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Microsoft woos game developers

On the eve of the anticipated announcement of its latest gaming effort, Microsoft may need to convince software developers to sign on to the effort.

SAN JOSE, Calif.--One the eve of the anticipated announcement of Microsoft's latest effort to make waves in the game market, industry executives say the company has work to do to convince software developers to sign on to the effort.

Whether its being spoken in English or German, in the convention center halls or restaurant booths, "X-Box" is the term on most everybody's lips on the eve of the Game Developers Conference trade show here.

"X-Box" is the code name for Microsoft's game console, which will be introduced with great fanfare by chairman Bill Gates at a keynote speech tomorrow morning. The device is based mostly on PC innards such as processors from Intel and would feature high-powered graphics chips from Nvidia and Internet connectivity, as previously reported. The system also will likely contain an operating system that is different from Windows CE or 98, sources said.

But while the buzz around Gates' speech is growing, potential competitors and market analysts alike say the company must surmount unique challenges if it hopes to succeed in the highly competitive market.

"Microsoft will have to convince people that there will be an installed base" that makes development efforts worthwhile, said Michael Arrington, director of software research for Jon Peddie Associates, a market research firm. In other words, there have to be enough potential customers for people to sell games at a profit.

Microsoft argues that in the PC world alone, there are plenty of potential customers. Adding a PC-like game console would in theory only add to that market.

Executives from game console makers Sony and Sega aren't quite as sure that developers are excited about that prospect. "In the last nine months, there's been a huge shift among PC game title publishers," Neal Robison, group director of licensing at Sega remarked at a panel discussion today. "They are tired of struggling to keep up with the PC platform."

Phil Harrison, vice president of research and development for Sony Computer Entertainment, said that the PC market looks impressively large compared with the console market, but it actually consists of many different markets because of the wide range of PC specifications that game developers have to address. In other words, not all PCs have the same processor, and they can't all play games with the same level of quality.

On the other hand, all 75 million Sony PlayStations are exactly alike, and even PlayStation 2 systems have the processor from the first PlayStation so they can play older games, he said.

"Developers can target the hardware specifically and be confident that they are going to be hitting 100 percent of that market. That's obviously impossible in the PC space," said Harrison.

Ted Hase, group program manager with Microsoft for its DirectX technologies, said that argument implies that companies like Electronic Arts, Konami, Eidos and others will have to make an either/or decision about developing games. But a robust economy means game developers aren't having to targeting development budgets either to consoles or PCs, he claimed. On the contrary, he thinks developers are thinking about both to ensure they have a steady revenue stream from sales on both platforms.

Several major game firms have already signed on to the X-Box camp. Activision, a video game powerhouse, is among the companies that will release games for the X-Box. "We are supporting the platform," Activision spokeswoman Ryh-Ming Poon said today.

Sierra Studios, a video game manufacturer most noted for "Half-Life" and other PC games, is evaluating the X-Box but doesn't plan any announcements in the near term, said spokeswoman Genevieve Ostergard. The company is expanding beyond PCs into dedicated gaming consoles, she added.

While declining to comment on the X-Box, Hase did say, "The proliferation of platforms is a good thing for the industry" and indicates a growing economy.

Gates may well decide to highlight what the company has done to help insulate developers from the problems Harrison refers to. DirectX is a collection of APIs (application programming interfaces) that act like a translator between a program's instructions and the PC's hardware. The DirectX software can help the program run without having to know exactly what type of hard drive or audio card is installed.

Already, Microsoft has given developers a preview of the next version of the software, called DirectX 8.0, which will let consumers chat with each other while playing games.

Microsoft is eyeing the gaming console market out of necessity. The overall market for game software in the United States and Europe is expected to grow from $8.7 billion last year to $17.2 billion by 2003, according to Datamonitor. The PC's slice of that pie will shrink from 38 percent to 31 percent by then, Datamonitor predicts, while Sony and Nintendo platform sales will account for 67 percent of all sales.

"The future of home entertainment is the living room. We clearly think it will be centered around the TV," said Robison.

In that light, Microsoft, the fourth largest maker of games for the PC, has been keen on the console market because software sales are expanding so rapidly on that side.