E3 is viewed by the hardcore. Casual's do not call in sick days, or get on the net to watch the internet via streaming off of a website while at the office. E3's purpose is to give flash and substance to reinvigorate the core base, and give hardcore gaming sites something to talk about. Then that core walk away from it and tell their casual friends about all of this exciting stuff. You could just as easily hold a seperate event or press conference and get Good Morning America to talk about your product. E3 itself is an event mainly followed by the hardcore, to get that core base talking. Microsoft forgot that.
I think everyone traded places this year. Sony was more like the last few years of Microsoft, they had the closest to a megaton in the Gabe Newell and Twisted Metal announcements, and they used the word exclusive a lot. Nintendo was more like Sony in that they showed a lot of the more core 1st parties instead of their last few years which was far more about catering to the casuals and pushing their hardcores aside. Microsoft took up Nintendo's old mantel about appealing totally to the casuals with one or two glances towards their core audience, and they had hints of Sony's 2006 Riiiidge Racer show with some of their awkwardness.
The problem, IMO, comes in that Microsoft's hardcore fanbase (and when I say Microsoft's hardcore fanbase I mean the guys who act like Microsoft raised their children and give them a check everytime they praise the system, I don't mean hardcore gamers on the 360) isn't used to being told Microsoft lost. Every year since this gen started Microsoft and it's hardcore fanbase have proclaimed a victory at E3. This is the first year where they clearly didn't win. If you go to other gaming sites and read the E3 comments, suddenly every hardcore Microsoft fan has kids and relatives, and they're all hyped up about Kinect. They all claim Microsoft has their biggest E3 victory yet because they sold the casual crowd 10x over. The problem is the vast majority of the demographic Microsoft aimed this conference at didn't watch E3. Casuals by most definitions are non gamers or gamers who play very lighly and like to be able to pick up a controller from time to time and play. Most aren't ppl who actively seek out gaming news and give up 2-10 hours over the course of 3 days to watch a crappy streaming website feed about gaming.
So, IMO, Microsoft spent 2 nights and 4 hours total catering to a crowd that for the most part won't be watching. Meanwhile subjecting their hardcore crowd to something that will turn them off. On top of that Microsoft isn't Nintendo, the hardcore are their base. 40 million Xbox 360's out there, and I'd like to think that atleast 35 million of them are into more hardcore games (the Halo's, Gear's, Mass Effect's). They tossed aside that entire 40 million to try and cater to a demographic they probably don't have. Why pay $400 for a 360 Kinect bundle, plus $60 for Kinect sports, plus $60 for Kinectimals when you could pay $200 for a Wii and get Wii sports bundled in, and then pay a little extra for Nintendogs (for fairness sake, same for PS3, why pay $400 for Move).
Microsoft tossed aside their entire base to try and chase after the Wii base and Wii's potential future customers. In the end that decision could bite them on the ass if they alienate their main consumers and don't end up capturing their new target demographic. I'm not saying it's a fail for the 360 as a whole, but at the least I think Microsoft failed E3 because of it. They had 2x the conference length as anyone else, and still spent the majority of their E3 press conference showing off exactly what they showed off the night before. That's also not counting that their Kinect show was described as a poncho wearing acid trip, and that their actual E3 presentation was a Kinect heavy, ESPN akward, showing off games we knew about months ago, and possible best showing was of a multiplat game, boring show.