But he said Skylanders: Spyro’s Adventure, which attempts to bring physical toys to life through videogames, has been worth it.

“It was scary,” he said. “But if you truly have a breakthrough idea, then you have to have the confidence to treat it as one because they don’t come around very often.”

To be sure, the game was a major deviation from the company’s war-based roots.

It melds physical toys with videogames by using a “portal,” which is plugged into the game console. Once a Skylanders toy is placed on the portal, the character transports into the game and comes to life on the screen.

In 2011, the game was the tenth-best seller after launching in October, and was the only title to make the list that wasn’t a sequel. Additionally, it was the only kids game.

Hirshberg appeared this morning as the keynote speaker at DICE, an annual videogame summit held in Las Vegas.

His speech, titled “The Eric Hirshberg Experiment,” addressed how he has a nontraditional background as a CEO, but that Activision Blizzard’s CEO Bobby Kotick saw the usefulness of his creative background. Rather than being a trained operations or finance manager, Hirshberg is a marketing type who is more likely found drawing and bringing a sketch pad to meetings.

“There are other creative CEOs, but they generally founded the companies, like Bill Gates or Steve Jobs,” he said. “But if creativity is at the core of your business, maybe it should be at the core of how they make decisions.”

Skylanders is just one case in point.

To make it the best experience possible, Hirshberg said they delayed the game’s launch by a year and spent the time getting the toys right, so they could compete side by side with characters developed by Pixar or Disney.

They also spent time making sure the game could work across platforms, so kids could play it at any of their friends’ houses regardless if they had a PC, Xbox, Sony PlayStation or Nintendo Wii.

As a result, every decision resulted in taking on more risk and spending more money.

Last night, Skylanders was voted as the most outstanding innovation in gaming as part of the 15th Annual Interactive Achievement Awards, which are decided on by members of the Academy of Interactive Arts & Sciences.

“We knew a lot of things had to go right — the core to that was bringing the toys to life. We knew that was magical, and if we got it right, it would have huge potential,” Hirshberg said. “We had the whole package. We had a great game and a great story and then pushed with all of our might with a big marketing plan.”

Yesterday, Activision reported fourth-quarter results, reporting well above its internal guidance and Wall Street analyst expectations, driven by extremely strong sales of Call of Duty, but also strong sales of Skylanders as well as, plus stable subscriber figures of its online game, World of Warcraft.

Additionally, the NPD Group said yesterday that the Skylanders toys were a top-selling accessory in January. It said that the toys were the highest-ranking item last month, and that collectively, Skylanders accessories represented 22 percent of all accessory sales.

For sure, Hirshberg has early successes to point to, but the experiment is ongoing.

But the company went a long way toward repairing its reputation tonight by generating excitement around several new products, including the new PlayStation Portable device it’s calling “Vita.”

Sony’s President and CEO of Sony Computer Entertainment Jack Tretton apologized briefly for the inconvenience that the hacks caused to customers, retailers and publishers, before turning the focus of the presentation to the PlayStation’s future.

In front of 6,000 people at Los Angeles Memorial Sports Arena on the the eve of E3, Tretton said this year’s line-up includes tons of 3-D games and new titles for its motion-controlled accessory called the Sony Move.

And most importantly, it announced the Vita–previously known as the NGP or PlayStation Portable, which will be released in time for the holidays. The Wi-Fi only version will cost $249, while the AT&T-connected 3G version will cost $299 (not including data plans).

5:15 pm: Get ready. Here we go. They’ve asked the audience to put on their 3-D glasses and turn off their cellphones.

They started off by buttering us up with a plethora of food trucks outside and beer. Not a bad option. But little do they know that we’d all prefer outlets.

BTW, blogging and 3-D glasses don’t mix!

5:19 pm: We are kicking off the show with a montage of 3-D games. But surely, not all of these will end up in 3-D, right?

