As Microsoft Prepares to Fight Sony in Game Market, Time Is Enemy Too
Microsoft Corp.’s determination to head off Sony Corp. in the battle to control digital entertainment faces some substantial risks, analysts say.
Can the software giant afford to wait nearly 18 months to release its hugely hyped video game machine called the X-Box? And can its development team deliver the new and complicated operating system on time and sign up enough hot game developers to provide products?
Microsoft is entering the video console business for the first time with its planned launch of the X-Box in fall of 2001.
One rumor is that Microsoft might take over Sega Enterprises to jump-start its entry into the video game console business. Microsoft and Sega were partners in a failed collaboration to offer the Windows CE-based development effort for Sega’s Dreamcast console game.
Both companies decline to speculate about a possible union. But Microsoft’s need for partners underscores the challenges of trying to turn the X-Box into a major force in the $7-billion-a-year U.S. video game industry.
By the time the X-Box reaches the market, Sony’s much-heralded PlayStation2, billed as an all-in-one entertainment center that also can let people listen to music CDs, watch DVD movies and surf the Web, already will have a nine-month head start. Nintendo’s Dolphin game player, with improved graphics and a proprietary DVD system, will be out by early next year. And Sega’s Dreamcast, released last fall, has sold nearly 5 million units worldwide.
Sony Dominates Console Market
Sony now has 53% of the console market share, with an estimated 25 million PlayStations sold in the U.S. to date, and 70 million worldwide. Sony began selling the PlayStation2 in Asia in March and consumers have grabbed nearly 1 million units. “The problem is the X-box isn’t going to come out for two years, and during that time . . . the box may be perceived as obsolete,” said Rob Enderele, a technology analyst for Giga Information Group.
Equally challenging, Microsoft programmers are under pressure to build the X-Box quickly so that outside software firms can begin writing new games in time for the launch, said Michael Arrington, analyst for Jon Peddie Associates, a high-tech market research firm.
“They are certainly under the gun,” Arrington said. “They have to convince developers that the X-Box is the platform to develop for.”
Microsoft officials attending the Electronic Entertainment Expo in Los Angeles last week appeared confident that the X-Box would attract enough game developers. And they downplayed the importance of being first to the market, saying it does not guarantee dominance in the often fickle game console business.
“The first guy out of the gate doesn’t mean he’ll be the winner. This is a discerning audience,” said Robert Bach, senior vice president of Microsoft’s Games Division. “If the games are better, they’ll switch.”
Indeed, the brief history of the video game business shows pioneer Atari being unseated by Nintendo, which then lost out to Sega, which was crushed by Sony.
Microsoft officials believe that the X-Box will surpass Sony’s PlayStation2, because it claims the X-Box’s new hardware platform combines the fastest PC processors and 3D-graphics chips to produce a game machine that could greatly exceed the performance of competing consoles.
Microsoft is also expected to spend billions of dollars to market and develop the X-Box, which has been described as a “game machine with the guts of a PC.”
Some leading game developers, including Electronic Arts Inc., Konami Co., Acclaim Entertainment and Eidos Interactive, have lined up to support the X-Box, Microsoft officials say.
