This year's E3 will see the successors to the Wii and PSP launched in a bid to arrest falling game sales
The troubled games industry will try to shake off its worries over falling sales for three days in Los Angeles this week ? principally by showing off Nintendo's next-generation Wii, and by embracing the online games and apps that are replacing the big-name blockbusters.
At the E3 trade show at the Los Angeles Convention Centre, Nintendo will unveil its successor to the hugely successful Wii games console. Sony, meanwhile, will try to put worries about hacking attacks behind it by showing off a new handheld device.
The most keenly awaited product for the 40,000 industry insiders is Nintendo's next console. Known as Project Caf�, the new console will feature HD visuals and a unique joypad, with a 15cm (6in) touchscreen display, motion controls and camera. This device could act as a secondary viewing option if the household TV were unavailable, or display game information such as inventories and maps.
"Think of an F1 game," said Chris Dring, of the industry news site MCV. "The real sport has those computer screens on the steering wheel that let the driver control every element of the car engine. Project Caf� will let a developer put all of that on the touchscreen, while using the controller as a steering device."
Industry insiders also wonder whether Nintendo is looking to get in on the idea of the multi-screen living room, in which people watch TV together using a large display but interact with the content through individual tablet devices.
"We will scratch our heads over Caf� thinking, 'is this brilliant or is this ridiculous?'" said Nicholas Lovell, an industry analyst. "Historically with Nintendo, we've always started at 'ridiculous', but ended up at 'brilliant'."
That was certainly the case with the first Wii, which was derided by hardcore gamers when it launched in 2006 its low-powered processor and TV output compared to Microsoft's then year-old Xbox 360 and Sony's unlaunched PlayStation 3. But the Wii, with its radical wand-like controller, had the last laugh, selling 86m at a profit, compared to 54m Xbox 360s and 50m PS3s, which have barely made a profit.
"The idea of a second screen, whether that's an iPad, a smartphone or a touchscreen games controller, is the future of interactive television," said Lovell. "So you might have a whole family watching Britain's Got Talent, but all interacting with it in different ways via their own screens ? with mum voting on acts, while the kids are criticising their hairstyles on Twitter,". Project Caf� may well be a harbinger of that era."
Certainly it will be key for Nintendo. Although the Wii is the most successful machine of its generation, sales of hardware and software have been steadily declining this year. At the same time the Nintendo 3DS handheld console, which features a glasses-free 3D display, has failed to sell as well as expected since its launch in March.
E3 will show a host of fresh 3DS releases, including new Super Mario, Mario Kart, and Resident Evil titles. But a well-received console announcement could re-invigorate Nintendo's entire business.
In the background, another key issue will be the rise of online gaming and connected services. With retail sales of games falling most publishers are looking at new ways to exploit their key brands, and while the creators of social and casual titles, such as Farmville and Angry Birds do not get a look in at E3, their influence is being felt.
Activision is launching a subscription-based social-networking service for fans of its Call of Duty shooter titles, while Ubisoft is pushing Ghost Recon Online, a free-to-play version of its hit military shooter series, which will allow players to purchase in-game items.
But those who accuse the games industry of sometimes lacking imagination will point to Lara Croft, making yet another appearance in the seemingly endless franchise that first began in 1996. In the newest version she has reverted to her early 20s, and is shipwrecked on a tropical island ? a prequel that even some producers down the road in Hollywood might think stretches things a bit.
Sony is still reeling from a hacking attack on its gaming network, which has potentially jeopardised the personal data of more than 100 million PlayStation Network customers. The company has now brought its gaming service back online after a security upgrade, and will be looking to divert attention towards its new NGP handheld device. The sleek console, designed to compete with Nintendo's 3DS, features a 12cm OLED display, two cameras, movement sensors, wireless internet, and an innovative touch pad promising new types of game interaction.
"The games publishers are certainly jumping aboard," said Dring, "but there is a debate about whether there is room for a high spec, high-tech dedicated handheld, when people can now download advanced games on their smartphones for a few pounds a time. "
Microsoft is unlikely to reveal a successor to its Xbox 360 at the event, and will instead concentrate on pushing its Kinect motion control technology. Launched last year, the device has shifted more than 10m units, but has yet to find favour with hardcore gamers. The company is hoping a Star Wars Kinect game, which lets fans wield an imaginary light saber, will help address this.
But of course, whatever happens, this industry event could be overshadowed by a meeting taking place several hundred miles away. Coinciding with E3 is Apple's Worldwide Developer Conference, and there are rumours that Steve Jobs may make announcements about a possible Apple console, or gaming set-top box. "The timing can't be a coincidence, it just can't," said Lovell. "Apple is trying to draw attention away from E3. And an iPad 2 with an HDMI connection to a big screen is a very interesting, multifunctional threat to the traditional games industry."