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Friday, 10 March, 2000, 11:56 GMT
Microsoft aims for new market
windows 98 packs
"In many ways the X-Box turns its back on Windows"
By BBC News Online's Kevin Anderson in Washington

Despite early stumbles when it enters new markets, Microsoft has a history of tenacity when there is a dollar to be made.

It is now boldly taking on new competitors with its foray into the gaming console market with the X-Box.

"This is a major change for Microsoft. Instead of software that always scales with the PC, they are going to make a massive commitment to a platform that won't change for many years," said Richard Doherty with the Envisioneering Group.

This stable platform model has been a boon for companies like Sony, Nintendo and to a lesser extent, Sega, which battle for a piece of the $15bn global market for home game hardware and software.

"Our summary is that (Microsoft) can¿t afford to be left out of the two horse race between Nintendo and Sony," Mr Doherty said.

The PC and Microsoft with its market dominant operating system "is the third filly on the track," he added.

But new gaming consoles including Sony's recently released PlayStation 2 and Nintendo's Dolphin system, to be released in the first half of 2001, will boast the performance of a PC costing several thousands of dollars.

PC gamers are bemoaning the decreasing number of titles being released as the market has fallen flat.

"Is the PC market in trouble?" The answer, industry pundits say unanimously, is "yes," wrote Jeff Lundrigan in a recent column in gaming magazine Next Generation.

A flood has become a trickle as the number of titles sent to him for review has dramatically decreased.

The same, but different

Microsoft hopes to leverage the billions it has spent in developing a software environment for the personal computer to develop a gaming platform, allowing game developers who have created the games for the PC to be able to easily convert those games to the X-Box.

The X-Box uses much of the same underlying software code that games use on the Windows PC platform including the DirectX multimedia application protocol interfaces.

But in many ways the X-Box turns its back on the Windows world that made Microsoft a global software giant.

In an advance demonstration of the X-Box for analysts, "I didn't hear the word 'Windows' once in four hours," Mr Doherty said. They did not talk about booting the X-Box. They are working to distance themselves from everything that people do not like about PCs, he added.

Tough competitor in Sony

Both the X-Box and PlayStation 2 begin to blur the lines between the PC and gaming consoles. Both systems include high-speed Internet capability, and the X-Box will have a hard drive.

Some market analysts believe that Microsoft developed the X-Box out of fear that Sony would outflank the software company in the post-PC era, when inexpensive, simplified, single function devices could replace the multi-function PC.

As the lines between markets blur, companies find themselves facing new competitors, and Microsoft will have an able adversary in Sony.

The original PlayStation is the most popular consumer electronics device in history, Mr Doherty said. It is well on its way to selling 70 million units.

And unlike Sony, "Microsoft is not a consumer electronics company", said Peter Glaskowsky, an analyst with MicroDesign Resources. "(Microsoft does) not have any meaningful experience in that industry."

Try, try again

Microsoft also has a history of bad first attempts.

"I think it boils down to the fact that Microsoft knows that it is a strong company, but it overestimates the value of its strengths in markets it is not serving," Mr Glaskowsky said.

He used Windows CE as an example. They wanted it to be as large of a subset of the desktop version of Windows as possible. "They believed in the values of Windows in itself," he said.

As a result, "Windows CE was much bigger than it needed to be, much slower than it needed to be and much more difficult than it needed to be," he said.

But the company has learned, and "the next generation of Windows CE is huge improvement."

The company also has the deep pockets to keep trying until they get it right, and "Microsoft is good at not making the same mistakes on the third or fourth try," Mr Glaskowsky said.

Winner won't take all

Microsoft may not have to engage Sony or Nintendo in a battle to the death for control of the game console market.

Unlike the PC software business where market share creates de facto standards, buyers of gaming consoles often buy more than one system.

Two out of three owners of game consoles own two or more systems, Mr Doherty said, adding that he predicts the market will experience growth in the low to high double digits for the near future.

"I don't worry that one winner will take all," he said.

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See also:

09 Mar 00 | Business
Microsoft opens the X-Box
02 Mar 00 | Business
Sony plays to win the games war
10 Mar 00 | Business
PlayStation2 runs into trouble
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