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Old 11-11-2002, 03:15 PM   #1
Black Ace
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Nintendo overtakes Xbox in the US!


Archrivals
Total U.S. sales* of video-game consoles, in millions of units:
Sony PlayStation 2 11.2
Microsoft Xbox 2.2
Nintendo GameCube 2.7
*From introduction through September 2002
Source: DFC Intelligence


Trailing Sony, Microsoft Xbox Bets On The Web
By Khanh T.L. Tran in San Francisco and Robert A. Guth in Tokyo
TUKWILA, WASH. -- To understand how much Microsoft Corp. has riding on the new online service it plans for its Xbox video-game console, pay a visit to a vast and ultrasecure building the company runs here.

The facility, a data center south of the Seattle airport, houses 130 of the 500 computer servers that will power the games for Microsoft's new Xbox Live, a service it expects to unveil next week that will let Xbox users play over the Web. No expense has been spared and no security precaution left unconsidered: Only 12 Microsoft employees are permitted access to the 20-by-40-foot black cage holding the computers. Each time the cage's door swings open, a motion-sensor videocamera records the scene. Sitting 25 miles away, at Microsoft's Redmond, Wash., headquarters, are at least three employees who monitor the network at all times for glitches and hacking attempts.

Microsoft hopes that running its own data centers will close the gap with archrival Sony Corp. The Japanese company already lets owners of its game machine, the PlayStation 2, play online. And sales of the Xbox have gotten off to a slow start since it hit the market a year ago, while Sony has continued to attract hot titles, such as the Grand Theft Auto car-thief series, that run only on the Sony machine.

Industry executives and analysts say online gaming probably won't generate significant revenue until the latter part of the decade, after the release of machines that replace the current Xbox, PlayStation 2 and Nintendo Co.'s GameCube. Xbox executives acknowledge that the number of Xbox Live players could range from just tens of thousands to more than 100,000 by year-end.

But Microsoft says it has to bet on online gaming now if it expects to build an Internet gaming business for the long haul. "It's really about setting the foundation and setting the agenda," says J. Allard, a general manager of the Xbox business.

Microsoft is hoping to parlay its experience running networks and large online services, such as its free Hotmail e-mail service, into success with Xbox Live. The company is already using technology derived from its Passport online sign-in service to help people log into Xbox Live. Its approach to online gaming is similar to the proprietary strategy it pursues in many of its core businesses: The company sells its software with components that work well together but don't necessarily operate with competitors' programs.

Microsoft has set a high bar as it readies to do battle with Sony and Nintendo. To use Xbox Live, gamers must have an expensive, high-speed "broadband" Internet connection, instead of merely a dial-up connection, and also must buy a $50 set-up kit in addition to the standard Xbox console and games. The kit includes a headset used to talk to other players and a year's subscription to Microsoft's gaming network, which is accessible only by using the Xbox connected to a TV.

Mr. Allard says the focus on broadband and a proprietary network give Microsoft more flexibility to add features, such as, potentially, speech-recognition technology or an instant-messaging function to chat with other players. Microsoft may eventually allow online players to download music and videos from the Web, he says.

Sony and Nintendo, in contrast, each require the purchase of a separate modem, priced under $40, to connect their machines to high-speed or dial-up Internet lines; neither has a sign-up fee. Sony is banking on the wide lead the PS2 has over the Xbox and GameCube. Sony has sold more than twice as many PS2 machines in the U.S. as Microsoft and Nintendo combined, according to industry analysts.

In touting its data center, Microsoft is clearly hoping to build excitement among die-hard gamers long before online gaming goes mainstream. Most game makers concur it will be years before they develop sophisticated online games, in part because today's way of distributing games, via discs, is so profitable.

Microsoft has invested heavily in its online-gaming push, opening the Tukwila data center and three others, in downtown Seattle, London and Tokyo. The Xbox group is funding some outside companies that are creating games for Xbox Live. The company has said it expects to invest $2 billion over the next five years on Xbox, including its online service. The network should give Microsoft a leg up over Sony if Sony doesn't build its own network soon, says Robbie Bach, head of the Xbox business. "They can invest now or they can invest later," he says. "But if they invest later, they'll be behind."

For Sony, however, networks aren't the only strategy for attracting online gamers. When Sony put the finishing touches on the PlayStation 2 in the late 1990s, it figured that networks wouldn't be fast enough to run the graphics-intensive games that gamers demanded, Sony executives say. But the company is bringing over well-known brands from the offline world to attract gamers to the online domain. In addition to Electronic Arts Inc.'s Madden NFL football title, Sony is also offering online versions of Twisted Metal: Black, its popular vehicle-combat game, and Final Fantasy, a leading game from Square Co. None of those games can be played online on the Xbox.

Nintendo, in contrast, is entering the online derby with caution. "In the short term [online gaming] creates some buzz and excitement," says Peter MacDougall, executive vice president at Nintendo's U.S. unit, also in Redmond. Yet, in a tough economy, "discretionary items like online gaming might be the first one to go," he says.

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Last edited by Black Ace; 11-11-2002 at 03:26 PM.
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