Nintendo has already put its cards on the table – now gamers are waiting to see how Sony and Microsoft can trump them. But what controllers will the PlayStation 4 and Xbox 720 ship with? To answer this question, we need to look at the economic challenges facing the two console manufacturers who are fighting fiercely for the loyalty of the diehard gamers.

Few gamer hobbyists are excited about the Wii U (although many will buy one) because, for the most part, the most dedicated gamers are committed to those platforms that have chosen to focus almost exclusively on their tastes in games. Actually, that’s unfair to the gamer hobbyists interested in strategy games, adventures and a whole host of other commercially borderline genres, since such players don't get any support in the upper market for games at all. The PS3 and 360 have managed to both streamline and belittle the videogame medium offering dazzlingly expensive titles for a predominantly male teen-to-adult audience with a taste for guns, violence and US-style action movies in general. By targeting the players who buy and play the most games and squeezing them for $60 a pop Sony and Microsoft have eked out a nearly profitable market space. But both are looking to do better next time around.

Let me reiterate this previous point: Sony have quite possibly made a loss on the PlayStation 3, which has sold about 58 million units, and although Microsoft are certainly pleased to have clawed up into second place in the home console market with 60 million 360s sold, neither company is doing particularly well in the digital entertainment space on any metric beyond (perhaps) customer satisfaction. Both corporations are desperate to do better next time around, but to do so they must solve a difficult – possibly impossible – problem. They need to release hardware that they aren’t going to lose too much money on that will sell to both the dedicated videogame fans they are already fighting over and the mass market for games that Nintendo and Apple have largely cornered.

But how do you do bridge the two markets for games? There is no clear answer. Nintendo’s Wii was and is a great fit to the mass market, but it lost Nintendo a lot of support from the dedicated gamers (although many still bought the hardware). Conversely, Microsoft has bent over backwards to steal gamers away from Sony, and to a great extent has succeeded – at the very least, Sony and Microsoft have split this smaller-yet-viable market between them. But both companies are trapped in an escalating arms race of graphical power and correspondingly expensive development costs that effectively reduces the number of active development teams and thus the number of major game releases at the top of the market. This has consequently destroyed the diversity of game content that gave Sony the edge in its first two machines, and led to a situation where platform exclusives are increasingly irrelevant since the big players are no longer willing to be tied to one format.

My instinct is that the gamer hobbyists are successfully hooked on the prestige titles and will continue to buy them for some time to come. Predictions of the 'death of console' seem to misunderstand the wide appeal of the console among the gamer hobbyists and the lack of desire the mid-maket has to play their videogames on a PC, although there is certainly a number of major problems with the economics of the console market that are going to become more and more acute going forward. The loyal gamers may be satisfied with their machines, but without a wider reach into the mass market, the economics of the AAA console title becomes ever more marginal in an industry that is posting gigantic profits in other areas (specifically social games and other games-as-services, such as World of Warcraft). Serious change is on the horizon, although how this will play out is at the moment anyone's guess.

The number one question concerning the commercial fortunes of the coming generation of gamer-friendly consoles is the default control schemes. Both the Wii (92 million units) and the DS (150 million units) succeeded precisely because they had the right controls for the wider market. Motion controls simplified access to videogame play to an extent that many gamers still don’t appreciate or even understand, and the touch screen on the DS (and, for that matter, on Apple’s iPhone and iPad devices) has been the single most significant transformation of control input in the history of games so far. It’s telling that the Wii U is basically a Wii plus an iPad – and this is not an ill-considered move on Nintendo’s part, especially if they continue to improve their ability to offer multi-role support for their consoles. (I know at least one gamer who uses their Wii to stream TV shows, for instance).

Microsoft’s decision is partly made for them: they consider the Kinect a success, and will want to make their next platform incorporate their nicely perfected EyeToy. Kinect has set records for peripheral sales, but as a development platform it is truly irrelevant, since no-one is going to want to produce software for an installed base of less than 20 million when all the other options have between three and eight times that audience on tap. Putting Kinect into their next console gives Microsoft great options for appealing to a wider audience – although with the buzz on the Kinect already largely spent, it isn’t going to be enough to bridge the mass market on its own by any stretch of the imagination.