If Sony’s banking on a 3-D gaming strategy, a lot of people are going to have to buy new TVs. Well, I guess they can hope….

Jack Tretton, President and CEO of Sony Computer Entertainment comes on stage, remarking that there are so many people in the crowd. He says it’s 6,000 people here!

This isn’t the first time I came on stage with an elephant in the room, he says. Yes, he’s referring to the hack.

He says this is the first time he can address it directly. “To our third-party publishing partners, you have been with us for years, and I know that it’s been costly for you. We wouldn’t be where we are today.

You gave us shelf space when there was no PlayStation brand, and now we see it exceeding last year’s numbers. Last week’s sales numbers are up 27 percent year over year.

To our consumers: Without you there is no Playstation. I’d like to apologize for any anxiety we’ve caused you….It is you that causes us to be humbled and amazed by the commitment you have to the brand. Network connectivity is at 90 percent compared to before the outage.

For those of you who left, or never joined, the next 90 minutes will hopefully convince you otherwise.”

5:25 pm: Tretton says they are going to work extra hard to make the PlayStation Network as valuable as possible.

As part of that, it will be adding Cinema Now to give access to the latest TV shows and movies.

5:27 pm: Tretton leaves the stage so we can start the party. First game to be shown off is Uncharted 3: Drake’s Deception.

Right about now, I’m realizing this is the fourth press conference I’ve been to today, and the umpteenth game preview. How many more can stand out, or impress? This is totally every videogame consumer’s E3 dilemma.

This is another first-person shooter, where you are walking around hallways and down the deck of a big ship.

And, a fight scene just ended in a grenade blast. The ship has sprung a leak, and water is pouring in. But the fight continues.

He’s now underwater trying frantically to find a way out before his oxygen is all gone.

You’ll have to buy the game to find out what happens next!

The game will be out June 28, and there’s a tie-in with Subway. With your next sandwich, you’ll get a free early sneak peek.

What’s this? Another version of Uncharted 3 will be available in 3-D. Not sure if it’s the same version, or a special copy. This isn’t a live demo, just a video, so it’s hard to tell how it will look once it’s released.

It’s coming much later in November.

5:37 pm: Insomniac Games is now on stage to show off Resistance 3, which is about a bleak existence.

Put on your glasses, this one is also in 3-D! (Have I mentioned that blogging is difficult with glasses on?)

With 3-D, you have three layers of depth perception. First, you notice rain drops are hitting your camera lens, then you notice how your gun protrudes out in front of you, and finally, you see the target you are shooting.

The game is gritty and grimy. Not a lot of light filters in through the gloomy clouds. It’s not pretty, but it’s realistic.

5:41 pm: Tretton is back on stage to say that their commitment to 3-D is unwavering, and that they believe that gamers can spur broader adoption of the technology.

Lots of good prices and games coming to the console, he says.

Content is a barrier, but so is price.

“We are making the entrance into 3-D more affordable for everyone,” he says.

They are launching two new hardware products, including a PlayStation-branded 24-inch display. It’s perfect for bedrooms and dorm rooms, he says. What’s really amazing is that two people will be able to play the game at once, by seeing two different screens, rather than a split screen.

This is really cool, but it’s completely unclear how this works.

The monitor will come with a pair of 3-D glasses and a six-foot hdmi core and Resistance 3. The bundle will cost $499.

A pair of standalone 3-D glasses will cost $69.99.

5:47 pm: Kobe Bryant comes on stage to show off 2K Sport’s new Sony Move game.

He takes the controller away to show the demonstrator how it’s done.

The ball is stripped from him, and then he fouls the Heat. Kobe says: “Man, this game is a little too realistic.”

He shoots, he scores!

He gives the game some serious props, saying it’s “frighteningly” accurate. He says that you can play the triangle offense better in the game than the Lakers did all year.

5:52 pm: Kobe leaves the stage. Now here’s another new Sony Move title called Medieval Moves.

