Gaming's battle for your living room

Microsoft readies itself to enter the $4 billion gaming market and goes head-to-head in the living room with Sony, Nintendo and Sega.

Microsoft has long eyed Sony's dominance of the living-room gaming scene. On Friday at the Game Developers Conference in California, Microsoft is expected to finally open hostilities against the PlayStation2 maker.

According to sources, Chairman and Chief Software Architect Bill Gates will use the conference to unveil Microsoft's long rumoured Xbox -- a game console based in PC technology but with all the ease of use of a console device. Based on a high-powered PC, the Xbox is expected to run an AMD Athlon processor, the latest NVidia GeForce graphics chip, 64MB of RAM, and a hard drive of between 4GB and 6GB, according to sources close to the deals.

The new gaming box launches Microsoft's attack on living-room rival Sony -- an attack that could net the winner a hefty slice of the $4bn (£2.43bn) console gaming market. It also comes just as other consumer electronics makers are looking for ways to corner their share of the living-room market. Both Sony and Microsoft are betting on game machines that are more: more technological wizardry delivering better graphics, more consumer features, such as the ability to play DVD and more hooks into the Internet through analogue, cable and DSL (digital subscriber line) modems. Rival Sega (Nasdaq: SEGNY), whose Dreamcast game console is the latest rage in the United States, questions whether Sony is biting off too much with the PlayStation2.

"My question to Sony is, 'Who are you? What is this product going to be used for?'" said Charles Bellfield, marketing manager for Sega of America. "Is the PS2 a game machine or a DVD player? Or is it a pipeline to the outside world?"

Valid questions, said Jeremy Schwartz, industry analyst with market watcher Forrester Research in the US, but Sony has a track record of success in this market. "The slight risk that Sony runs with the PlayStation2 is confusing the consumer with a product that does too many things," he said. "Yet, in (Sony's) defence, they are all things that the consumer understands: Gaming, DVD and the Internet."

And to date, Sony has been extremely successful in delivering what the consumer wants. Already, the PlayStation2 has hit Japan like a consumer tsunami, with just under 1 million units sold in less than two days. Sega, likewise, set records in the United States when the Dreamcast sold 500,000 units in two weeks.

With such numbers, most analysts don't doubt that Sony will quickly dominate the market. "The fight will be for the No. 2 position," said Edward Williams, senior vice president and researcher at investment house Gerard Klauer Mattison & Co. "But we really can't pick the horse that will be No. 2. It's difficult to bet against Nintendo's content, but it's equally difficult to bet against Microsoft's war chest.

"The Microsoft Xbox, the [Nintendo] Dolphin, and the PlayStation 2 could all be really good products," said Williams. "They are all coming from very strong -- financially -- companies."

Yet little has been heard from Nintendo since the original Dolphin announcement last year. In addition, without something to show off soon, previous developer allies may begin to cool relationships. Nintendo should also be worried about getting developers on board. Already, Sony has gained unprecedented support for its new machine, garnering a large fraction of the future development dollars. While Sega expects to have 200 titles by the end of the year, the PlayStation2 could surpass that early in 2001. And Microsoft has a built-in advantage with developers from its strong ties born from its domination of the PC industry.

"No matter how simple it is to develop to a game machine, the fact of the matter is that you have to dedicate a team," said Forrester's Schwartz.

In a market that has had difficulty supporting three platforms, adding a fourth could turn the battle royal into a death match. The winners will be those platforms with the most developer support.

Bill Gates is like a pushy salesman. If he can get one foot in the door, he'll barge on through. Go to AnchorDesk UK with Jesse Berst for the news comment.

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