Every year, the video game industry presents the ultimate show conference for gaming fans, the Electronic Entertainment Expo (E3). Renowned as much for its scantily clad booth babes, explosive exhibits, and sensory-overloaded sights and sounds as it is for its previews of future video game technologies, E3 always delivers enticing announcements from the industry's biggest players. This year, Microsoft was on hand to tout the successes—both past and future—of its Xbox 360, which it hopes to establish as a credible major-league player. At long last, Sony showed off final PlayStation 3 hardware, which was almost resoundingly disappointing, given the hype with which the company promoted this machine a year earlier. And Nintendo, the supposed also-ran of the next-generation video game market, turned out to be the biggest surprise at the show.

The prevailing theory is that big-gun releases such as Sony's PlayStation 3 and Microsoft's Xbox 360 will set the pace for the future of video games. Both machines are brawny and powerful, offering HDTV-quality graphics and surround sound. From a pure specification standpoint, little differentiates the PlayStation 3 and the Xbox 360: Microsoft got there first with a console that costs less, but the PlayStation 3 will come with Blu-ray functionality and will support superior 1080p graphics. It's a battle for the ages, to hear the industry analysts tell the story.

Wii Are the World
But Nintendo, the one-time video game behemoth, might just be on to something. At E3, Nintendo showed off its own next-generation game machine, the Wii (as in "we" not "why")—previously codenamed Revolution—and the game players swooned. The Nintendo Wii won't feature the near-photo-realistic graphics of the PlayStation 3 or Xbox 360, and it won't support a next-generation DVD contender. Instead, Nintendo has positioned its next machine for a more relaxed, game-centric crowd that doesn't necessarily want to engage in violent first-person shooters, hyper-realistic sports games, or massively multiplayer role-playing games. The Wii, Nintendo says, is gaming for the rest of us.

The company might be on to something. As an avid gamer, I was quick to dismiss the Wii, but it's important to note that guys like me, who spend hours per week blasting people from around the globe in online games such as Call of Duty 2, aren't necessarily the norm. Indeed, the Wii's lower price—estimated at about $200 to $250 (Nintendo hasn't announced pricing yet), compared with $500 or $600 for a PlayStation 3 or $400 or $500 for an Xbox 360—should be enough to win many converts. The Wii is also a more personal machine, more iPod than street racer, with an elegant white design and a cute, small form factor. The Wii's controller, which doubles as a remote control, is similarly small and attractive.

Nintendo is promising a return to simpler times, when games were fun and easy to play, despite—or perhaps because of—their lack of photorealistic graphics, video cut scenes, and booming surround-sound soundtracks. Wii games will be smaller and less epic than those on the PlayStation 3 and Xbox 360, and they'll generally be cute, colorful, and approachable.

From a business perspective, Nintendo has to sell far fewer units than Microsoft or Sony to make good money. So, even if Nintendo grabs only a third of the market, it could end up making more money on its console than the competition makes on theirs. And here we were, ready to write Nintendo off!

PlayStation 3 Unveiling Disappoints
As expected, Sony rolled out the final PlayStation 3 hardware at E3, and it was a huge disappointment in every sense of the word. First, Sony will offer two PlayStation 3 models, but in contrast with the Xbox 360, it will be impossible to upgrade the lower-end model to match the features of the high-end model. The costs are astronomical, as well. For $500, you'll be able to purchase the base PlayStation 3 version, which includes a 20GB hard disk. But the higher-end model, at a whopping $600—or $200 more than the high-end Xbox 360—is the one most gamers will want. It includes a 60GB hard disk; Memory Stick, Secure Digital (SD), and CompactFlash (CF) inputs; Wi-Fi capabilities; and High-Definition Multimedia Interface (HDMI) output capabilities. (The low-end model is limited to just Component Out.)

Perhaps just as disturbing as the price is the fact that Sony is reneging on many of its promises for the PlayStation 3. The console will include just one Ethernet port, not the three Sony promised, and four USB ports rather than the promised six. And dual-HDMI output is missing in action. Finally, the PlayStation 3 case is awash in vents, in sharp contrast to the clean design Sony showed off a year ago. Apparently, the realities of cooling the Cell processor caught up with the PlayStation 3 design team.

Gamers at E3 report that actual PlayStation 3 game titles look identical to similar Xbox 360 titles, so you can't expect to get a better experience on the PlayStation 3. With its lower cost, immediate availability, and simpler development environment, gamers would be wise to consider an Xbox 360 instead of a PlayStation 3. It's available now, after all.

The Xbox 360 Starts to Pay Off
As Microsoft tried to highlight at E3, the Xbox 360 offers next-generation gaming today, and now that we know a PlayStation 3 will require a second mortgage, the Xbox 360 is starting to look even more attractive. As for those supply problems, forget about them: You can now find Xbox 360 consoles in retail locations and online. And oodles of games are available. Microsoft says more than 160 will be shipping by this coming holiday season.

Microsoft's big announcement at E3 was for the eagerly awaited Halo 3, which will ship only for the Xbox 360 but won't be available until some time in 2007. Until then, Xbox 360 owners will have to make do with new games, accessories, and services. The HD DVD player for Xbox 360 will ship late this year, as will 256MB Memory Units, a wireless headset, and a video camera. And Microsoft is morphing Xbox Live into Live Anywhere, a service that combines Xbox Live with your Windows Powered cell phone and Windows Vista. Imagine the possibilities: You'll be able to challenge someone to an online gaming duel via cell phone. OK, that sounds dumb. But give Microsoft credit for taking its online service to the next level in a year in which Sony doesn't even have a coherent online strategy for the PlayStation 3.