6:06 pm: Sorry about that folks, but I lost Internet access for a little bit. Now I’m back.

I’m afraid I missed a few titles, including Little Big Planet, Sly Cooper and Infamous 2.

Now we are getting a peak at Dust 514, a space galaxy title.

Dust 514 is an exclusive to the PlayStation platform.

6:10 pm: Up next is Bioshock, a fantasy-looking game with a first-person shooter.

The creator of Bioshock is now on stage, telling a story about how he said some unfavorable things about Sony’s Move to the press because he makes core games–not family-friendly casual titles.

Sony called him to change his mind and make him a believer.

And, it worked. He says there will eventually be a Bioshock title using the Sony Move.

In the meantime, he says they are even more interested in the NGP, the new Sony PlayStation portable.

6:14 pm: Tretton is back on stage to announce a new partnership with THQ, which includes exclusive content from Saints Row coming out November 15.

Another exclusive is with Star Trek, which will be a Move title. A special Star Trek Move controller will also be released with the controller to replicate the phaser.

6:16 pm: We are now 75 minutes into the 90-minute press conference. I’ll expect more talk of the NGP any second.

We’re waiting to hear about its release date and price and whether it will make it out in time for the holidays. Previously, it was rumored to be delayed because of the devastating earthquake in Japan.

Tretton interjects that three more exclusives are coming from EA: SSX, the snowboarding title; Need for Speed: The Run; and Battlefield 3, which will include extra exclusive content that can only fit on the blueray disc.

6:19 pm: And, here we go, what we were waiting for: more information on the NGP.

Kazuo Hirai, president and CEO of Sony’s consumer products and services group, takes the stage to tell us all about it.

The original PlayStation portable came out in 2004. The question is, how do we deliver a PlayStation experience to a wider audience?

The answer is something he’s calling PlayStation Suite, which will allow non-PlayStation devices to play PlayStation content, including a ton of certified Android phones and tablets.

The NGP provides the next generation of portable gaming that allows you to play games with a number of new methods, like dual cameras and touchpads.

What it’s officially being called is Vita.

The device has a five-inch screen, front and rear touch pads, and front and rear cameras, allowing for augmented reality. The device will have both Wi-Fi and Wi-Fi-plus-3G models for on-the-go gaming.

“Of course, having such a set of features requires the nation’s fastest mobile broadband network. We are partnering with AT&T.”

The AT&T announcement garners serious laughs from the crowd.

A social network will come with the PlayStation Vita called Near, which will allow you to connect with friends and post game scores.

6:28 pm: Now time for a demo of the NGP–I mean Vita!

They are running through a short section of Uncharted 2, a game we saw demo’d earlier for the PlayStation. The device’s touchscreen allows you to punch the enemy. It can also be tilted so that the player can drop across the screen. However, where it makes sense, players can continue to use the same Sony PlayStation buttons they are used to from the console.

The game allows a player to swipe and tap the screen, where they’d normally have to memorize and execute a lot of quick button taps on a controller.

It’s an interesting combination of what you see on the iPhone and the typical PlayStation game pad.

Not sure how many titles there will be to begin with, or how much the Vita will cost or when it will be released.

More demos are occurring for now. The latest is Ruin, which is only a working title at this point.

6:36 pm: An interesting aspect of Ruin is that people will be able to put down their Vita, and pick up their game play exactly where they left off on the PlayStation 3.

The game play is stored in the cloud, and the exact same game will be available on both the Vita and PlayStation 3.

6:40 pm: Another game from ModNation Racers allows users to build their own track using the touchscreen to drop trees and houses where you want them.

Additionally, Vita players will have access to all the user-generated tracks created from day one.

6:43 pm: A few more details on Vita, which still sounds far off. An exec is saying that many of the PlayStation Vita titles will be tied to the PlayStation 3 through three methods: Cloud saves, online competition and content sharing.

6:47 pm: One more title is StreetFighter from Capcom, which was announced last year. Today, they are announcing that they are also going to have a StreetFighter X Tekken version for Vita.

