Next-generation gaming? It may already be here

December 2, 2011: 6:30 AM ET

Microsoft, Nintendo and Sony are gearing up to battle one another with a new generation of gaming gear. Turns out, a few other companies may already be beating them to it.

By John Patrick Pullen, contributor

video_games_1980sFORTUNE -- What the future of console video gaming will actually look like is anybody's guess. Microsoft, Nintendo and Sony have made a ritual out of releasing new game systems every few years and battling it out for customers. Now, before technical barbs have been traded or glitzy launch plans drawn up, three companies with little experience in traditional gaming may be beating them to the punch.

Little is know about the next Microsoft (MSFT) Xbox or Sony (SNE) Playstation, despite an uptick in speculation about the consoles expected around 2013. Of the three major game makers, only Nintendo has revealed anything, showing its upcoming Wii U this summer. Launching next year, Nintendo's Wii successor comes with a tablet-like 6.5-inch touchscreen controller that doubles as a handheld gaming device and web browser. Players could use the controller, for example, to shoot ninja stars at enemies displayed on a television.

Trouble is, that sounds a lot like a product already in stores: Apple's (AAPL) iPad can be used as a controller for games beamed to an Apple TV. Indeed, products from Apple, Google (GOOG) and startup OnLive are poised to make the most of the biggest trends in gaming and -- possibly -- put a serious dent in the ambitions of gaming's traditional players. And the stakes are high: the global console hardware and software market is expected to grow to $39.7 billion by 2015, according to International Data Corporation.

In short order, Apple has become an important force in gaming. Though the company long seemed indifferent to the market, the advent of the iPod and iPhone changed that. Developers flocked to Apple's App Store and, over the last few years, its iOS platform helped launch a new generation of Marios, including Angry Birds. "iOS is easy to develop for," says Rob Murray, founder of Firemint, a game developer owned by Electronic Arts (ERTS). He says one of his firm's most popular titles was prototyped within a week, a time-frame unheard of for even the simplest console games.

In June, Apple introduced Airplay, which allows apps to stream from a handheld device to a nearby Apple TV -- a setup similar to Nintendo's upcoming Wii U. Murray says that enables titles like Real Racing 2 to turn an iPad into a steering wheel and a TV into a windshield, for instance. The secret? Apple's processing prowess. "The A5 is the most powerful chipset that we've encountered so far," he says. "That's why we were able to do this TV out. We've now got two screens and we're able to drive them with that power."

Google TV, meanwhile, has been stunted by slow sales and delayed software. But the Mountain View, California company's approach makes many of the same features possible. Casual game developer GameHouse president Matt Hulett is bullish, noting the growth of the Android mobile platform which also powers Google's television products. The developer of titles including the bestselling DoodleJump, Hulett says better software could lead to a surge in gaming on Google TV. "This is real," he says. "If you look out three or four years, console gaming is flattening down and micro transactions are going to be as big as console."

OnLive takes a different tact. It is a streaming gaming service available on PCs, Macs, tablets, smartphones or a $99 adaptor that connects to televisions. For the first year, publishers were either bringing their games to the service months after launch, or posting popular titles that had already seen their day. This past summer, however, several high-profile games became available with OnLive on their release date. Part of OnLive's lure is the promise that gamers won't have to stand in line on launch day. Instead, they can have their game served to their living room as soon as it's available. "It is an interesting, emerging technology, and it's a new way to deliver online interactive entertainment to people," says Randy Pitchford, president and CEO of Gearbox Software, developer of the most recent Duke Nukem title.

While OnLive may not grow into a competitor to Microsoft or Sony, it could signal an emerging trend of cloud gaming. Developers don't need to do much to support the platform, says Pitchford. Typically, since Xbox and Playstation are completely different, programmers have to write the unique software for each platform. OnLive's central computers, however, can stream from the Xbox, Playstation, or PC version.

Will Apple, Google and possibly OnLive displace Microsoft, Nintendo and Sony? Not likely. The later have tailored their products to gamers, while the former are using games to help build out other businesses — hardware and software for Apple and Google, subscriptions for OnLive. Still, their success may end up taking valuable attention away from the traditional big three.

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