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E3 is usually the videogame industry's big party of the year — a chance to celebrate its strengths and showcase the titles it expects to drive sales forward for the rest of the year.
But as the game makers gather for this year's event, a cloud hangs over the soiree. Retail sales are down 27 percent compared to this time in 2011. Mobile devices are stealing the spotlight from traditional consoles. And naysayers are openly questioning the long-term viability of the console industry.
Given the hard numbers, that's understandable, but there are a few other factors to consider before making such a declaration.
The first is the age of today's game machines. Microsoft's Xbox 360 made its debut in 2005 — and Sony's PlayStation 3 bowed the next year. In an industry that has traditionally swapped in new hardware every five years, that's a big gap — and it's one that is starting to affect sales.
"We've had an abnormally long console cycle and I think people are ready for something new," says Eric Handler, senior equity analyst at MKM Partners.
Investors are also comparing current sales numbers to the cycle's peak, back when the Wii was a must-have device that retailers couldn't keep on store shelves. Now that demand for Nintendo's system has effectively dried up, the numbers can't compete.
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