Tokyo -- A nagging fear that the market for videogame consoles is about to plateau has Sony, Microsoft and Nintendo rethinking their next-generation boxes in hopes of attracting a new audience.

The console giants came to the E3 show in Los Angeles last week toting a new bag of tricks. Microsoft Corp. is pushing synergy among consoles, cell phones and PCs; Sony Corp. is pitching its upcoming Playstation 3 as a consumer electronics "gateway" device to broadband; and Nintendo is betting the farm on Wii, its new game console with a unique controller that uses three-axis motion signal-processing technology.

Although the game console market will continue to grow this year and next thanks to the launch of new consoles, iSuppli Corp. (El Segundo, Calif.) is predicting a market decline starting in 2008. Videogame console revenue will shrink to $9.2 billion in 2008, $8.5 billion in 2009 and $8.3 billion in 2010, compared with a projected 2007 peak of $10.2 billion, according to iSuppli. Senior analyst Chris Crotty blamed this downward trend on a "demographic ceiling" in the potential gaming population.

Ben Keen, chief analyst at Screen Digest (London), cited the basic "cyclical" nature of the console market. He, too, is predicting that annual sales of next-generation machines will peak in 2008 at around 37 million. Microsoft, Sony and Nintendo are crafting distinctively different strategies in anticipation of this trend. Keen characterized Sony's Playstation 3 as "the all-round entertainment hub for the home" and Microsoft's Xbox 360 "as an extension to the PC-centric digital home vision." Nintendo, meanwhile, is pursuing "a narrower, more focused gamer-centric strategy," he said.

Ultimately, "This is about developing gaming experiences that appeal to the mass market," Keen said.

The good news is that these divergent approaches generate design-win opportunities for chip vendors. Analog Devices Inc. and STMicroelectronics are key suppliers of the MEMS sensors in Nintendo's controllers. Broadcom Corp. will also profit from Nintendo's Wii system by supplying the first Bluetooth wireless game controller system to ship "in the box," not as an optional accessory, and the first integrated Wi-Fi solution for online gaming.

But here's the bad news. It's far from clear if any of these schemes can crack the demographic ceiling. Worse, rather than attracting new converts to gaming, these costly equipment upgrades might wind up alienating the hard-core gamers that now sustain the market, industry watchers believe.

Nintendo is the most strident in proclaiming the end of the videogame console "epoch." President Satoru Iwata said that Nintendo's shifting of focus from fast, powerful processing engines to more intuitive user interfaces reflects a new imperative to create "the easiest environment" to encourage nongamers to get off the bench. Hence the launch of Wii's new videogame controller (go to www.eetimes.com and search for article ID: 187201578).

Offered in a pair--a main and a freestyle controller tethered by a cable--the controller is designed to be held in one hand. It can be swung, aimed, twisted and turned as if it were the player's sword, motorcycle handle or tennis racket.

Bill Gates, Microsoft Corp.'s chairman, also promised last week to "make gaming attractive to people of every age." Gates laid out a plan to "connect" and "pool" gamers across consoles, cell phones and PCs, once the new Windows Vista operating system is released next year. In March, Microsoft launched a beta version of a tool called the XNA Studio, which integrates the development environment for all game titles on Win Mobile, Xbox 360 and Vista.

Screen Digest's Keen called this mobile strategy "potentially one of the most significant new developments announced by Microsoft at E3. If they can win over mobile operators, it could eventually lead to Microsoft occupying a key strategic role in the mobile-gaming value chain, possibly even displacing existing mobile publishers."

Ken Kutaragi, CEO of Sony Computer Entertainment Inc., is calling Playstation 3 (PS3) the first model to fully exploit broadband connection. Sony has integrated Gigabit Ethernet into the new console, along with a 2.5-inch serial ATA hard-disk drive (at 20 or 60 Gbytes) for downloading content and a Blu-ray optical drive for playing back high-definition movies. Microsoft, in contrast, will launch an Xbox 360 HD-DVD player "add-on" for the holiday season.

Powered by the Cell processor, the PS3 is being pitched as much more than just an ordinary game machine, with added features that justify the hefty price tags of $499 and $599. Kutaragi implied that the console, integrated with a huge HDD-based storage space, "may serve as a home server in the future" (see www.eetimes.com, article ID: 187201383).

The success of Microsoft's Xbox Live, an online gaming service that anticipates having 6 million users by year's end, hasn't escaped Kutaragi's notice. Now Sony is spending some $180 million to build its own Playstation Network. Kutaragi described it as "a common platform serving all users." The company will finish setting up three data centers--one in North America, one in Europe and another in Japan--by November, in time for the PS3 rollout. Full-function tests for licensees are scheduled in July.

Not everyone agrees with the leading game console vendors' strategies.

"In my view, Microsoft is still too stuck on the hard-core gaming demographic," said Screen Digest's Keen. "Sony and Nintendo have shown much more commitment to moving beyond that and expanding the market."

Crotty of iSuppli noted that features such as Internet connection, mass storage, online gaming and optical-disk playback are "pretty standard" for the next-generation consoles. The key difference for upcoming boxes--particularly PS3 and Xbox 360--is "more pow- erful processors and HD video," he said.

The jury is still out on Nintendo's new controllers. The company had little success with earlier user interfaces like Power Glove. But Christophe Lemaire, marketing manager at Analog Devices, argued that the emergence of a highly integrated three-axis accel- erometer makes it "much easier and more cost-effective for game console makers to integrate motion sensors into mainstream videogame controllers."