Microsoft chairman Bill Gates today outlined his vision for the X-Box--a game console with built-in high-speed Internet access and e-commerce capabilities that could well supplant the PC in many areas--to an overflowing crowd at the Game Developers Conference here.
"This is a huge milestone for us. It's a new platform for the industry," Gates told an estimated 2,000 attendees. "The PC won't be the only device people use to get on the Internet to be entertained."
Arriving on store shelves in the second half of 2001, the X-Box will compete directly against Sony's PlayStation2, Nintendo's Dolphin and Sega's Dreamcast in the lucrative gaming market.
The battle among the four companies will largely be waged over winning the hearts, minds and wallets of teens. To lure that crowd, Microsoft promises the X-Box will come with an easy-to-use operating system, an 8-GB hard drive, built-in connections for high-speed Net access, ultra-realistic graphics and a bevy of games. As previously reported, an Intel chip will serve as the brains of the box.
In many ways, the X-Box will create its own ecosystem. With the Net connection, users will be able to download trial versions of a game and then buy it if they want it after a test-drive, Gates said.
"Microsoft's vision is a very broad and ambitious one. It is about empowerment," he said, a statement that drew a mixed reaction from the crowd.
Whether the company will succeed remains to be seen, several analysts said. Microsoft has extensive technological expertise and financial resources, but game consoles represent an entirely new market for the company. And it is a market that operates under its own peculiar rules. By contrast, companies such as Sony and Sega understand the game console market because they created it.
"Sony knows the consumer, and they really know how to market to the customer," said Schelley Olhava, an analyst at International Data Corp. "What successful consumer product has Microsoft had?"
To succeed, "(Microsoft) will need to have a decent library of games when that thing comes through the door and not just rehashed games for the PlayStation2," she added.
The X-Box will mark another step into the hardware business for Microsoft. The Redmond, Wash.-based software giant plans to sell these devices under its own brand, Olhava said. Currently, Microsoft makes most of its money by selling operating systems and software to computer makers, which wrap the software into their own boxes.
Through its WebTV subsidiary, Microsoft sells TV set-top boxes, but these are co-branded with hardware manufacturers. In all likelihood, an overseas manufacturer will assemble the X-Box, but Microsoft has said it will be actively involved in designing it and planning the manufacturing.
Game console makers typically sell the box for under cost and make up the difference on sales of games.
Besides the big hard drive, the X-Box will contain a Pentium III processor from Intel, 64MB of RAM and a graphics processor from Nvidia capable of processing 1 trillion operations per second, Gates said.
"It will be a brand new GPU (graphics processing unit). It is nothing that we have in the pipes right now," said Michael Hara, vice president of marketing for Nvidia.
"I think that 'stable platform,' being a Windows platform developer, are the kindest, sweetest words (Gates used)," Paul Schuytema, president of Magic Lantern Playware, said of the presentation. Magic Lantern develops PC games for companies like Red Storm Entertainment, author Tom Clancy's entertainment company.
Schuytema said smaller development companies like his will be excited by the possibility of making a console-type game because it will be a more affordable proposition than PlayStation or Dreamcast development. Windows programmers are more readily available, and the skills they already have will apply to this new market.
Another plus: "Microsoft likes to win at whatever they do. You know they will put in the resources to create a market," he said. "Sony is so strong, Microsoft is not going to crush it," said Schuytema. "I think it's going to be a two-platform world now" between Sony and Microsoft.