They have a real-life demo of the game, which really has the crowd excited.

6:52 pm: One thing that’s very noticeable even from the audience is the size of the Vita, which looks a little awkward to hold with just one hand. It’s a serious piece of machinery. You almost wonder why they didn’t skip directly to making a tablet form factor.

We’re watching a short video on all the content coming to the Vita. There are tennis games, street fighting, mazes and much more.

Now here’s the real fine print:

The device will be available starting by the holiday season.

The Wi-Fi-only model will cost $249, and the 3G plus Wi-Fi model will cost $299. (No details on AT&T 3G pricing plans).

The PlayStation Vita will be on display tonight for everyone to play for themselves.

Tretton comes back on stage to wrap things up: “As you can see, the depth and breadth of content like never before…By adding 3-D, PlayStation Move and Vita, we offer the best entertainment around. We hope you are as excited as we are about what’s to come.”

Next up lots of demos and unnamed musical guests.

Now the stage is lifting up in the background to reveal a bunch of drummers and a DJ.

I guess the party has just begun.

That’s it for the live blog. Thanks for sticking around!

More From E3

• At E3, Xbox Lets Kinect Lead the Charge on Gaming, Live TV Ambitions
• Justin.tv Broadcasts Gamers’ Every Move on TwitchTV
• Who Needs War? Sparks Will Fly in EA’s New Sims Game for Facebook.
• Sony Unveils Vita Gaming Device at E3; Will Launch This Year for $249
• E3: Nintendo Unveils the Wii U With Tablet-Style Controller
• Three Key Takeaways From Nintendo’s Wii U (Plus Photos!)
• No Hacks to Report at Xbox, But Microsoft Isn’t Letting Its Guard Down
• Forget About 99 Cents, What If You Could Rent Mobile Games for 25 Cents?
• Digital Game Revenues Hit $5.9 Billion in 2010

Iwata, who presented the show’s only keynote, said he fears today’s emphasis on mobile and social is going to hurt the industry.

Later in the afternoon, critics said his statements only prove his ignorance and point to the company’s own weaknesses.

“Long-term, Nintendo is doomed,” said Michael Pachter, equity research analyst of Wedbush Securities. “He’s under full frontal assault by Apple.”

In the keynote, Iwata explained the games industry is no longer focused on building the highest quality experiences, but rather is narrowing in on free or very low cost titles.

“The majority of people here are creating games for social and mobile. I fear our business is dividing, and that threatens the employment for those of us who make games for a living,” he said.

Iwata also addressed Apple’s impact on the industry, but without every naming the iPhone and iPad-maker.

The lack of acknowledgment felt particularly strange given that his comments were being made at the exact same time that Steve Jobs was across the street, unveiling the iPad 2, which has all the hardware capabilities in place to become a serious gaming device.

The closest Iwata got to talking about Apple, and probably Facebook too, was when he said that “these platforms have no motivation to maintain the high value of video game software. For them content is something created by someone else.”

For emphasis, he added: “The value of games does not matter to them…The fact is, what we produce is value, and we should protect it.”

[A video of Iwata's entire speech can be viewed on Nintendo's web site.]

Iwata gave the impression that he was oblivious to the burgeoning mobile and social sectors around him, which despite being in their infancy, are generating significant revenues and attracting large audiences. Together, they both have the ability to define the future of gaming.

“He may be right, but then the 200 to 300 million people who play games on Facebook are wrong,” said Jeff Brown, the VP of corporate communication for Electronic Arts  ”Social gaming as a whole aggregates into a business that is undeniably big money.

“When it’s that big you are forced to pay attention,” he added.

Among the large publishers, EA’s ahead of the game when it comes to preparing for the day when consumers switch from paying $60 for an Xbox title to paying a few bucks or nothing at all for an iPhone or Facebook game. Yesterday, it furthered its commitment by expanding its third-party publishing platform into social and mobile through its acquisitions of Chillingo and Playfish.

