Sony plays to win the games war

Sony is gambling $1.4bn on PlayStation2

The Japanese public finally gets its hands on the Sony PlayStation2 this weekend.

For PlayStation fans, the new console offers more than just games.

With a 128-bit microprocessor dubbed the "Emotion Engine", it not only offers superb graphics, but also includes a DVD player. It comes with a price tag of $362.

The machine can also play most of the game titles designed for the first PlayStation.

From next year, an internet connection will be added once more Japanese homes have been equipped for broadband services.

Rival to personal computer

Sony's aim is for the console to rival the personal computer.

It can be connected to a VCR, cable television and computer devices such as a keyboard. For Sony, it is a $1.4bn gamble on its future.

Its bet is that the 70 million people who bought the first PlayStation will upgrade to the new one, safeguarding its leadership of the market.

The hope is that millions of new users will join them. The odds look to favour Sony. Its website crashed as thousands logged on to try to buy PlayStations for sale on the internet.

But the most eager watchers of the demand for PlayStation2 will be Nintendo and Sega. For them, Sony's launch is the latest shot fired in a battle for control of the hearts and minds of video games players.

The Sony plan

PlayStation2 is crucial for Sony, as it relies increasingly on the games market for its profits.

Sales of the current PlayStation accounted for about 40% of the group's operating profit last year.

"It's the most important product in Sony's future," Merrill Lynch analyst Hitoshi Kuriyama said.

The company plans to ship a million consoles in the first week, making 500,000 a month after that. Sony is currently market leader with a 70% share.

The market is worth an estimated $13bn globally, and in the UK alone, one in five households is estimated to own a PlayStation. In the US, video games almost outsold Hollywood films last year.

Hardware and software sales totalled £4.5 billion. This compares with US box office sales of £4.6bn.

The competition

The big three in the games market - Sony, Sega and Nintendo - could soon be joined by a fourth contender.

The world's largest software company, Bill Gates' Microsoft, is developing a lower-priced console that could upset the games cart.

Sega launched Dreamcast in the UK last year

Sega launched its Dreamcast console last year.

It can be hooked up to the internet, allowing users to download games and play on a network with others.

The Dreamcast console is make-or-break for Sega, which saw its market share plummet to about 1% after the failure of its Saturn console in 1995.

It hoped to establish its product before Sony's arrived in the shops. So far, it has seen strong demand outside of its native Japan.

"We think many users are excited and expectant (about PlayStation2) but our business has a different strategy - we are focusing on the network strategy," Sega spokeswoman Miyako Shimuzu said.

"If your question is 'are we afraid?' we say 'no'."

Sony says it is waiting for better-quality internet connections before offering access.

"The name PlayStation has become synonymous with quality and consistency, so we'd rather wait for broadband which has better quality than current lowband internet connections," Sony Computer Entertainment spokesman Benjamin Guernsey said.

Nintendo is set to launch its Dolphin console by the end of this year, although some market watchers doubt that the firm will be able to meet this date.

If Nintendo can meet its deadline, Dolphin will be available at about the time the Playstation2 is launched in Europe and North America.

"Maybe (the PS2) will have a great impact but we will compete with it," Nintendo's European sales chief Kobayashi Shunichi said.

Nintendo has agreements with electronics giant Matsushita to provide DVD players and IBM to provide microchips for its new machine.