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MAY 24, 2005
By Cliff Edwards Gaming's Clash of the Titans Microsoft's next-generation console comes out first. Sony promises more features. Nintendo says its unit will outplay them all The battle is joined. With the annual Electronic Entertainment Expo now just a few scattered memories of parties, crowded exhibit floors, blaring music, and video, Sony (SNE ), Microsoft (MSFT ), and Nintendo (NTDOY ) now face the tough task of proving their next-generation consoles merit waiting for. Based on presentations each company offered May 16-17, no clear winner emerged (although many felt Nintendo might come out a clear loser with its Revolution game console). Sony's PlayStation 3 stood out for superrealistic game demos and eye-popping console design. Meanwhile, at a press conference a few hours later, Microsoft was put on the defensive by what looked like inferior hardware and less-convincing game-play on its Xbox 360. A day later, by not offering many details, Nintendo seemed to float above the fray with its "prototype" Revolution, which raised more questions than answers among nervous developers. SEGA'S FOLLY. One of the biggest riddles remains: Does being first to market matter? Microsoft will have at least a six-month jump on rivals. Bill Gates and his crew vowed never to be tardy again after the first Xbox hit shelves more than a year behind Sony's PlayStation 2. Thanks to certified hits like Gran Turismo and Grand Theft Auto, the PS2 has since outsold Xbox by 4-1. This time around, Xbox honcho Robbie Bach argues that, because of Microsoft's lead, developers are likely to optimize their games first for the Xbox 360. "That's a very good thing, in my book," Bach said in an interview. Maybe not. Remember Sega's Dreamcast? That company had a year's lead on the PS2, but Sony's then-superior technology clobbered Dreamcast's sales. Researcher IDC games analyst Schelley Olhava says if Sony delivers on all the technology it showcased during its news conference, Microsoft could find itself in a similar fix. Sony says it will roll out PS3 in the spring, although it did not give details on which regions of the world will meet that deadline. Game developers say a big factor in Microsoft's favor is its clear strategy for using the Internet to generate extra game-related revenue. For example, players may be willing to spend a few bucks on on such things as new character-themed clothing offered online. That could help boost a $20 billion market now largely governed by one-time sales (see BW Online, 5/24/05, "A Talk with palmOne's New Pilot"). ONLINE MYSTIQUE. At the show, Microsoft demonstrated new improvements to its Xbox Live online gaming service and noted that customers will get entry-level "silver service" (online service) free. The Xbox 360 also will be tied to Windows PCs and supposedly connect to a variety of handheld devices, letting consumers access outside music and video content and play it through the Xbox. Neither Sony nor Nintendo has offered many details of its online plans. Sony Computer Entertainment America President Kazuo Hirai declined to elaborate in a follow-up interview. "There will be an extension of the PS3 outside the home, with chat, e-mail, and head-to-head game competition," Hirai says. "We're looking to develop a relationship with the customer to say what works and what doesn't work." Sony hopes to gain the upper hand once more by throwing in cutting-edge technology. The Japanese giant will offer the next-generation high-definition digital video disk technology, Blu-ray, in every box and have connectors to two high-definition televisions, as well as the recently introduced PlayStation Portable. Problem is, all the new bells and whistles could make the PlayStation 3 too pricey for anyone but hard-core gamers. EXCLUSIVE TITLES. For its part, Nintendo had little to say about Revolution that game developers did not already know. The oldest of the top three console-makers drew thunderous applause after announcing Revolution would be able to play virtually every game in Nintendo's history. But President Satoru Iwata did not offer details of the "entirely new way of playing games" that he has been promising. The company doesn't expect to release further details until the end of the year, as it gears up for what it will only say is a 2006 launch. Gamers, be warned: This battle is going to look more like a chess match than a fight to the finish. Each company hopes behind-the-scenes incentives will lure the likes of Electronic Arts (ERTS ) and Square Enix to create exclusive titles for its consoles. Exclusivity could be the key to success, since hit franchises have always been the deciding factor in any console's success. "We will be there to support the developers to make sure they take advantage of the power of the PS3," Hirai says. Counters Microsoft's Bach: "From a platform perspective, we have the most powerful one on earth." With the gloves off and billions of dollars at stake, count on such rhetoric as just the first salvos in a multifaceted strike to win the battle for fun.  Edwards is a correspondent for BusinessWeek in in Los Angeles Edited by Ira Sager
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