Published as part of our sister-site GamesIndustry.biz' widely-read weekly newsletter, the GamesIndustry.biz Editorial is a weekly dissection of one of the issues weighing on the minds of the people at the top of the games business. It appears on Eurogamer after it goes out to GI.biz newsletter subscribers.
The temptation to portray the games market as a three-way battle between Nintendo, Microsoft and Sony is both obvious and excusable. These, after all, are the firms who would happily admit to being in a race for gaming supremacy. However, in order to paint a fuller picture of the console battle, there are several other players who need to be considered.
There are, of course, the big publishers. Electronic Arts, once seen as a kingmaker and still a powerful force - EA's initial unhappiness with Xbox Live arguably held back the commercial success of the service for years. Activision Blizzard, the newly formed market leader among third party publishers, whose World of Warcraft title is the world's most profitable game - WoW hasn't touched the console race yet (except, perhaps, by locking up as many as eleven million hardcore gamers and keeping them away from other console and software purchases), but when it does, its impact could be profound.
The smaller publishers, too, have a major impact - both individually (consider the influence that franchises like Grand Theft Auto and Final Fantasy - both from what are arguably second tier publishers - have had on this round of the platform holders' battle) and perhaps more importantly, as a group. Publishers nervously eye one another's portfolio and platform decisions to see which way the wind is blowing, and their resulting group decisions are a key measure of the health of each platform - and, of course, something of a self-fulfilling prophecy.
But it's not just games companies who influence the progress of the games market. One company which I've talked about before as having a major impact, despite officially holding no designs on the games business, is Apple. As a manufacturer of consumer electronic devices, its rivalry with the games business as a whole is easy to understand - quite simply, many consumers will find themselves making a simple purchasing decision between a new iPod and a new videogame console.
However, the influence of Apple is far more extensive than is suggested by the simple retail rivalry of iPods, PSPs and Wiis. Last week, as the industry gathered in Los Angeles for E3, a couple of stories stood out as a testament to the widening battle lines between Apple and the major players in videogames.
First, there was the somewhat expected but nonetheless important announcement of both Sony and Microsoft's movie download services. Microsoft has struck a deal with US provider Netflix (how this will scale into other territories isn't yet clear - I hope Microsoft has a clear expansion strategy, but it could be a major stumbling block for the firm), while Sony is using its own clout in the movie business to create a custom service.
These services are, of course, a challenge to one another - but moreover, they are a direct challenge to Apple's iTunes Store, which has expanded from being the world's biggest music download store to being the largest download store for movies and TV episodes. It's a given that Sony and Microsoft's objective in the games business is not simply to own videogames, but to own the primary source of media in the living room and a significant chunk of the distribution and delivery mechanism for that media. That objective may have been clouded in the past few years by their struggle against one another (and by the ascendancy of the Wii, the only games console which doesn't also function as a "Trojan horse" for media), but both firms also know that if Apple develops a stranglehold on distribution, this is a battle they could both lose.
That rather stark situation is one which is fuelled by the widespread use of DRM - Digital Rights Management, a cuddly acronym for restrictive technology which ostensibly protects media companies from piracy, but in reality does little to prevent piracy and a great deal to reduce consumers' ability to use and enjoy their purchased media as they wish. Described by its opponents as "Defective by Design", this description could not be more appropriate.
The DRM systems inherent in movie distribution networks like iTunes, Xbox Live and PlayStation Store are all incompatible with one another. The result is that media bought on iTunes won't work on your consoles, media bought on Xbox Live won't work on your portable media player, and media bought on your PS3 can't be watched on an AppleTV box or Xbox 360.
This deliberate defect in the media products means that when you start buying from one of those stores, you get locked into continuing to use that store and its player on an ongoing basis. Right now, the majority of consumers (of those who have started using digital downloads at all, of course) opt for Apple's store - if that pattern were to continue, Sony and Microsoft's efforts in the console battle would be irrelevant to the wider media business.
The game console makers, however, can take solace in one crucial thing - the weak performance of the AppleTV, a slimline box which is designed to sit underneath your television and provide an interface for purchasing, storing and playing iTunes Store content. Hampered by a high price and restrictive support for video formats, the AppleTV really hasn't taken off as Apple hoped it would. Perhaps it's just ahead of its time - more likely, it's badly designed and positioned, and in need of a rethink. For now, however, this is a major chink in Apple's armour which Sony and Microsoft will hope to exploit.
At the same time, though, Apple is making its own inroads into what might formerly have been considered gaming territory. The Friday before E3, it launched the iPhone 3G into stores around the world - attracting the kind of queues and media frenzy which are normally reserved for a major game console launch. Simultaneously, it launched new operating system software for the entire iPhone and iPod Touch range - which now allow developers to create applications for the devices, and sell them online through the iTunes App Store.
Anyone who doubts the impact of game developers being freed up to work on one of the most desirable pieces of consumer hardware of the past decade would do well to consider two facts. Firstly, the iPhone is a remarkably powerful piece of hardware - estimates we've heard for its ability as a gaming device suggest that it's an easy rival for the PlayStation Portable, prowess which it combines with up to 16Gb of storage, high-speed Internet access (most iPhones are sold with unlimited data contracts, a former stumbling block for mobile network gaming), a unique multi-touch screen interface and an exceptionally precise tilt sensor.
Secondly, take a look at the rough figures from the App Store in its first weekend of operation - compiled by mobile advertising group MediaLets from its monitoring of activity on the store. These figures suggest that games were the most popular applications on the store by a large margin. Almost 30 per cent of App Store products were videogames, and titles like Super Monkey Ball - the top-rated commercial product on the store - pulled in millions of dollars for their creators in the first weekend alone.
Is this the birth of a new mobile gaming platform, then? It's a little early to say whether it'll be an important platform, but the strength of the platform and the performance of games like Monkey Ball and Bejeweled in the early download charts also mean that it would be foolish to write the iPhone off at this stage. It may not be a conventional gaming device in interface terms - but neither were the Wii and the DS, after all. Even if its success in games remains muted, it's another front in what's turning out to be the most interesting corporate battle of the era - not Sony versus Microsoft versus Nintendo, but Apple versus all of them.
For more views on the industry and to keep up to date with news relevant to the games business, read GamesIndustry.biz. You can sign up to the newsletter and receive the GamesIndustry.biz Editorial directly each Thursday afternoon.