The annual Electronic Entertainment Expo (E3) in May, is always a time of incredible hype for the game industry. However, it is also the show where companies in the industry are forced to back up their hype with some solid product showings. With three new game systems on the market, this year’s E3 was one of the most intriguing shows of the past few years. We got to see the upcoming PlayStation 2 products, but more importantly it represented the unveiling of Nintendo’s GameCube and Microsoft’s X-Box. With this show under our belt, we can finally start making some solid handicapping of the upcoming hardware system battle.

A major focus going into the 2001 E3 show seemed to center on the Microsoft X-Box. As a new system, from a new player, the hype and anticipation around the X-Box had built to enormous levels. Unfortunately, living up to such hype is almost impossible. Therefore, it is no surprise, that at E3, many observers were disappointed in the X-Box. Meanwhile, the Nintendo GameCube, which prior to E3 had flown low under the radar, earned many rave reviews. However, perhaps the strongest showing came from Sony. With a solid lineup of upcoming PlayStation 2 software, much of the criticism that was once directed at Sony and the PS2 now seems to be focused on Microsoft and the X-Box.

Of course, there is a major danger in rushing to judge new systems. The X-Box faces the same challenge that the PlayStation 2 faced: the initial software for a high-powered new system is almost always under whelming. It will be only after a year or so on the market that the PlayStation 2 has the high quality software lineup that consumers expect. It is unrealistic to expect that Microsoft or Nintendo would be any different. In fact, each of the three major game systems has it’s own significant strengths and weaknesses. The PlayStation 2 has a strong software lineup, but, in the eyes of many, is underpowered when compared with the competition. Furthermore, Sony is relying heavily on expensive add-ons for features like online gameplay. On the other hand, the X-Box is seen as the more powerful system, but Microsoft is late to market and behind in the software battle. Meanwhile, the Nintendo GameCube will have a major price advantage and Nintendo’s high-powered franchises. However, once again it seems Nintendo is focusing mainly on the younger end of the game market.

Nintendo’s booth clearly had the buzz, as it was crowded throughout the show. Nintendo used E3 to announce that the GameCube would be released on September 14, 2001 in Japan and then on November 5, 2001 in the U.S. To many people this came as a surprise. A lot of observers thought that the GameCube would be delayed until 2002 while Nintendo focused on the Game Boy Advance. Nintendo made further waves a week after the show, when they announced a $199 price for the GameCube. Nintendo also showed off a prototype of the DVD version of the GameCube that Matsushita is currently working on and expects to release in the U.S. sometime next year. Nintendo says it does not anticipate having any of the system shortages that Sony experienced last year.

The current plan is to launch the GameCube with around six first-party titles. Though there were only a handful of games, and few third-party products, the games that were shown were much better than what people expected at this time. The focus in the Nintendo booth was clearly on the GameCube software lineup. Though there were plenty of games shown for the Game Boy Advance, including franchise-based titles such as Mario Kart Advance, F-Zero: Maximum Velocity, Pokemon Crystal and Wario Land 4, the crowds were more focused on GameCube games such as Luigi’s Mansion, Star Wars Rogue Leader: Rogue Squadron 2, Wave Race, StarFox Adventures, Super Smash Bros. Melee and Pikmin. The only possible disappointment was that neither Mario or Zelda GameCube games were shown at E3. However, Nintendo has stated that preliminary versions of these top Nintendo franchises will be shown at Nintendo’s Space World show in August 2001. Other than that, the company clearly had an excellent show and looks surprisingly prepared for the GameCube launch in November.

Microsoft set-up an expansive booth to show off the X-Box and its upcoming games. The company also announced that the X-Box would launch on November 8, 2001 at a retail price of $299. This is a mere three days after Nintendo launches their system. Microsoft anticipates having 15-20 titles available at launch, with 600,000-800,000 hardware units.

