda: Ocarina Of Time" hits stores right after E3 and Wii owners will see the latest version of the Zelda console game subtitled "Skyward Sword".

Microsoft: Microsoft will keep the focus on Kinect this year, with up to 10 new games for the device set to be unveiled, including a few that are meant to appeal to core gamers, rather than the casual audience that Microsoft initially courted.

The company will also focus on its tentpole titles "Gears of War 3" and "Forza 4" and almost certainly has a "Halo" surprise up its sleeve, as that game prepares for its 10th anniversary in November.

A new media partner announcement wouldn't shock too many people either. Microsoft has led the way in positioning their console as more than just a game device, striking the first streaming deal with Netflix and adding ESPN content last year.

Microsoft’s Xbox Kinect, a gesture-recognition controller – a camera that is able to detect subtle movements and sounds from players.
Source: Microsoft
Microsoft’s Xbox Kinect, a gesture-recognition controller – a camera that is able to detect subtle movements and sounds from players.

Frank Shaw, Microsoft's vice president for corporate communications, in a blog post this week, said "Xbox is the gateway to games, music, movies, and TV shows—in short, it is central to entertainment. Put simply, Xbox [equals] entertainment and is core to our entertainment strategy."

Insiders also say Microsoft is seriously exploring an app store for the 360 to help it stay competitive with the coming wave of Internet-enabled television sets. Whether that will be announced at E3 or another venue is still up in the air.

Sony: Sony has no choice but to address its recent data breaches at E3, but don't expect the company to dwell on those. The focus will be on moving forward and it will rely on a strong catalog of games to help it do that, including "Uncharted 3: Drake's Deception" and "Twisted Metal".

On the hardware side, Sony will reveal details—including, most likely, the final name and launch date—of its NGP (next-generation portable) device. Given the lukewarm consumer reaction to the 3DS, Sony will need a strong launch lineup and a competitive price to make a strong market impact.

Electronic Arts: After years of rebuilding, the turnaround seems to be happening at EA and the company plans to come out swinging at this year's E3. "Battlefield 3" plans to go toe-to-toe with Activision's "Call of Duty" franchise this November and the game has impressed critics so far.

"Star Wars: The Old Republic" will also be a big focus, as EA bets big on the massively multiplayer online game. EA may stop short of announcing a launch date for "Star Wars," but don't be surprised if a public beta date is among the announcements at the show.

One thing you likely won't hear about: The still-in-early-development title from Respawn Entertainment, the studio that includes the founders of the "Call of Duty" franchise and several key team members from those games. Expect that to be unveiled in 2012.

Activision-Blizzard: Activision will stick with its flagship at E3, focusing heavily on "Call of Duty". Expect this year's installment "Modern Warfare 3" to be featured (likely at Microsoft's pre-show press conference, given the close relationship of those two companies). And more details are expected about "Call of Duty: Elite," the franchise's new subscription-based service.

On the other side of the spectrum, Activision will also highlight a pair of kids-friendly toy/game hybrids dubbed "Skylanders Spyro's Adventure" and "Wappy Dog".

Look for CNBC's coverage from the E3 next week.

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