Cammie Dunaway, who heads up marketing at Nintendo of America, told Gamespot in an interview, “Even though our installed base it, at this point, 5 million households larger than the PS2 was at the same point in its lifecycle, [The Nintendo Wii] still has a lot of room to grow.”

Despite this affirmation, there are rumours that new hardware from Nintendo is expected to appear at E3 this spring, possibly in the form of a Nintendo DS follow-up.

Meanwhile, Sony says it’s in no rush to develop a PlayStation 4 anytime soon. Their reasoning: the PS3 has yet to meet its potential.

“I can’t even imagine what can be done technically beyond the PlayStation 3 in the near future,” said Jack Tretton, CEO of Sony Computer Entertainment’s American division. “A question I often get is when we are going to see PlayStation 4. When somebody can craft the technology that exceeds what were able to do on the PS3, but we are still just starting to harness it.”

Early in this generation, all three game console companies were quick to say that they expect this round to have a much longer life-cycle than recent generations, which only lasted about five years.

Nintendo president and CEO Satoru Iwata explains:

“As you probably know, the current situation of Wii cannot be defined as healthy … It is our urgent mission to recover the momentum of Wii during the holidays utilizing Nintendo’s strength.”

The Wii still holds the lead in terms of total sales overall, and the price cut has done more to boost sales outside of Japan, but the past few months have seen a decline in sales, giving the competing Xbox 360 and PS3 to gain some ground.

Adding up its second-quarter results, Sony reports 3.2 million sales, a 1.1 million increase over the same quarter a year earlier. The same period also saw a signficant increase in game sales for the PS3 console.

Meanwhile, Sony’s little-engine-that-could, the PlayStation 2, is finally showing signs of decline. The system has been selling comparably to the PS3, as well as other current-generation competitors, the Xbox 360 and Nintendo Wii. Now, the PS2 has declined to 1.9 million in sales with only about half of the total games sold compared to the previous year.

The PSP also had a bit of a decline, dropping from 3.2 million to 3 million in sales, though game sales are up.

Sony bet heavily on the long-term adoption of its technically-superior PS3 console when it realased the device in November 2006. The console had to compete with the Xbox 360, which was out a year earlier, and Nintendo Wii–both of which had lower price-tags and comparable, or arguably superior, game libraries.

Adoption of the PS3 has been slower than Sony expected, but if sales continue to rise there’s hope for the PS3 yet.

In an interview with G4TV, Microsoft’s Aaron Greeberg indicated that he expects the Xbox 360 to stick around for quite some time.

I think we absolutely have a very long life ahead of us. I think what we’re seeing this generation is that we have a console that is no longer limited by hardware. … We see a very, very long future ahead of us as we think about the platform and we’re not even thinking about the next generation at this point.

Greenberg indicates that the power of connectivity through its Xbox Live system is partially responsible for the lifespan of the Xbox 360.

I think that what we did with the New Xbox Experience, and many people said that it was essentially like launching a new console and we did that through the power of software.

Sony had made similar remarks about its PlayStation 3, but theirs seemed, in part, a defense of the console’s slow adoption compared to its competition.  Apparently the company didn’t expect its leading-edge console to really catch on until 2009-2010 anyways.

Microsoft has promised that it’s “just getting started” with the New Xbox Experience, and that more updates and goodies are on the way for the Xbox 360.

But so far, the appeal of the Nintendo Wii has been strongest with audiences who aren’t typical gamers.  Nintendo has greatly expanded casual gaming, but the audiences that typically enthused about video games before the Wii aren’t as interested.  That’s where the Xbox 360 and PS3 reign.

But Nintendo is now saying that will change in 2009.  In an interview with MTV Multiplayer, Nintendo marketing VP Cammie Dunaway said that the Wii may start to appeal to the “Halo gamers” in the coming year.

I think that next year you’re going to see the tide turn a little bit, in terms of people realizing that the Wii can have something of interest for everybody.

Meanwhile, Sony and Microsoft continue to keep the hardcore gamers busy.  Sony today announced that its PlayStation Network has hit 14 million active users, while Microsoft gears up to unleash the new Xbox Live Experience tomorrow.  Games like Gears of War 2, Call of Duty: World at War and Fallout 3 are selling in huge numbers to the “real” gaming audience.