The tough part of Microsoft’s decision is whether to stick with their derivative ho-hum controller as the centre of their gamer appeal, and in this respect there are a number of problems. Firstly, it’s going to make the new console a lot more expensive to produce if it has to ship with both Kinect and a standard controller. Secondly, if Microsoft announce a new console that depends upon an ordinary twin stick controller for gamer appeal they are basically counting on converting their existing installed base onto the new machine as they’ll have nothing to tip the loyalties of rival fanboys into their favour – this could be exceedingly foolish. Microsoft absolutely need selling points that can draw Sony gamers into their camp, and Kinect isn't going to do that. Lastly, what does it mean to developers if the new Microsoft console ships with two entirely distinct control schemes – twin sticks and Kinect? Must they support both? Will some titles support one and not the other? There is no easy solution to any of these problems, although tolerating a hetrogeny of control schemes might seem like the only acceptible option.

Sony’s situation is in many respects much simpler. The Move plus Navigator are basically an extremely impressive upgrade to Nintendo’s Wii Remote plus Nunchuk, in keeping with what I have called Sony’s Copycat Policy, and Sony will want these high class motion controllers to ship with their new console for a number of reasons. They know the Move has mass market appeal because they can see that Nintendo outsold them by more than 50% with the Wii, and they know that the Move is superior to both the Wii Remote and anything else Nintendo is likely to be able to make with their lesser technical resources. With a positive fanboy response to the crucial first person shooter experience when played with the Move, Sony have very strong reasons to make the Move plus Navigator the core of the PlayStation 4’s control scheme. They’ll want to include their upgraded EyeToy (sorry, PlayStation Eye) in order to be competitive with Microsoft’s Kinect, but otherwise their main control scheme is already written for them.

But therein lies a problem – because it’s by no means the case that all gamers are won over by motion control, and many are flatly hostile to it. Frankly, the truly dreadful Sixaxis play experience did not help in this regard and neither did the shoddiness of early Wii motion controls, although a certain amount of pugnacious resistance to change among gaming nerds is the real issue. As a result of anti-motion control sentiment, Sony will fear that if they put all their eggs into the Move’s basket they might lose ground to Microsoft in the smaller-but-vital gamer hobbyist market as previous Sony loyalists who hate even the idea of motion control defect to their immediate competitor. If Sony had visionary leadership, they might have faith that Move and the Navigator would win over converts simply because it is such a nice piece of engineering – but they’ve seen their copycat controller lose out in the battle for media attention to the more dynamic Kinect and may fear their device isn’t good enough. (In this respect, they needn’t be concerned: the Move by all accounts is exceptionally good at what it does – even if what it does is simply improve upon what Nintendo have already done).

So Sony face the same awful decision Microsoft face: do they ship a twin sticks controller with the PS4? If they do, they have all the problems I already listed – higher cost-per-unit and thus bigger initial loses, a potential need to support multiple control schemes that will not please developers, and so forth. But my suspicion is that Sony will be terrified of losing yet more ground to Microsoft and will feel they must support a twin stick controller with their new machine. Since the battle to convert gamers to motion controls of some kind is still a live concern, they don’t have the balls to try and force this issue through – and that could cost them. But of course, not supporting twin sticks could also cost them. That’s the crisis over future controllers that both Microsoft and Sony have to grapple with in the crucial months before GDC or E3 in 2012 where firm announcements will have to be made.

There is hardly anything interesting about the hardware that the new Sony and Microsoft machines will ship with, since we can already know that they’re both going to be upgraded to come up to par with contemporary PC gaming kit. Sony’s technology choice is the easiest yet for them, since they can simply reuse the innovative-but-awkward Cell chip from the PS3 and add more of them – at least one source has suggested a move from one Cell processor to 8 Cells, which sounds highly plausible. The interesting and vital decision that both platform manufacturers have to make is what control scheme ships as default in the new machines. Do either have the guts to wave goodbye to the twin stick controller as a relic of an older market and push forward with a motion control system that has the potential (on paper, at least) to appeal to both gamer hobbyists and the mass market? I doubt it. But I’m interested to see if they can prove me wrong.

What do you think? Share you views in the comments.