As it does every four or five years, the 
video game industry is rebooting itself this year. Instead of rolling out brand new game systems for the living room, though, manufacturers are looking to build on the market they’ve already created.
“The video game sector is nearing a turning point, with the potential for new hardware innovations and a strong development pipeline to reinvigorate growth,” says Colin Sebastian, an analyst with Lazard Capital Markets.
While the video game industry has its share 
of problems, complacency is not one of them. Innovations roll out at a staggering pace—which is part of the reason gaming can be such an expensive hobby.
Generally, the life cycle of a game console goes something like this: After a splashy launch, the system will spend roughly five years in the spotlight, followed by another three to five years living in the shadow of the next generation. But for the Xbox 360, PlayStation 3 and Wii, the spotlight will keep shining for the next several years.
Not too many years ago, studios would have fought tooth 
and nail for the licensing rights to an upcoming film that had hit potential. Today, it’s a much less crowded field.
THQ, which has made millions making games from the Pixar films, recently struck a deal with Dreamworks to makes games based on their upcoming properties. For THQ, it’s a chance to appeal to the younger segment of the gaming world, a demographic it has been solidly in control of for years. For Dreamworks, it’s a chance to expand its properties beyond the theater screen—with minimal financial risk.
There’s a fox in the henhouse at E3 this year.
As Microsoft, Sony and Nintendo promote their upcoming hardware innovations and try to extend the life cycle of this generation of consoles, a burgeoning company called OnLive sits on the show floor of the video game industry’s trade show, sending out the message that dedicated game machines could be a thing of the past.
As the video game industry gathers at E3 to 
look forward to the holiday season and what it hopes are more prosperous times, storm clouds are gathering on the horizon that have the potential to radically change gaming in the months and years to come.
The substantial growth of video games as a financial and pop culture force has put gaming on a number of new radars — both competitive and political. And interested parties are moving in from all sides.
Best Buy has nothing on this 
geek squad.
Los Angeles is under siege, with as many as 45,000 video game industry insiders and onlookers descending upon the Los Angeles Convention Center for E3—one of the loudest, glitziest—and sometimes gaudiest—trade shows of any industry.
As the video game industry gets set to 
show off the games that will dominate the charts in the back half of 2010 and early 2011, what better time to see what has been driving sales for the first half of the year?
After a disappointing 2009, software sales are down 8 percent so far this year, according to the most recent numbers from the NPD Group, which tracks game sales. That’s a shortfall of over $500 million. The numbers should begin to rebound in the coming months – but so far, 2010 hasn’t been too encouraging.
The midway point of 2010 is 
fast approaching, and so far there’s not a lot to cheer about in the video game world.
Sales of software titles are down 8 percent year to date—a shortfall of more than $200 million, according to the most recent numbers from the NPD Group, which tracks video game purchases.
If the video game world were following its normal 
cycle, console makers would be revealing details of their next generation systems in less than two weeks. This cycle is anything but normal, though – and so at this year’s Electronic Entertainment Expo (E3), game makers will instead chart a new path.
Rather than introducing new systems, Microsoft and Sony will both introduce motion sensor controllers that are intended to both attract a new audience to the Xbox 360 and PlayStation 3 – and extend the lifespan of those systems by at least another three years. Nintendo, which is still seeing great success with the Wii, will focus instead on once again innovating the portable world.
Microsoft is shaking up its entertainment and devices division, the group responsible for many of its most familiar consumer devices.
Robbie Bach, a 22-year veteran of the company and president of the unit since its inception five years ago, will retire this fall. And J Allard, who was the powering force behind the Xbox video game console and Zune media player (and, until recently, was the driving force behind the company’s plans to make a PC tablet computer), will also depart the company.
Chris Morris: Journalist 