When the videogame world descends on Los Angeles this week for the industry's annual gathering, Nintendo Co. will stand in the spotlight.
The Japanese company is using the Electronic Entertainment Expo, or E3, to unveil a successor to the Wii game console, a critical release amid a slump for the gaming giant.
E3 has long been a springboard for new gaming consoles—historically released every five or six years—which help spur demand for both hardware and software. Nintendo provided a sneak peek of the new system that it calls the Wii U at last year's show, but the company is expected to really show the machine's capability on Tuesday at an E3 keynote presentation.
The stakes are high. Nintendo's original Wii, launched in 2006, sold in huge volumes because of factors such as easy-to-play games and controllers that sense users' motions. Nintendo has sold nearly 100 million units over the years, outpacing Microsoft Corp.'s MSFT -2.54% Xbox 360 and Sony Corp.'s PS3.
But the sales pace gradually faded. Nintendo in the last fiscal year posted its first annual loss in more than three decades.
Nintendo suffered another blow from last year's sluggish debut for its 3DS hand-held game device. While a deep price cut has helped to spark more interest in the 3DS, Nintendo is expecting its revenue to fall an additional 26% in the year to March 2013.
The Wii U may test whether Nintendo can stay the course amid tides of change washing over its industry. For the past 30 years, the company has remained rooted to the traditional model of selling consoles that play games stored on cartridges or disks. But other, less-expensive ways to play games are gaining ground quickly.
Where Wii games often cost $25 to $50, game apps for smartphones and tablets—many of them free or priced as low as $5—are a new alternative for Nintendo customers. Meanwhile, Zynga Inc. ZNGA -3.99% and other companies have pioneered a field called social gaming, offering online games that are free to play while charging users for additional features.
At the same time, rival console makers Microsoft and Sony have built online networks to enhance the appeal of their hardware—moves Nintendo has been unable to match.
Nintendo's new machine, slated for release later this year, aims to build on the Wii's success. It incorporates the original Wii's wand controllers with a new tabletlike controller with a six-inch touchscreen display, a built-in camera and motion sensors.
The Wii U also aims to remedy a major deficiency of its predecessor by offering high-definition graphics, a key feature that helped the Xbox 360 and PS3 appeal to the core gaming consumer.
"The Wii was very successful in attracting noncore gamers, but can Nintendo do the same with the Wii U when mobile phones and tablets can offer so many free-to-play games?" said Nanako Imazu, a Tokyo-based research analyst at CLSA. "That is the concern."
Ms. Imazu estimates that the Wii U will sell for between $250 and $350. Nintendo has said it doesn't plan on announcing the price of the Wii U at the show.
Sony and Microsoft are also developing successors for their respective systems, but neither company is expected to introduce new machines at this year's show.
At its presentation on Monday, Microsoft is expected to highlight "Halo 4," the latest installment in its blockbuster franchise of first-person shooter games exclusive to the Xbox. Sony will attempt to generate buzz for the PlayStation Vita, a hand-held game machine that the company launched late last year to a lukewarm reception.
Highly anticipated games such as Activision Blizzard Inc.'s ATVI -0.77% coming "Call of Duty: Black Ops II," the latest installment in the multibillion-dollar franchise, are also expected to attract attention.
The E3 show floor will have some new faces, reflecting the shifting dynamics of the industry. Zynga, fresh off a recent initial public offering of stock, will be an exhibitor for the first time.
Japanese mobile-phone game provider Gree Inc. 3632.TO -10.28% will also be a first-time attendee, hoping to make its presence felt with a massive booth and a glitzy party featuring a popular DJ, Girl Talk.
The Week Ahead looks at coming corporate events.
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