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Supplements to Add Muscle to Next-Generation Video Games

15 Aug, 2002 By: John Gaudiosi

With Microsoft, Nintendo and Sony firmly ensconced in a long-term console video game battle for the time and $50 software investments of a worldwide audience, the $21 billion worldwide gaming industry is already looking to the next wave of hardware. Expected to launch by 2005, Xbox Next, PlayStation 3 and GameCube 2 are likely to usher in a new war on the living rooms of the world.

Xbox and PlayStation 2 are the first phase in a plan that will eventually create a set-top box that performs a full range of services. These two systems, which retail for $199 each, come equipped with DVD movie playback capabilities (Microsoft charges an extra $29.95 for the remote control that unlocks this feature) and online options. Sony's PS2 requires a $29.99 network adapter card, available late this month, to open up the broadband/dial-up modem capabilities, while Xbox ships with an Ethernet card that will give gamers access to Microsoft's Xbox Live online service, which launches Nov.15.

While Xbox ships with a 10GB hard drive, Sony will charge an extra sum for its drive, which is expected to ship in 2003 for around $99. These hard drives are the key to these machines' abilities to not only download video game content via broadband, but music and movies as well. The next round of hardware will add digital video recorder options to these capabilities, allowing gamers to pause live TV and record shows to the hard drive like a TiVo or Replay TV does today.

Microsoft, which combined its Ultimate TV organization with its Xbox team, has been at work on a project code-named Freon, which could release before 2005, breaking the traditional five-year life cycle the video game industry has established over two decades. The reported price tag for this concept machine is $500, although whether it will ever see the light of day is still in question.

“The key to winning over the living room is keeping the price point of the hardware under $350 so that it's attractive to the casual consumer and to make the various functions of the device extremely simple to use,” said James Lin, managing director and senior analyst, Jefferies and Co. “It's important to clarify the purpose of these machines. Is it a gaming device that happens to have DVD movie playback, online access and DVR capabilities? Or is it a DVD player that happens to play video games and has broadband functionality?”

While game companies aim at the hardcore gamers -- consumers with a disposable income who routinely buy 20-plus video games a year at $50 each, plus own every gaming system -- it's the mass market gold the industry is truly aiming for. With the living room, the clientele is much less tech-savvy than the PC user, so simplicity is key.

Gaming will remain the focus of the next generation of Sony, Microsoft and Nintendo hardware. Sony Computer Entertainment's chief technical officer, Shinichi Okamoto, said PS3 will have 1,000 times the processing power of PS2. Sony is focusing its research on distributed computing, which would spread the processing power of PS3 across a closed broadband network of thousands of connected consoles. Okamoto mentioned the Sony/IBM/Toshiba-developed cell processor could be the key to this decentralized computer entertainment network. Sony is working with IBM, which has been researching grid computing, a variation of distributed computing, for quite some time in the hope of using the technology in the next PlayStation.

With more than 62 percent of its profits coming from video games in 2001, Sony will continue to focus on the PlayStation brand. The game Everquest is the first example of Sony divisions working together to deliver Sony-created content through its online channel, and additional opportunities will open with the next PlayStation. Hard drive prices continue to drop, giving game makers more storage space to add to game devices, which will result in more room to save TV programs, music and movies.

Xbox already has greater processing power than Sony's PS2, but lags far behind in the race for consumers' homes (Sony has sold more than 30 million PS2s worldwide to Microsoft's 3.9 million). Xbox Next is expected to increase the already amazing visuals of Xbox and take gaming further online via broadband. While Xbox is the entry point to online gaming, Microsoft believes a more powerful system will be required to fully realize the online world.

“Game manufacturers will never sacrifice gameplay for other features,” said P.J. McNealy, analyst, Gartner G2. “The reason Xbox doesn't have an Ultimate TV running in it today is because the processor can't handle playing games and recording TV shows at the same time, so Microsoft put gaming ahead of DVR.”

Nintendo, marching to its own drumbeat as usual, has been mum on its next console. The company has focused solely on gaming with its $149 GameCube system, and the Matsushita GameCube/DVD movie playback hardware that was released in tech-savvy Japan was a bust and is not expected to ship in North America.

“Nintendo dominates the handheld market with Game Boy and will continue to focus on the kiddie market and its original software IPs,” said McNealy. “I don't think they'll focus on the living room like Microsoft and Sony.”

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