This article titled “E3 2015: will living room PCs and virtual reality shake up the console war?” was written by Keith Stuart, for theguardian.com on Thursday 11th June 2015 09.43 UTC

For the past 30 years, the console wars have always played out in pretty much the same way. A new set of machines arrives with more powerful processors and graphics hardware than their predecessors. The console manufacturers compete directly against each other to get the best exclusive games and the best versions of multi-platform releases. The platforms mature, and rumours begin about more powerful hardware on the horizon. The cycle begins again.

But this year’s E3 exhibition in Los Angeles sits slap bang in the middle of interesting intersection the dedicated games console business. From one direction comes a host of new rivals, from another, the dawn of an entirely new interactive entertainment technology. Of course, the traditional console business has been threatened before. Some analysts once thought that smartphones and tablets would strangle the market for dedicated games machines, others speculated that the resurgent PC, augmented by the digital games distribution platform Steam, would render them obsolete.

But the new challenges are a little different because they are going to entirely reposition what we mean by a “games console”.

First there is Valve and its Steam Machine, a gaming PC in a simplified format designed to be placed under the living room television and intended for gaming, video and other entertainment functions. Valve is not building anything itself, but has developed a SteamOS to run on the machines, as well as an innovative Steam controller. Third-party PC makers will produce their own versions, which will cost between £400 and £800.

The Alienware Alpha, for example, is set to cost about £430, complete with a decent Nvidia GTX graphics card and is designed as a pure Steam games machine. At the upper-end, the Origin Omega, complete with multiple overclocked Intel Core i7 processors and a £3,300 price tag, is more of an all-round multimedia platform with television and home cinema in mind. Of course, both the PlayStation 4 and the Xbox One also have their eyes on our living room entertainment options, providing a wealth of video-on-demand and live TV services. But their hardware – which is already looking dated compared to current PCs – is not upgradeable. With the Alien Alpha Steam Machine you can upgrade the CPU, memory and hard drive – you can only do the latter with Sony and Microsoft’s consoles.

Not everyone is impressed with the concept. “I’m not over enthused with the current Steam Machine offering and I doubt they will have an impact on the established order in the living room in their current forms,” says analyst Piers Harding-Rolls, head of games at IHS Technology. “And I don’t believe this is Valve’s core aim either. Driving this is an ambition to extend the PC gaming audience beyond its current confines: developing a more user friendly, TV-based experience, is a way to do this. Whether this disrupts the console market or not is less interesting to Valve in my opinion.

“I think a very small segment of the Steam population may be interested in a Steam machine but many power users will already have a solution that connects to the TV or streams content from their gaming rig to the TV if that’s what they want. There is likely to be some uptake from existing console users that want a TV-based experience and access to the Steam library of games, but I don’t see many prioritising a Steam Machine over the purchase of a console at this stage.”

Indeed, Valve may well face a similar problem to the aborted 3DO console, which launched in 1993 as an all-round multimedia player, but which wasn’t build or shipped by the 3DO company – instead partners like Panasonic and Goldstar licensed the tech and produced their own versions. The problem was, manufacturers were worried about committing until there was more software support and a proven market, but consumers were put off by the higher price point, and game publishers picked up on this pervading reticence.

In the background, though, are several other media streamers and set-top boxes all offering a variety of services for the living room. Nvidia’s Android-based Shield console is set to offer TV, video and game streaming – apparently all in 4K resolution. Then there are the ever-evolving TV plans from Apple, Google and Amazon, the latter launching its own games studio last year.

“The disruption of TV gaming has been on the cards for a number of years, but we are yet to see a compelling alternative to the current consoles,” says Harding-Rolls. “I would define the current market developments as being disruptive around the edges of the TV gaming opportunity but there is nothing there yet to really rip up the current status quo. Let’s not forget that it was only a couple of years ago that Android consoles such as Ouya were being proclaimed as key competitors in this space, and where are they now? Nvidia’s Shield Android TV console is interesting but the company is not pursuing game exclusives, which does not position it strongly in the eyes of the gamer as an alternative to the current consoles.”

Reality wars

There is another interesting interloper waiting at the margins of E3: immersive technology. It is likely that Sony will provide more information about its Project Morpheus virtual reality headset for the PlayStation 4 – including supporting games, a release date and a price point.

All we have seen is an impressive set of technology demos, and some neat ideas about how VR could change the living-room entertainment experience. The announcement of some big first-party support, perhaps from stalwart Sony studios like Naughty Dog (Uncharted, Last of Us) or Media Molecule (LittleBigPlanet, Tearaway), would reignite excitement.

Meanwhile, Valve will not be showing its critically acclaimed HTC Vive VR headset at E3, but rival Oculus is holding a pre-E3 briefing that could provide launch details for its Rift virtual reality headset. The company has reportedly scooped its own announcement by accidentally releasing details onto its website, although it has since claimed those are old prototype images.

We are also expecting Microsoft to tease more about its Hololens augmented reality headset at E3. The device, which will overlay computer graphics onto the real-world, similarly to the Google Glass headset, will be compatible with both Xbox One and Windows PCs, and games are set to be a big part of its offerings.

In this way, E3 could become an interesting test ground for two competing visions regarding the future of immersive interactive entertainment. Will consumers want to be fully surrounded by a virtual environment, as they are with VR headsets, or will they favour technology that allows them to remain sentient to the world around them while game elements are projected on top? One of the major problems facing both VR and AR at a mass consumer level is that nobody in the industry really knows what people want.

What they do know is that games as we know them will have to change. In virtual worlds, the player must have continual control of the camera viewpoint to avoid nausea and needs time to acclimatise to new environments – it could be that games turn into short experiential experiences, rather than lengthy cinematic adventures.

Whatever the case, Steam Machines, media streaming and the rise of virtual and augmented technologies are all set to provide new paradigms for the games industry to understand and adapt to – and adapt to quickly. We may be between major console hardware iterations, but the smartphone market has significantly accelerated consumer demand for new platforms and experiences. Sony and Microsoft have to stay up to date in a market where an eight-year console cycle seems practically geological.

The game-consoles wars we used to know are over. The hardware theatre is infinitely more complex and fragmented now. The immediate future is about ceaseless incremental updates as well as intricate multimedia plans, and multi-screen support (such as games that run on console, tablets, smartphones and computers, with seamless online interaction between all platforms). Further out, it is about removing the game from the 2D display altogether.

E3 should give us a good idea of whether Sony or Microsoft will make the first and boldest move into this embattled territory.

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