“We believe the role of a new console, a new system, is to bring great new entertainment ideas to life … We will consider the launch of new consoles when we have got great new entertaining ideas that can only be done with a new console.”

There’s certainly no need to push forward yet.  Nintendo’s current strategy puts casual gameplay above graphic and technical marvels, and the Wii continues to deliver on that front.  The NPD recently reported that Nintendo continued to top the charts with the Wii and DS holding the first and second spots in sales, with the Xbox 360 coming in third.

The Nintendo Wii is expected to continue to top the charts through the holidays, while the Nintendo DSi repackaging will hit North America and Europe by the summertime.

Aaron Greenberg, product manager at Microsoft, tells Kotaku, “we feel confident that we’ll outsell the PS3 this holiday season in North America and in Europe. We’ll do it on a global scale.”

The Xbox 360 is now the cheapest console on the market.  Microsoft also points out that its console sees a higher number of games sold per console than the others.

According to Greenberg, the company is also taking measures to ensure the stability of the Xbox Live service, which suffered downtime last holiday season after an “unexpected” surge of new users joined.

“In the past, in the eighties and nineties, that was a major issue,” he explains. “I remember the big ‘Mario vs. Sonic’ debates. What we see today is that the influence of exclusive titles on the sales curves becomes ever smaller.”

“Given the production costs of the games, it is hardly possible for developers to commit itself exclusively to someone,” continues Schneider-Johne.  He illustrates how the console developers have a business incentive to limit themselves, but that third-party developers “like Electronic Arts or Activision can have a business model of rarely developing for a console exclusively. Therefore, the exclusive title is a little less important.”

And indeed, this is becoming more and more apparent as big-name titles abandon exclusivity.  Until Grand Theft Auto IV, the GTA series came out on PlayStation consoles first, and was only later ported to the Xbox and Windows PC platforms.  Final Fantasy XIII was set to be a PlayStation 3 exclusive, but Square Enix has since decided to “port” the game to the Xbox 360, even delaying the release to do so (although its sister title, Final Fantasy Versus XIII, is still slated as a PS3-exclusive).

The graphics capability of the PS3 is becoming more apparent as first- and third-party titles begin to show off more of the system’s power, says Steinberg:

“I think that we’re seeing, graphically, PS3 games starting to create some distance.  Some of the other competitors are going to feel that they’re getting long in the tooth, looking quite dated, because they haven’t created that ten-year vision from a horsepower standpoint.”

And indeed, games like Metal Gear Solid 4 and Gran Turismo 5: Prologue are starting to widen the gap in the appearance of the systems, and give the PS3 more unique titles that would make it a worthwhile system.  (We’re still curious to see the difference between the PS3 and Xbox 360 versions of Final Fantasy XIII.)

Steinberg went on to deny claims that they’re developing a Wii-like controller, and re-affirmed their core market: gamers.

“…as a brand, Nintendo’s got their thing, and we’re not trying to get the senior citizen group to get into gaming.”

The console wars continue…

The huge losses that Microsoft and Sony have suffered in getting their consoles into the hands of gamers at a (sort of) affordable price are a sharp contrast to Nintendo’s huge success and profitability with the Wii. While the high-end consoles came at a high cost for both the system developers and consumers alike, Nintendo was able to out-sell the competition with a cheaper, albeit less powerful system.

“I think the results of this cycle will have a strong influence on the next cycle, in that cheaper consoles will be expected,” Pidgeon explains. The massive popularity of casual gaming on Nintendo’s console, as well as with simple games like Guitar Hero is already changing the way game developers approach the industry.

Pidgeon goes on to suppose that the entire industry may shift from hardware-focused consoles to lighter appliances that depend on the Internet. “The platforms of the next cycle may not be a console at all, but software distributed by network to convergent devices like PCs, set top boxes and smart phones,” he explains.

Pidgeon goes as far as to suppose that the Sony PlayStation 3 may be the last console to incorporate “cutting edge” hardware. It may be possible that the video game console will create a greater divide between casual gaming platforms and dedicated, technically superior platforms. If not, hardcore gamers may need to rely on their PC hardware to deliver more powerful games.