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Xbox xtended

With its first game system, Microsoft was clearly still finding its way. The sequel, unveiled Thursday, adds features that will shape its market.

By DAVE GUSSOW
Published May 13, 2005

	[Microsoft]

Microsoft advanced to the next level in video game competition Thursday, introducing the new Xbox that morphs the console from kid stuff to a complete "entertainment system" for adults.

Capable of handling high-definition video, digital music and photos, instant messaging, online transactions and video games, the newly named Xbox 360 re-emphasizes Microsoft's push into the living room and digital entertainment.

While the Xbox 360 won't be available until November, the announcement sets the stage for the next round of competition with Sony and its market-leading PlayStation 2.

Sony will announce details of PlayStation 3, expected to go on sale in 2006, at the Electronic Entertainment Expo trade show next week in Los Angeles. But Microsoft is getting the jump with its announcement this week, with more details at the show, and availability in time for the holiday shopping season.

The video game market is a $10-billion-a-year business, according to the NPD Group research firm. Sony has sold 87-million PlayStation 2 units, according to figures compiled by the Wall Street Journal, compared with 20-million each for the Xbox and Nintendo's GameCube. Nintendo also plans to have a new console next year.

Even though Microsoft apparently will beat Sony to market - it's notorious for missing deadlines - Sony has shown before it can outmaneuver a competitor, as it did with Sega's Dreamcast system that won critical praise but not market share, says Andy McNamara, editor in chief of Game Informer magazine.

If Sony is six months later than Microsoft with the PlayStation 3, he says, that gives Sony more time to hone its technology. Also critical will be which company gets exclusive contracts for popular games, such as Halo for the Xbox.

"What 360 will have to stand on is to have games that gamers want to play," McNamara said. "That's what really matters when it's all said and done."

PlayStation 2 had about a year's headstart on Xbox. It took Microsoft time to get its bearings, as well as billions in losses. But it has made up for lost time.

"Over the last year and a half, Microsoft with the Xbox has created an underground cool," McNamara said. "It really has some momentum, but no one can deny PS2's brand awareness."

When the Xbox hit the market in 2001, many wrote it off, Rob Enderle, principal analyst at the Enderle Group research firm, said by e-mail. But now "it regularly beats Sony, the market leader, in sales volumes and the unit is profitable. Increasingly Microsoft is seen as the company to beat and they are clearly the firm Sony is the most worried about."

Beyond making the promised November rollout deadline, Microsoft needs the cool factor the Xbox gives the company. The company showed off the machine on an MTV special, though details were leaked on the Web early. It also comes at a time when Microsoft is seeing growth in its flagship products of Windows and Office software slow.

"Given how important image is to company valuation, as demonstrated by the iPod and Apple," Enderle said, "the Xbox is very important but not of critical importance to the longterm success of what has become a highly diverse company."

David Hufford, Xbox group product manager, emphasizes the 360's gaming capabilities, calling it "the Ferrari of video games." The price tag has not been announced, though industry buzz puts it between $300 and $400.

The 360 is designed for high-definition display, even in the wide-screen 16:9 format (a traditional TV screen has a 4:3 format). That will give rich detail to the characters and scenes, and 360 has the blazing speed that gamers crave.

"When you move to high definition, you have to get every single detail right," Hufford said. "If you don't, you're going to kill that suspension of disbelief that gamers want."

Indeed, the increased capabilities are giving developers new territory to explore for the 360 and other machines, says Scott A. Steinberg, vice president of entertainment marketing at Sega, which announced two new games for the 360.

Gamers expect lifelike graphics, he says, and they will be better on the new machines. One of the main elements that will be different is that patterns of predictability, such as explosions occurring at the same time, will be harder to detect, even repeat.

So in Full Auto, which Steinberg describes as a combat racing game, explosions and other action will be determined by factors such as the angle of a car, how a weapon is fired and even what debris is in the road.

"You could drive around that urban track 100 times and not repeat a sequence," Steinberg said. "The physics behind the motion and environment are built to be unpredictable."

And that, he says, will benefit players, perhaps even save them a little money. "They'll have replay value that will keep these games fresh and won't put them in the retirement bin as fast as games in prior generations."

Microsoft wants to build on its 1.4-million Xbox Live online players by allowing players to buy characters, uniforms or other game elements online. Players can customize the screen with their photos and music.

And, Hufford says, developers will have the capability to update games and make them available online. For example, someone might want to do a game in weekly episodes, or add levels more frequently than new games usually come out.

While it first describes technical specs for speed and computing power for improved game play, the company also is emphasizing its other features. Connect it to a digital camera to view photos. Download music. Talk to friends. Play DVDs.

"If you look around at the world, everybody has a digital music player or a digital camera or a PC," Hufford said. "If we can multiply the experience people have on those, it will benefit everybody."

Enderle says adding powered speakers to the console makes it almost a complete audio/video system.

"Increasingly the Xbox is purchased by and for adults," the analyst said. "And these extra features take the place of other products that they would otherwise have to buy and integrate. The proliferation of remote controls is becoming increasingly annoying."

Information from Times wires was used in this report. Dave Gussow can be reached at gussow@sptimes.com or 727 771-4328.

[Last modified May 13, 2005, 06:11:03]