Console Makers: Move It or Lose It

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That may not spell success for this holiday season. Although Sony has some noteworthy game launches coming up, including the reintroduction of the classic Warhawk franchise, two of its heaviest hitters—Metal Gear Solid 4 and the next Final Fantasy game—won't be on store shelves until next year. That could be a problem for Sony and provide a competitive advantage for Microsoft, says Pacific Crest analyst Wilson.

Meanwhile, there's Nintendo. While Microsoft and Sony have both targeted more traditional gamers, Nintendo has taken a different tack with its Wii console. By focusing on attracting nongamers with simple motion-sensitive controllers, the company has removed itself from a rat race that values blockbuster titles and increasingly complex gameplay and graphics.

George Harrison, senior vice-president for marketing at Nintendo of America, describes Microsoft and Sony's rivalry as a competition over who can spend the most money on games rather than attract the largest audience. (Microsoft recently spent $50 million on additional exclusive content for Grand Theft Auto IV, five times as much money as was spent developing the Xbox 360's current best-selling game, Gears of War, according to statements made by Epic Games Vice-President Mark Rein.)

Winning with the Casual Set

"We're happy to stay out of that," Harrison says. "Microsoft is going to get their Halo fans. Sony is going to get their Ridge Racer fans. We just feel that there's a whole audience that no one is talking to."

He could be right. Nintendo is set to reenergize its classic franchises with Wii games like Mario Galaxy and Super Smash Bros. Brawl, where the company's archetypal characters Star Fox and Link duke it out in an arena-style format. And although less than 10 million Wii consoles have been sold, Wilson expects sales to jump to 16 million by the end of the year.

And while at one point it seemed as if Nintendo were crazy to introduce a console without advanced technology or high-definition graphics, the naysayers are looking increasingly wrong. If the Wii takes the lead this holiday season, expect publishers to continue shifting development resources toward casual games to capitalize on the console's success.

Megerian is an intern at BusinessWeek. He is a rising senior at Emory University, where he co-majors in journalism and international studies.