Microsoft Aims to Be a Player in Game Circles

Microsoft Corp., which will demonstrate its secret video game machine today in San Jose, is starting a separate games business unit and plans to spend more to promote its new entertainment device than it did to launch Windows 95.

The machine, called the X-Box for now, is an all-in-one entertainment center that will let people play games, listen to music CDs, watch DVD movies and surf the Web, officials said Thursday.

Designed to rival Sony Corp.’s much-heralded PlayStation2, the X-Box marks Microsoft’s latest effort to gain a dominant role on the Internet, where digital appliances such as cell phones and TVs are connected to the Net and to each other.

Though the X-Box won’t be available for sale until fall 2001, Microsoft has already been approaching advertising agencies to talk about its planned marketing blitz.

“This is an entertainment launch and we know we’re in the hundreds of millions of dollars range,” said Don Coyner, director of marketing for X-Box. “It’s going to be bigger than the Windows 95 launch.”

“The game industry is incredibly competitive,” said Richard Doherty, director of research for Engineering Group, a technology research and assessment firm in New York. “Sony doesn’t have pockets nearly as deep as Microsoft’s. Neither does Sega or Nintendo.”

This past fall, the big three video-game makers said they would spend a total of nearly $400 million for marketing in their battle for market share in the fickle $7-billion video-game business.

The unprecedented push was fueled by Sega of America’s introduction of its Dreamcast game player last September, when the company began spending $100 million promoting the machine. Sony Computer Entertainment America and Nintendo of America each spent $150 million on a torrent of rival ads.

Sony recently launched its new PlayStation2 in Asia, and Nintendo will start selling its new Dolphin machine this year. Each plan to spend millions more to promote their new game machines well ahead of Microsoft’s entry.

The X-Box is a game console machine with “pieces of the PC architecture built into it,” said Kevin Bachus, director of third-party relations for the X-Box.

Microsoft will not say how much it will charge consumers for the X-Box. The PlayStation2, now only available in Asia, is selling for $370.