The Console Wars

All three gaming consoles have been disclosed at E3, the new Sony/Apple-like Xbox 360, the new Playstation 3, which looks like it was designed by Porsche, and the Nintendo Revolution, which rather looks like it was designed by, well, Sony.  

The good news is all of the products look much better than those preceding them, and they should outperform their predecessors as well; however, there are massive differences between them.  The Nintendo product is the lightweight in terms of performance, but it’s expected to cost less than half of what the other two products cost, in a market that traditionally has not liked products over $200 very much.  Unfortunately, it will also be the last to market and it will enter when the other two players should have vastly greater game support.  That gives the Nintendo long odds for this race, which has been increasingly between Sony and Microsoft.

Of those two products, the Sony appears to be the more powerful, with a Cell derivative architecture they co-designed with IBM.  However, “appears” and “is” are two different things; both the revolutionary design of this thing and a history for very difficult design tools suggest that getting all maximum performance out of this product may take a couple of years before developers can approach the performance potential of this box.  While this product is arguably the most attractive of the three, its early use of Blue Ray may saddle it with a Beta Max-like technology if, as expected, an alternative specification becomes final. 

The Xbox isn?t as powerful as the Sony, but it compensates by having a design that is relatively common in the workstation space.   As a result, the problems it will experience will likely seem somewhat repetitive and therefore hasten the time to market.  In addition, Microsoft makes the best developer tools in the class, the combination of which should result in better products sooner and then a plateau towards the end of its life cycle.  What makes the Xbox 360 stand out are its non-gaming features.  If accepted, this becomes the replacement for CD Changers, high end progressive scan HD DVD players, and digital music players.  Just this device coupled with a receiver is all most folks may actually need in the living room.  

How 2005/6 Play Out

Microsoft is expected to release their system in the second half of 2005 if it catches the 4th quarter, where 50% of all consoles are typically sold; it enters 2006 virally as the hot thing to have for Christmas 2005.  At between $400 and $500, it is unlikely many families will buy both it and a Playstation, and getting a child to wait months after Christmas for their great gift ranks in the range of impossible.  

What makes this new class of hardware different is the increasing use of online gaming features, which creates an even more aggressive viral effect than we have had in previous generations.  Being able to message a friend you want to play with, build and sell virtual game elements, and massively increasing community pay defines the XBox and, assuming the price isn?t seen as excessive, the product shows up on time, and it works (all big ?ifs?), Microsoft should have a virtual lock on the market by the time the PS3 actually shows up. 

When the Sony comes out, it will face a market where the other guy has the momentum and the larger installed base.  Unless Microsoft stumbles, Sony enters the 4th quarter of 2006 with an expensive alternative to the XBox; it faces what may be a better alternative in the Nintendo Revolution, which will be in constraint and both more exclusive and lower priced during this period.  In addition, the Nintendo should appeal to a young audience, making it a clear alternative to both Sony and Microsoft.  If this scenario plays out, Microsoft and Nintendo effectively divide up the market and leave the crumbs for Sony, which becomes the new Sega.  That Sony is currently the market leader, looking at a situation where Microsoft has to stumble for them to win the market they currently dominate, probably has a lot to do with why they have a new CEO.  Hopefully for Sony, he has enough time to do something about this. 

The Apple Surprise

Apple has several issues to deal with as they enter the 4th quarter.  School observers are seeing fewer iPods during the end of the school year, which has people speculating that demand for the device as ?the in thing? is dropping.  We believe it is because the Shuffle removed the exclusivity of the Apple look; music players are reaching the same maturity stage that stalled portable CD players a few years back.  The Xbox is currently the most likely to be what the kids who wanted iPods last year will want this year.  

In addition, the Xbox uses up three chips per box.  With estimated demand at 10M, that is 30M dual core PowerPC derivative processors.  Because Apple appears to buy tactically if Microsoft is current, and they have locked down the supply they need for this ramp up, Apple could run into some expensive product shortages going into the fourth quarter, which is typically very good for them.  IBM will also be ramping up for Playstation 3 consoles and supplying IBM?s own PowerPC server and workstation needs, suggesting that someone is going to be short of parts in the second half of 2005; this shortage is likely to get worse if demand exceeds plan (which it may in this case). 

This all depends on four things:  Microsoft has to release the product on time and feature complete, it can?t break excessively, it has a large number of good launch titles, and the customer finds acceptable a price that could be as much as three times greater than the current system. 

The next eighteen months should be really interesting for a lot of folks and we may even see one of the game consol members exit the segment.  Me, I?m just looking forward to experiencing the new physics engines while I virtually blow up buildings and work off the frustrations of a long working day. 

The views expressed here are solely those of the author and do not reflect the beliefs of Digital Trends.

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