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Xbox v. PlayStation: Microsoft Throws Down the Gauntlet

By Rob Enderle
Mar 29, 2004 6:30 AM PT

At the Game Developers Conference (GDC) last week, Microsoft raised the bar on what has become one of the more interesting battles in the industry. Actually, it would be more accurate to say Microsoft has taken the gloves off and now -- really -- is going after the entertainment segment.

Xbox v. PlayStation: Microsoft Throws Down the Gauntlet

The Xbox and MSN groups at Microsoft have been more like independent companies loosely coupled with the parent. A few months ago, MSN was brought back into the fold and made strategic again -- so much so that there are rumors suggesting Microsoft may buy AOL from Time Warner. The GDC was the coming-out party for the Xbox group to move through the same process.

While they didn't actually announce the Xbox 2, I think I have enough to create a reasonably strong idea about what that will be. I'll end this column with my predictions on this highly anticipated new version of the product.

What is the Xbox?

The Xbox is the closest thing Microsoft makes to an Apple PC. They fully spec it, they designed the interface from scratch to address a targeted audience, and they even defined a unique case to showcase the offering. They, like Sony, also subsidize the hardware, offsetting this cost with game royalties, which is why they can sell a box that costs well over US$200 for less than $200. Much like Apple uses BSD, Microsoft uses an embedded version of Windows to make the platform work.

The Xbox was brought out not to compete with Apple but to compete with Sony, which had taken out Nintendo as the undisputed king of the gaming market. To a large extent, this move was driven by a belief that Sony intended to reposition the PlayStation as a PC and use it to damage Microsoft's market position.

Microsoft, in responding to a threat that never actually materialized, created a rather good gaming platform that has been steadily bleeding market share from both Sony and Nintendo since its inception. Sony is still dominant but is slipping. Nintendo is all but gone, except on handheld games. And Xbox is a strong number two.

Back to Microsoft's Core

The industry spends a lot of time describing Microsoft; the most accurate description, in my opinion, is that Microsoft is a company that is expert at tools and platforms. In fact, you may recall that when Microsoft did Java, a platform created by Sun for the nearly sole purpose of killing Microsoft, Microsoft actually made the best tools for it. If there is one thing that few challenge as high competency, it is Microsoft's capability with regard to tools.

Now, the promise for this Xbox when it first launched was that its similarity to a PC would allow for faster time to market and lower development costs for firms that already had PC-development efforts. While this was generally true, the toolsets the two groups used -- for PC and Xbox platforms -- were different, which added unneeded cost to the process.

In addition, developers were reinventing the wheel with each game and felt forced to spend a great deal of their time on infrastructure before they could even think about the game itself. This practice resulted in an upside-down model where about 80 percent of the effort and time was spent on the plumbing for a game and just 20 percent on the game itself.

This often meant a game could be as much as 90 percent done before it became clear that it wouldn't, in fact, work. It typically costs between $5 million and $15 million to develop a game. It's an incredible risk.

The Microsoft Plan

What Microsoft is doing is blending the tools it provides for both platforms into one toolset, called XNA, then bringing both platforms to parity. This means that regardless of whether you are developing for Windows or the Xbox, you will have access to Microsoft Live capability, the transaction engine (in case you want to charge for some components), voice capability and links between the two platforms. For instance, if you wanted a game that used music off the PC, that would eventually be possible.

In short, you not only have near-identical capabilities to leverage, you also have the ability to work cross-platform, something the warring Vaio and PlayStation 2 folks at Sony simply won't do.

This plumbing stuff is difficult, and game designers would rather not deal with it. The core argument for Microsoft is that this process should substantially offset the spiraling costs of creating a great game. By creating a common layer of technology to which gamer developers can write, they can shift their budgets and human resources from infrastructure to game development and, in theory, not only build a less-expensive game, but also make it better and get it to market more quickly.

Better, Faster and Less Expensive

Better, faster and less expensive is typically a very strong argument.

The Sony platform, on the other hand, is known to be a bear to develop. Tools are clearly not Sony's strength. They build great hardware, but game companies are measured on profitability, and Microsoft's approach appears to play to that need more effectively. Granted, the consumer is the final and most important voter, but if the games are there, the consumer will probably move -- or at least that is Microsoft's bet.

One other thing I haven't yet mentioned: Accessories will be brought to parity on both platforms as well. We now know why Microsoft killed its PC gaming accessory business. Xbox accessories will work on PCs, and vice versa, both using a common driver and layout specification. No more relearning your hard-earned joystick skills when moving from PC to Xbox.

Microsoft will relaunch its PC game products as cross-platform -- if you can call Xbox and Windows cross-platform. Even Logitech should like this change because it will help reduce Logitech's inventory costs as well.

The Xbox 2 Speculation

I promised to give you my call on Xbox 2. This is only a guess, but with what we know about the new converged platform, I can at least confirm that rumors of Microsoft moving to a G5 chip were just wishful thinking by a few Apple loyalists. The chip will be built by IBM, which also builds for VIA and AMD.

My best guess, given the timing of the product and the new PlayStation 3, is that it will be based on the AMD 64-bit core that IBM helped develop. It will have a hard drive because it needs the performance. And it will continue to have a DVD drive. A burner would compete with the PC and add unneeded cost; a media bay is a remote possibility.

It will run the old games. New 64-bit games -- which is where that AMD part is really supposed to shine -- will scream on this console. Therefore, it'll likely run an embedded version of Windows XP 64.

It will have an ATI graphical and sound subsystem and a case that will stack on the shelf better than the current one. The remote control IR receiver probably will be built in, but the remote itself will continue to be an upgrade, and progressive scan for DVDs will finally make it into the product. An accessory family will include 802.11g WiFi, wireless joysticks with voice capability, a video camera and HDMI outputs (along with composite, DVI and VGA).

The Xbox case color likely will remain black, but with a pronounced silver X on the front. We won't know for some time whether I'm right, and Microsoft isn't talking. But it does give us something to look forward to.

You'll need to excuse me now, however. It is time for me to go downstairs into the game room and, once again, get my butt kicked by a couple of 13-year-olds. If you are on XBox Live, my name is Spirit, my nickname is Target.

Rob Enderle, a TechNewsWorld columnist, is the Principal Analyst for the Enderle Group, a consultancy that focuses on personal technology products and trends.

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