The video game console wars kick off in earnest this week as the arrival of Microsoft's flagship Halo franchise on the Xbox 360 sets off a battle for the all-important holiday buying season that will — for the first time — be fought on equal terms by all combatants.

Microsoft is betting heavily on the third instalment of its flagship Halo franchise to spur sales of the Xbox 360.

The Xbox 360, which launched almost two years ago, is up against stiff competition from Nintendo's Wii and Sony's PlayStation 3, both released last November. While the three consoles duked it out last Christmas, the Wii and PS3 were at a disadvantage because they didn't yet have a full arsenal of games — developers typically need time to get used to a new console before they design games that fully use all of its features. This holiday season, all three are well established. Not surprisingly, each is bringing heavy artillery to the battle in the form of big game releases.

Nintendo is heading into the crucial showdown with momentum on its side. According to the Financial Times, the company's Wii console has taken the lead in terms of consoles sold worldwide, despite the Xbox 360's one-year head start. By the end of July, Nintendo had sold 9 million Wii consoles, compared to 8.9 million for the Xbox 360, the newspaper said.

In North America, however, the 360 still enjoys a lead, according to consumer trend tracker NPD Group. The 360 had sold 6.7 million units in North America as of August, compared to 4.3 million for the Wii. Nevertheless, the Wii is building momentum, having outsold the 360 in the United States and Canada in August.

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'We knew it would be one of our more successful console launches, but we didn't think it would be this successful,' Farjad Iravani, marketing manager for Nintendo Canada

The console's success has surprised everyone, including Nintendo, given the company lagged in the previous generation of video game wars. Nintendo's Gamecube sold fewer units than Microsoft's original Xbox and the Sony PlayStation 2, which forced the Kyoto, Japan-based company to re-evaluate its strategy.

Nintendo decided it would try to duplicate the success it had with its DS portable device, which stressed simplicity, rather than continue competing with the high-end graphics and computing power demanded by the traditional gaming crowd. The solution was a console based on a simple motion-sensing controller, which has proven to be a hit.

"We knew it would be one of our more successful console launches, but we didn't think it would be this successful. We're pleasantly surprised," said Farjad Iravani, marketing manager for Nintendo Canada. "We knew gaming would appeal to more people and bring more people in if the hardware system was easy to interact with. You don't have to go through a steep learning curve to learn how to play the game."

Price had also typically been a barrier to expanding the home gaming market to the masses, Iravani said, so Nintendo decided to keep the cost of the Wii low by avoiding the high-end graphics and processors used by the 360 and PS3. The Wii sells for about $290, while the fully packed 360 retails for around $500. The top-of-the-line PS3, which houses the most advanced technology of the three consoles, including a next-generation Blu-ray DVD player, is the most expensive, at about $660.

Exclusive titles are key

For the upcoming holiday season, all three companies are counting on titles that are exclusive to their own consoles to drive sales. With many of the bigger software publishers, such as Activision and Electronic Arts, developing titles that can be played on all three consoles, it's up to the hardware makers to distinguish their machines by creating their own exclusive games.

Wii owners can duke it out with their favourite Nintendo characters, including Mario and Link, in Super Smash Bros. Brawl.

Nintendo is counting on a number of its key franchises to help build the Wii's momentum, including the recently launched science-fiction shooter Metroid Prime 3, and Mario Galaxy, starring Nintendo's iconic plumber, which launches Nov. 13. Nintendo is also hoping Super Smash Bros. Brawl, a fighting game starring many of the company's trademark characters, will be a hit when it comes out on Dec. 3.

Microsoft is looking mainly to Halo 3, the latest installment of its popular science-fiction franchise, to drive console sales. The original Halo and its sequel were largely responsible for the success of the first Xbox, so the Redmond, Wash.-based software giant understandably has high hopes for the third one, the first for the 360. The Halo franchise — and the hardware it helps sell — has essentially become the anchor of Microsoft's venture outside of its core software business.

"It's an incredibly important franchise for us," said Jason Anderson, marketing manager for Xbox Canada. "Absolutely it's going to sell us a tonne of consoles."

Aside from Halo, Microsoft has a number of other exclusive titles in store, including the futuristic role-playing game Mass Effect, developed by Edmonton-based BioWare, to be released on Nov. 20. Its popular racing franchise, Project Gotham, also gets its fourth installment on Oct. 3.

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'If you look at the history of Sony, they don't really have a great track record of maintaining their leadership position,' Jason Anderson, marketing manager for Xbox Canada

Part of the 360's success can be attributed to its Xbox Live online component, which allows console owners around the world to play games with each other. Console owners in the United States can also download television episodes and movies over Xbox Live — a service Microsoft plans to expand to Canada this fall. Anderson could not provide details on the new features and would not say when they will be introduced, but said they would also help spur sales of the console.

Sony sales have been lagging

Sony's PS3 is heading into the holiday season at a distant third with 3.7 million units sold worldwide, according to the Financial Times. NPD Group pegs North American sales of the console at 1.8 million, less than half the number the Wii has sold and barely one-third of the Xbox 360's sales. It's a reversal of fortune for the Tokyo-based company, which has won all previous console battles it has fought.

While Sony has a number of big titles coming out soon, including the recently launched action game Heavenly Sword and the adventure romp Ratchet and Clank Future: Tools of Destruction on Oct. 23, the latest versions of its key franchises — Metal Gear and Final Fantasy — have been pushed back until next year.

Industry analysts have pointed to this dearth of strong titles, as well as the PS3's hefty price tag, as reasons for its sluggish sales. Sales won't take off until Sony builds up a strong library, said Darrel Ryce, NPD Group's director of technology and entertainment research.

"Titles tend to sell systems," he said. "As the library builds, you'll see increased penetration for the PlayStation 3 as well."

Sony's rivals have been less than kind in pointing out where the company has gone wrong.

Sony brings the cat-like Ratchet and his robot companion Clank to the PlayStation 3 with their latest adventure, Ratchet and Clank Future: Tools of Destruction.

"If you look at the history of Sony, they don't really have a great track record of maintaining their leadership position. Look at the portable music space — they used to own portable music with the Walkman. Where is that brand now?" said Microsoft's Anderson. "The same is now happening in the video game space. They perhaps get a bit comfortable as a market leader, make some poor decisions around a very expensive console that's got a lot embedded within it that customers are being forced to pay for, and a largely mediocre games lineup."

Sony itself has put a positive spin on the PS3's performance and has said the console is selling as well as the PlayStation 2 did in its first nine months on the market. The PS3, with its advanced technology and Blu-ray DVD player, is also intended to be a long-term product so attempts to judge it now are premature, according to Matt Levitan, marketing manager of Sony Computer Entertainment Canada.

"On paper, it may look to some that we're a distant third and lagging behind, but in terms of our own growth, we're doing quite well with a product that is priced higher than our previous consoles," he said. "We've built this to be a 10-year product. It's a marathon, not a sprint."

Levitan also took a swipe at Microsoft, saying Sony isn't betting the success of its console on one franchise — such as Halo — but can count on a number of its long-established titles, including Metal Gear, Final Fantasy, Ratchet and Clank and racing series Gran Turismo.

"It's not so much taking one franchise and building an entire brand on it. It's about a variety of software," Levitan said. "We never built our business on that, we never said this is our franchise and if it doesn't sell, we're in trouble."

NPD's Ryce said that although Sony's behind its rivals, the company's console is hardly doing poorly. The video game market is still growing, and having one clear winner doesn't mean the other competitors are losers, he said.

"You can point to all three and say all three are experiencing success," he said. "I don't see anyone walking away after the holiday season and not doing well."

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