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Microsoft enters the home
April 2000
The $17bn global games industry is entering its next phase
with the recent launches of new consoles from Sony and Sega and the promise of new machines from Nintendo in 2001. However, this time round the Japanese companies will be joined by the first major US competitor for
6 years, Microsoft.
Microsoft have been working on a high-spec PC/games console hybrid, codenamed X-Box, for a number of years and we anticipate that the company, using third party manufacturing partners,
will launch their machine in Autumn 2001. The machine will be (4x) DVD-ROM-based, will, unlike all the other consoles, have a hard drive (8GB) and will compete in terms of processing and graphics power and price
with the other 128bit consoles. The operating system, which will be based on existing Windows games operating software, is expected to be 99% compatible with PC titles. Curiously, modem-based internet connectivity
is not expected to be built in as standard although the machine will feature an ethernet adapter allowing potential data transfer speeds of up to 100Mbps.
Despite the high cost of manufacturing such a device,
Microsoft are intending to be very competitive with price and a ։199-։249 initial retail price should be expected. Microsoft will adopt the standard console business model of controlling the
manufacturing of titles for the machine, levying license fees for both peripherals and software developed for X-Box and having a final say on all games developed for the machine. Whilst Microsoft is expected to use
third-party manufacturing partners to create the box, it will be branded, marketed and sold solely as a Microsoft product.
Microsoft are insisting that X-Box is a games machine and its plans for the box are
all games-related. However, given the convergence-natured context of the market they are entering, it seems curious that they are not promoting the machine's online capability or its clear potential as a TV-based
utlra-cheap PC. After all, all it needs is a mouse and a keyboard and it would be a PC far more powerful than most in the market for a tiny fraction of the cost.
To understand why that is, one must look at
the vested interests that Microsoft clearly needs to protect.
It has its WebTV division in which Microsoft has already invested over $300m and currently employs over 500 people. WebTV functionality which,
compared to the X-Box, is fairly basic, could be built into X-Box very easily but would seriously undermine the WebTV initiative. More importantly though, Microsoft has strong partnerships with PC manufacturers who
would all be threatened by a ։200 PC.
Although Microsoft claims that X-Box will feature USB (the standard interface for modern PC peripherals), it does not actually have a USB port, only internal USB
functionality so a USB mouse that is made for a PC would not work on X-Box. With final say on what software is developed for X-Box and what peripherals (eg keyboard, mice, modem etc…) are also released for the
machine, Microsoft can completely control the type of uses third parties can make of the machine and thus keep it out of both WebTV and its PC manufacturing partners' markets until it wants to.
It is too
early to attempt to analyse the potential of Microsoft's console although its proven success in the games peripherals market, its growing internal games development resources, the marketing muscle they expect to put
behind the product (it claims X-Box will be its biggest ever product launch) and its ever improving rapport with developers, combined with a longer than expected lead time (enabling more developers to be ready for
the launch), suggests that it has many of the ingredients for a successful video games debut.
And, as Sony proved, one does not necessarily need games console experience to lead the market at the first
attempt.
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