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Analysis: Clash of the video game consoles

By Daniel Sieberg and Richard Stenger
CNN Sci-Tech

(CNN) -- As the Christmas shopping season gets into full swing, two high-tech products are at the top of many wish lists: Microsoft's Xbox and Nintendo's GameCube. In addition, Sony's PlayStation 2 is still a sought-after item, and games for all three platforms are being produced at a rapid rate.

This three-way clash of the consoles is certain to enthrall video game fans since the competition will likely heighten the quality of all the products and keep each company on its toes.

However, is there enough room in the market for these different machines? Which one will capture the hands and minds of gamers? And will Xbox or GameCube dislodge the PlayStation 2 from the top of the game console heap? These questions and more are difficult to answer in the increasingly competitive marketplace, experts say.

• Game wars heat up for holidays
• GameCube sales brisk
From diodes to DVDs: A timeline of video game consoles 
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But the battle didn't begin this month, or even this past year.

Earlier this year, before Microsoft entered the scene on November 15, there were still three companies fighting for market share. However, in February, Sega succumbed to the pressure and decided not to continue in the hardware arena.

Instead, it focused its energies on software, a move many analysts felt should've been done a long time ago, and just recently released a game to be used on Sony's PlayStation 2 -- a relationship that was once a bitter rivalry.

The demise of Sega's Dreamcast machine, which is still available for a much lower price than its contemporaries, acts as a constant reminder for those companies that are left to duke it out.

When the Dreamcast was released in September of 1999, gamers were excited by its graphical capabilities. It was the first console to move into the 128-bit architecture, providing users with enhanced visuals and more memory.

The Dreamcast honeymoon period lasted for about a year, since its only direct competition was the Nintendo 64 (leftover from 1996), which didn't have the power of the Dreamcast. But when Sony launched its much-anticipated PlayStation 2 in the United States in October 2000, with its DVD-playback, improved game play and technical wizardry, Sega suddenly found itself in a street fight, from which it ultimately withdrew.

Impressive initial sales

Indeed, the battle of the video game consoles goes back even further. Companies such as Atari and Sega were sparring with each other long before Microsoft decided to enter the fray.

What is new is the way the creators are attempting to position the consoles as home entertainment devices and lure families to use the systems as well as hard-core gamers.

As a sign of what's at stake and how interest has recently heightened, Nintendo says it sold $100 million of the GameCube and related merchandise on the first day of sales on November 18. By comparison, that claim is more than the opening day weekend gross of the year's biggest film to date, "Harry Potter and the Sorcerer's Stone."

Microsoft says that its initial Xbox shipments, believed by analysts to be around 300,000 consoles, were selling out at retailers nationwide. Microsoft won't release specific sales or shipment figures.

Both Microsoft and Nintendo say they have learned from last year, when a dearth of Sony's PlayStation 2 frustrated countless buyers during the holiday season.

In fact, this year the lucrative gaming industry will likely surpass 1991's record-setting $6.1 billion mark, in large part due to the popularity of the PS2, the heir to the most popular game machine ever. It has sold briskly since its debut in late 2000.

That dominance likely will remain unchallenged for awhile, but the situation could eventually change.

Sony's PlayStation 2 has been on the market in the U.S. since last year.  

"Sony will maintain its impressive market share of the console market through 2002 (but) Microsoft has the financial tools to become a serious competitor by Christmas 2003," predicted Carl Howe of Forrester, a high-tech industry research group.

The PS2 has an impressive lead and some impressive stats: About 20 million units are use. It can play original PlayStation games. It can play DVD movies. There are hundreds of different game titles to chose from.

But the upstarts are gambling that they can muscle their way into the market. Nintendo, which has a loyal base of users, launched with about 700,000 consoles and expects to make 1.1 million available by the end of the holiday season.

Only 20 or so GameCube titles will be available by the end of the year. But the console costs only $199, $100 less than either the PS2 or the Xbox. And despite its inability to play DVDs, the GameCube has a host of recognizable Nintendo characters to draw upon like Mario and Pokemon.

Microsoft may be the newcomer to the gaming industry, but the software giant has plenty of resources to back up its product. The company is spending an estimated $500 million to promote the Xbox and analysts expect 1.5 million units to be sold by January.

"In the short term, I think that Sony will be the dominant player," said Tim Bajarin, a gaming expert and president of Creative Strategies. "But in the long term, I think both Sony and Microsoft will have staying power in the market. They have the marketing power necessary to survive at the top."

Internet 'in the living room'

In a sense, Microsoft has a more important goal than just selling game consoles. If consumers use the Xbox with their televisions to tap into the Internet, Microsoft could be able to tap into a whole new sector of the market, according to Bajarin.

Other attempts, like WebTV and TiVo, have failed to establish a beachhead in the family rooms of the U.S. public. But the Xbox could be the "Trojan horse" that brings the Internet into the living room, said Bajarin.

Nintendo's GameCube offers controllers in several different colors.  

But first, Microsoft must prove that the Xbox can attract gamers, no easy task for a new console maker. So far, the console has earned mixed reviews.

P.J. McNealy, senior analyst at Gartner G2 in San Jose, California, told The Associated Press that the strong early sales of both consoles are a good sign, but their success will be measured in the longer term.

"They met the short-term goal, which is create enough games in a minimal amount of genres for the hard-core gamers to jump on board," McNealy said. "The challenge is to expand those demographics in 2002 and 2003 with broader-based games. That's a two-year or three-year challenge that not only Nintendo and Microsoft have, but also Sony."

Some gaming enthusiasts have given the Xbox only mediocre marks. Yes, it has shown that Microsoft can make a quality gaming machine, but it has not revolutionized the industry as promised, they say.

Howe thinks it has superior speed and memory, but points out that only 19 games were available at launch.

Historically, the market has supported only two major game consoles. Nintendo and Sega dominated the 1980s. But after launching PlayStation, Sony took over the top in the 1990s. Then Sega began its slow descent, eventually leading to the demise of the Dreamcast machine.

But perhaps the market has changed, Howe reasoned in a Forrester brief. The Xbox, with its most advanced technology, will satisfy hardcore gamers, mostly males in their late teens to their early 30s, analysts suggest. The GameCube, with its emphasize on children's games, will likely find favor among younger players.

And the PS2, with its exhaustive list of titles, established game brands and ability to play original PS games, could appeal to the broad majority.

"All three vendors will coexist in the gaming market for the foreseeable future," Howe said. "Because the games for the three platforms will appeal to vastly differently audiences."


• Xbox
• Playstation 2
• Nintendo
• Sega
• Forrester Research
• GartnerG2
• Creative Strategies

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