Will PlayStation 2 rule the living room?

Sony's next PlayStation could have all the makings of a killer home-entertainment device-if the company takes the cuffs off.

With a 128-bit processor that runs games three times faster than the Pentium III, a graphics chip two times faster than some high-end graphics powerhouses from Silicon Graphics, DVD capabilities, and most likely, online connectability, the so-called PlayStation 2 could be a dream home-entertainment device when it comes to market late next year.

But Sony Computer Entertainment America Inc. (SCEA) seems reluctant to make PlayStation 2 the centre of the living room. "We have no intentions of putting this technology into any other form of consumer electronics or markets at this time," said Phil Harrison, SCEA's vice president of third-party relations and research and development. "While there are similarities to next-generation set-top boxes, we see this as an entirely new market."

On Tuesday, SCEA officials revealed the specifications for its next-generation PlayStation game console. The video-game console has the potential to play DVD movies and connect to the Internet. But Sony may not put these features into the box.

"We have not come to a decision at this time whether we will put in the ability to play DVD or not," said Kaz Hirai, executive vice president and chief operating officer of the Sony subsidiary. Hirai added that it could support a Web browser, as well, but the decision to add such a feature has not been made either.

The implications for the market are huge. More than 50 million PlayStations have been sold worldwide, and Sony has high hopes for its successor. "There are over a billion colour TVs on the planet -- that's our market," Harrison said, during the announcement, made in Tokyo. "That market will include other conventional forms of home-entertainment, and we see ourselves as a superset rather than a subset."

Sony, an entertainment conglomerate, worries that a multi-faceted PlayStation might cannibalise sales for other units. Thus it may effectively hobble the device. At least one financial analyst sees the logic in Sony's decisions. "Sony makes a lot of money selling audio-video components, so they have reason not to want to release DVD (in the PlayStation)," said John Taylor, a video-game analyst at securities firm Arcadia Investment Corp.

Even without the features, PlayStation 2 could still be able to read software written on DVD-ROM disks and could play multimedia games over a proprietary network, said Hirai. "This is not meant to be a multimedia product," he said. "It's a new interactive entertainment system." Still, Hirai admitted that the original PlayStation could do things, such as playing audio CDs, that were not a part of its core features. Business needs may ultimately force Sony to take the gloves off the PlayStation 2.

The consumer electronics giant may eventually have to go with the ability to play DVD movies, said Gerry Kaufhold, an analyst at multimedia researcher In-Stat Group. "If they don't put DVD movie capability into the PlayStation 2, it ultimately costs them money -- there will be DVD movies that won't get sold," he said. That might hurt DVD sales at Sony divisions such as Sony Pictures and Columbia.

Adding DVD might attract many more consumers to the platform as well. "It's a Trojan Horse," said Kaufhold. "Consumers will go out and buy the PlayStation 2 for the games and will get introduced to DVD." As a result, sales of DVD movies could be boosted. Stay tuned, because what Sony decides may determine what goes into consumer living rooms, starting next year.