Unfortunately, to many E3 attendees, the playable games at the show were rather under impressive. Games like Mad Dash, NFL Fever 2002 and Halo did not live up to expectations, and left many wondering where the AAA titles were. Halo was a bit of a letdown because it was announced by Bungie (the game’s developers) that the game would be released without multi-player online gaming. This was a major disappointment considering the game was planned as a multi-player game from the get-go. On the other hand, there were other titles at Microsoft’s booth, that looked very promising, including the two tentatively-titled first-party games Project Gotham and Project Ego, as well as Oddworld: Munch’s Oddysee. There were also many announcements of X-Box titles by the numerous third-party developers in attendance. These titles included Crazy Taxi Next and Jet Set Radio Future by Sega, Madden NFL 2002 by EA Sports, and the exclusive Dead Or Alive 3 by Tecmo. However, the overall feeling was of minor disappointment at the X-Box games. This was magnified be the way the system had been hyped up as the killer console that would blow away anything seen on the PlayStation 2. Instead, it appeared that at E3 the opposite happened. Sony and Nintendo were the ones showing off the titles everyone was talking about.

In the end, the X-Box is a powerful system and Microsoft is a strong competitor. In the long term, there will likely be plenty of high quality X-Box titles. Many of the top developers are creating games for the system. The main question around the X-Box is whether, in the short term, Microsoft can overcome the early lead of the PlayStation 2 and GameCube.

Sony’s emphasis at the 2001 E3 focused on two areas: individual games and the company’s online plans for the PlayStation 2. Sony made several specific announcements regarding online gaming plans. The key news was a partnership with AOL Time Warner. While specific details were vague, it appears PS2 owners will be able to access many of AOL’s features such as instant messaging and chat via the PlayStation 2. It also appears AOL will provide much of the core network infrastructure for online PS2 games. Other PS2 online partners include Real Networks (Real Player), Macromedia (Macromedia Flash Player) and Cisco (IP software). However, there appear to be some major catches with Sony’s online plans. In order to access AOL, one will need to purchase some optional accessories, including an LCD screen, hard drive, network adapter, keyboard and mouse. Not much is known about the cost of many of these items, but all together it looks like this will not be cheap. This is especially true of the LCD screen. The good news is that the network adapter, will allow for both broadband and 56k connections, and will retail for $39.95. The network adapter and 40GB hard drive (price unknown) are scheduled for release this November. Sony expects to have several games playable online by the end of the year.

Online plans aside, it was with traditional video games that Sony came on strong. At E3, Sony showed an impressive lineup of games, something sorely missing from the system’s first six months on the market. The company’s booth showcased both first-party and third-party titles for the PlayStation 2 (as well as a decent size presence to the PlayStation). Strong first-party titles include the long-delayed and first true PS2 killer app Gran Turismo 3 A-Spec, the platform game from Naughty Dog Jax And Daxter: The Precursor Legacy, the destruction derby-like Twisted Metal: Black and the multi-player online capable SOCOM. On top of that, there were many good looking third-party games shown at E3, including the latest EA Sports titles (such as Madden NFL 2002 and NBA Street), Capcom’s Devil May Cry, Konami’s highly-anticipated Metal Gear Solid 2: Sons Of Liberty and Square’s Final Fantasy X. A few of the games shown at Sony’s booth, notably Tribes II, SOCOM and Tony Hawk’s Pro Skater 3, were playable online. Overall, Sony had a very good showing at this year’s E3 with the many quality titles at its booth. It appears that this fall the PlayStation 2 will overcome the major complaint against the system: poor games.

In the end, this year’s E3 showed that there truly will be three strong competitors in the video game hardware race. Microsoft and Nintendo finally laid their cards on the table so now it is time to reassess the forecasts for the individual game systems. At the end of June, DFC Intelligence will be releasing detailed updates to our hardware and software forecasts. However, at this point in time, we can say that the Nintendo GameCube was the most surprising system. We had fully anticipated a strong PlayStation 2 software lineup. On the other hand, while X-Box software may have been disappointing to many, it was also fully anticipated for a new game system. On the other hand, we were unsure of where the Nintendo GameCube would be from a pricing, release date and software standpoint. After E3, we feel much more comfortable forecasting a strong market reception for the GameCube.