Sony unveils plans for PlayStation II

The Japanese electronics giant today detailed its plan to turn its new PlayStation2 game console into a center for pushing "electronic content" in the home. The device could eventually compete against PCs and networking devices as the nascent market for home networking catches on.

Sony's announcement comes on the heels of Sega's launch of its next-generation Dreamcast system last week. Unlike Sega, which is still being coy about the future of its game console, Sony is intent on taking the high-powered, 128-bit chip in its system and using it to duplicate and perhaps improve upon many of the core functions of home PCs.

"This will open doors to new computer entertainment experience in the home," said Kazuo "Kaz" Hirai, president and COO of Sony Computer Entertainment America (SCEA) in a press conference call. Other executives were still more blunt about Sony's intentions.

"It will take years for the PC and other competing technologies to catch up" to PlayStation's technology, said Phil Harrison, vice president of research and development for SCEA.

Elaborating on how the PlayStation will compete against PCs, he said "What we see is that [market is] shifting radically into a number of 'vertical use' applications rather than the general-purpose computer we see today. How [the PlayStation introduction] impacts other products and businesses is a function of our success and their failure."

Initially, Sony envisions its gaming console as a device that can download games from the Internet onto a hard disk via high-speed such as cable modem connection. Later, analysts expect Sony to use its considerable clout in the movie and music businesses to offer PlayStation users the ability to purchase and download material.

For instance, the system will effectively double as both DVD movie and CD audio player, executives said, with the potential to playback upcoming DVD audio formats as well.

In an obliquely worded press release, Sony said it also plans to develop an e-commerce infrastructure to support its plans for the PlayStation as well.

Just as important, the company also announced the launch date of the successor to the wildly popular PlayStation, for which industry analysts and gaming mavens have eagerly been waiting. The PlayStation2 console will go on sale in Japan on March 4--three months later than originally expected--Sony executives said. The system will be unveiled in other Asian countries next summer, followed by a release in the United States and Europe in the fall of 2000.

Sony executives expect to sell more than 1 million consoles--sold at a relatively high $368 each--in the first week of its release. In comparison, Sega sold 150,000 Dreamcast game consoles in Japan last year for about $240, and pre-sold 300,000 for $199 here in the United States last week during the official launch.

"Sony's planning to sell 1 million consoles in the first two days of the launch and then at least another 500,000 in the next few weeks," Universal Securities analyst Motoharu Sone told Reuters.

"They had forecast 2 million units for this business year so it's not going to mean that big a difference," he added. Sony's fiscal year ends March 31.

Analysts have wondered when Sony's new system would be available, as PlayStation now contributes over 40 percent of Sony's overall profit. There have been concerns that the powerful new chip in the new PlayStation is difficult to manufacture.

Competition for consumers growing
The game console market is big business. The market for video games totaled around $15 billion last year, according to research firm NPD Group.

Sony has sold more than 55 million of its PlayStation consoles since its introduction, but a new set of challenges faces the company as the device expands its reach into homes, analysts say.

"The game console does have to break the stigma of being a game machine if Sony wants to expand so much beyond [its original function]," said Brian Canny, analyst with Parks & Associates.

In addition, Sony is vying for discretionary consumer dollars against other Sony devices, such as digital video recorders based on designs from TiVo, Net TV set-top boxes, and digital cable set-top boxes through its alliance with General Instrument.

"It remains to be seen how many 'black boxes' people will put in their homes," Canny said. "People's TVs will be stacked three feet high with all these things."

PC isn't dead--yet
"The PC isn't going to go away," said Mark Snowden, analyst with Dataquest. "Half of the homes in America have a PC, and it is the preferred means of accessing the Internet, doing work at home, and a whole range of other things," he added.

What will happen, he predicted, is that within five years, a greater amount of e-commerce activity such as purchasing music CDs, books, and videos will migrate to devices that are hooked to televisions, such as the PlayStation2.

Such possibilities probably won't materialize until around 2001, which is when Sony plans to offer a cable modem as an option for users. That's because unlike Sega's Dreamcast, the PlayStation2 won't come with a built-in modem.

Harrison said dial-up modems can't offer the kind of high-quality experience the company wants to deliver because they are too slow. However, consumers will be able to connect to the Internet through third-party modems that connect via an inudstry standard connection known as USB (Universal Serial Bus).

Also in the future, Sony will soon launch an online site dedicated to offering music news, reviews, and songs--or even albums--that can be downloaded to the PlayStation.

Through Sony Pictures Entertainment, which is involved in motion picture and television production and distribution, Sony will be able to offer online versions of TV game shows such as Jeopardy and Wheel of Fortune, which could potentially allow players to respond to questions along with contestants in a live broadcast.

Reuters contributed to this report.