Next week, the video game industry will descend on Los Angeles for E3, the Electronic Entertainment Expo.

The video game industry's biggest trade show is where the top console manufacturers and software developers will reveal their latest and greatest products. Last year, Nintendo previewed its 3D gaming console, the 3DS. Microsoft unveiled the Kinect controller and Playstation debuted the PlayStation Move controller, motion sensored add-ons to their existing consoles. This year could be even bigger than last as there are rumors abound that Nintendo will preview its next-generation major gaming console.

Nintendo with their next generation console will generate the most excitement, said Scott Steinberg, veteran video game analyst at They have a long and proud history of innovation and what they will be able to do to top the Wii, the system that made motion control popular, will be interesting. It could be more power, HD graphics, a controller with touch screen capability that would function as itself.

According to Japanese newspaper Nikkei, the next generation Nintendo console will include that touch screen controller. It will come with a six-inch screen and will dually function as its own portable console and controller for the bigger gaming console. It will also come with a camera that will allow players to create characters based on photos they take, according to Nikkei.

Analysts say the introduction of the new console comes at a critical time for Nintendo. After having the  dominant console for this generation in terms of sales, the company has fizzled in recent times. According to research firm NPD Group, it went from selling 10 million consoles in year four of the Wii's existence, to only five million last year. At the same time, it was passed by Xbox 360 in terms of yearly sales and Sony's Playstation 3 nearly closed the gap as well.

Nintendo had a spectacular rise and then a spectacular fizzle, Michael Pachter, video game analyst at Wedbush Securities said. This is the right time for them to do it (introduce a new video game console). I actually think they are late, they should have done it before. But they didn't, and they will continue to fizzle for a year until this next generation comes out.

The next generation, which is being called Project Café within Nintendo circles, is expected to arrive in 2012 at some point. Until then, analysts like Steinberg, say the video game industry is theirs to lose.

Microsoft and Sony can only go one way and that's up, Steinberg said.

Both Microsoft and Sony in the past year have shifted the focus of their consoles from video game players to overall entertainment systems. This year, analysts expect both companies to introduce a plethora of new non-gaming services, similar to a Netflix, to their consoles.

Sony is also expected to introduce a new handheld console, which will be the next generation PSP. The handheld, codenamed Next Generation Portable (NGP), will not be a 3D player like the Nintendo 3DS. It will be touch enabled and capable of playing movies. The system will also have Wi-Fi and 3G support as well as a built-in GPS. Thus far, the 3DS, hasn't sold well, something that will likely weigh on the minds of Sony executives.

The onus is on Sony to prove with the NGP that handheld consoles still have value in the world of a multifunctional device like a smartphone, Steinberg said.

On the software side, analysts don't expect too many major surprises. Pachter says every year there are a few unannounced reveals that generate buzz, but for the most part, the gamers know in advance what will be announced. He says Microsoft can really make its E3 impact with games.

Microsoft hasn't announced anything in terms of software all year, so there's a lot of interest. Sony, everything has been preannounced, so there's much less interest and Nintendo, everyone knows the games that will be announced since they are all franchises, Pachter said.

Follow Gabriel Perna on Twitter at @GabrielSPerna