So far, it’s paying off.

EA’s digital business was up 39 percent in 2010 and its on track to hit three-quarters of a billion in revenues this year.

Zynga, the undeniable leader on Facebook, also took offense to the statements.

Zynga’s Chief Game Designer Brian Reynolds, who came from the traditional games business and was lead designer on the big hit Civilization II, was especially baffled by the comments about being able to make a living in social.

Last year, Zynga hired more than 800 people and today has more than 1,500 full-time employees in 13 offices, spanning six countries.

“I expected better from Nintendo. They are missing the point of what we are doing,” he said. “We are making games that everyone can play and socialize on while playing.”

What’s more, Zynga is doing a great job monetizing, he said.

Sources tell BoomTown’s Kara Swisher that it’s close to completing a funding round of $500 million, valuing the company at $10 billion –making it worth more than EA’s $6 billion market cap. In 2010, its revenues were rumored to total $850 million.

“We do it in a microtransaction way, and it’s free to play, but they’re wrong that they don’t make a lot of money,” Reynolds said.

The gaming industry has always been fraught by disruption.

In the past, the storyline has been about the consoles wars with Microsoft, Nintendo and Sony all going head-to-head to be the gaming leader. Now, it’s about the platform wars with consoles vs. mobile and social.

How quickly do things change.

It was only a year ago at GDC that Zynga seemed to piss off everyone when accepting an award on behalf of Farmville for best new social/online game.

In a similar manner as Nintendo today, Bill Mooney, the general manager for Farmville at the time, used his acceptance speech to make the argument for why everyone should leave console gaming for social games. He even solicited resumes at the podium.

Mooney’s overtness was translated as lack of respect for the traditional games business, which is what seemed to bother people the most.

What’s different with today’s platform wars vs. yesterday’s console wars is that this time, it’s not about one beating another. It’s about expanding the market opportunity for gaming. Ultimately, if you give people a choice of platforms to play on, more people will play.

Reynolds said while Zynga has made huge gains since last year, it still hasn’t been fully recognized for its work.

“What we’ve done has permeated everywhere, but we don’t have the recognition from the old guard. The young guys — they get it, but the forces of the industry are living in the past. The longer it takes them to realize that, the more it will cost them to buy your way back in.”

As for whether Nintendo is wrong or right, and whether it will have to pay heavily down the road to get back in, we’ll have to wait and see.

The rest of Iwata’s hour-long keynote was spent promoting its upcoming 3DS launch at the end of the month.

Today, Nintendo’s North American President Reggie Fils-Aime announced a partnership with Netflix to offer streaming video.

It also formed a partnership with AT&T to give internet access to the handheld gaming devices wherever it operates WiFi hotspots.

Webush’s Pachter said despite the pressure from Apple, he believes the 3DS is novel and has the ability to sell tens of millions of units, but it will face competition from the iPod and iPhone, which have similar games and much lower prices.

EA’s Brown also wouldn’t count them out. “The instant you stop thinking they are relevant, they turn the industry upside down.”

The study by SquareTrade, an independent provider of warranties on electronics, estimates that 2.7 percent of Wiis fail during the first two years of ownership, compared with a 10 percent failure rate over that period for Sony’s (SNE) PlayStation 3 and a 23.7 percent failure rate for Microsoft’s (MSFT) Xbox 360. The Wii failure rate is not just low for a game console, but for any kind of consumer electronics, the SquareTrade study says.

The company said it came up with the results after studying failure reports for 16,000 game consoles purchased by SquareTrade customers.

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“I’m getting concerned about Sony; the PlayStation 3 is losing a bit of momentum and they don’t make it easy for me to support the platform,” he told the Times. “It’s expensive to develop for the console, and the Wii and the Xbox are just selling better. Games generate a better return on invested capital on the Xbox than on the PlayStation.”

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