Analysis: How Gaming Seeps Into CES 2011

[Reporting from Las Vegas' CES, Gamasutra editor-at-large Chris Morris looks at video games' presence at the major electronics show, examining how the show hints at the blossoming of a post-console future for games.] For a trade show that's not about video games, there sure are a lot of people talking about and playing them here at the 2011 Consumer Electronics Show. OnLive, Kinect and Playstation are being discussed nearly as much as tablets, 3D TVs and cameras. It's some of the clearest proof yet showing that as video games evolve and grow, the industry is moving closer and closer to the world of mainstream entertainment. You've probably seen the big headlines so far. Microsoft led off its 2011 pre-show keynote by announcing eye-popping sales for Kinect -- along with the addition of Hulu Plus and Kinect functionality to Netflix. OnLive will be embedded into Vizio's 2011 model HD TVs, Blu-ray players, tablets and smart phones. And Sony gave Uncharted 3 a plug in its press conference that was nearly as big as the one it gave to the upcoming film The Green Hornet. (Heck, even the nearby porn show is shilling a game -- but the less said about Bonetown, the better.) Peripheral manufacturers are here in force, as well. Turtle Beach, for example, is showing off its latest lineup of gaming headsets for the PC, Xbox 360 and PS3 -- with a $249 programmable wireless surround sound headset dubbed the Ear Force PX5 leading the charge. Capcom has a booth on the strip to show how builds of its latest games - including Marvel vs. Capcom 3 and Okamiden - are progressing. And Softkinetic is showing off its Kinect-like gesture recognition controller - which TransGaming has integrated into its GameTree platform. (Put another way: a Kinect-like experience for PC gamers is now reality.) There are plenty more, including Razer and others, but from what I've observed, the biggest gaming news to come out of the show is hands down the inclusion of game streaming services in Internet connected TVs. OnLive's deal with Vizio is certainly the most intriguing from a console perspective. For the first time, one of the biggest barriers to entry for gaming has been removed, as people will be able to play current, AAA games -- in all their graphical glory -- without having to shell out hundreds of dollars for a console. They will, of course, still be out of luck with many of the industry's most popular games like Halo and God of War -- but it's a step (and a big one) toward the widening of digital distribution throughout the industry. And to succeed, people don't have to all rush to OnLive at once. The service will be embedded in their sets for as long as they own them, which increase the chances they might try it out at some point. Meanwhile, Oberon Media's announcement that it had both locked up the exclusive rights to bring Tetris to connected devices (including TVs) and its inclusion on Panasonic's app marketplace was another step in the same direction. No rational person, of course, is sounding the death knell for consoles at this point. It is, after all, just the beginning of the movement. But the installed base of televisions is exponentially larger than that of consoles -- and it won't be long before connected TVs offering these services encroach of console sales numbers. If those users begin playing the games that are offered to them through that device, it could have a significant impact on the way the video game industry operates. Publishers could avoid the high royalty costs console makers demand -- and, if streaming games becomes a popular way to play games, it could increase their margins, something investors are always interested in. It may well turn out that when all is said and done, the 2011 CES won't be remembered for the dozens of tablets on display and the tiny tweaks made to 3D TV as that struggles to find an audience. It will be the year that the video game industry saw its business model begin to shift.