The war for America's thumbs

The stakes are huge and the combatants are mighty -- who will win the war for video-game console supremacy?

Published October 21, 1999 4:00PM (EDT)

In offices across the globe, sober-suited businessmen are preparing for an apocalyptic, trillion-dollar clash of business titans, a conflict that will mean soaring wealth for some and possible bankruptcy for others. But what will determine the outcome of this desperate struggle? Just this: the fickle tastes of teenage boys. The endless battle for video-game console supremacy is heating up again.

In the next year and a half, no fewer than four big companies -- Sony, Sega, Nintendo and Microsoft -- are planning the release of (or have already launched) "next-generation" systems fantastically more powerful than the groundbreaking Sony Playstation, boasting graphic images that approach photorealism. But conventional wisdom says that at most only two systems can coexist at any one time. Gamers flock to the console with the most and best games; game developers want to produce games for the system with the largest base of customers. More games means more customers means more games -- a virtuous cycle, if you're winning, a fatal one if you're losing the market-share war.

In the early '90s, Sega's Genesis and Nintendo's SNES shared the market after crushing the Atari Jaguar; in 1996, Sony's Playstation blew away the 3DO and Sega Saturn, relegating the Nintendo64 to also-ran status. The console market has always had either a single big winner or two competing
systems crowding out the others. But now there are four pegs and only two holes; some of these forthcoming systems will die.

But who? Sega is back -- it launched its comeback try on Sept. 9 in the United States with the 128-bit Dreamcast console. In March, Sony will release its Playstation 2 in Japan, with a U.S. launch targeted for next fall. Nintendo claims its next-generation console, code-named Dolphin, will appear in the States next winter. And the real wild-card, Microsoft's mysterious X-Box, may also appear in fall 2000.

The elements of victory are straightforward -- technology, price, game availability and speed to market. But the stakes are greater than mere console market share. For at least two combatants -- Sony and Microsoft -- the ultimate goal is not just to grab your gaming hardware dollars, but to control the very center of your entire electronic life.

Why will gamers buy next-gen consoles at all? Ultimately, because all four systems offer staggering advances in speed and graphics. They all make Playstation games look like cartoons.

Playstation was a big advance over earlier consoles because it could display 3-D images rendered on the fly, allowing a much greater sense of immersion and illusion of space than possible with previous machines. Artists define 3-D models as a series of connected polygons, with "bones" that control how they can move and "textures" that paint over these polygons to give them visual detail and depth. Playstation can display no more than a few hundred polygons on the screen at one time; if you try to do more, you get jerky action.

All the new systems boast the ability to display millions of polygons simultaneously. They offer something close to photorealism. A gamer walking into a store and watching a demo is going to be blown away.

But which system offers the best performance? Which hardware is the best?

The Dreamcast and Playstation 2 specifications are fixed. Nintendo has revealed only a few bits of information about Dolphin, probably because it knows it has to one-up Playstation 2, and hasn't decided on the system's details
yet. X-Box's specs are all "per rumor" -- Microsoft won't even confirm the existence of the X-Box program.

Graphics Processing

The next-gen consoles are all blazing-fast machines, as powerful as supercomputers from a couple of years ago. Dreamcast's processors achieve 1.4 billion floating-point operations per second, Playstation 2 gets 6.2 billion. Sega likes to say that Dreamcast is 15 times as powerful as a Playstation and has four times the graphic processing power of a Pentium II (although that's a somewhat misleading comparison, since any serious PC gamer has a 3-D card in his or her machine that handles extra-speedy graphic processing).

Obviously, Playstation 2 is a more powerful machine than Dreamcast -- and Dolphin is likely to be faster yet. X-Box -- who knows? But rumor has it that the X-Box will incorporate nVidia's GeForce 256 chip -- the most powerful graphics processing hardware yet developed on the personal computer side. Exactly how that stacks up against the consoles remains to be seen -- people don't normally compare PC 3-D boards to console systems.

Sony claims Playstation 2 can process 75 million polygons per second (Sega claims 3 million for Dreamcast). The claim is greatly exaggerated. It's true only for small polygons, and only if all three of the machine's co-processors are doing nothing but geometry computations -- in other words, no textures; no
physics; no lighting or other effects; no artificial intelligence; no gameplay. The Playstation 2 is a faster machine than Dreamcast -- two to four times -- but nowhere near the 25 times that a direct comparison of peak rendering rates implies.

Online Play

Dreamcast is the first console to contain a built-in modem. There's a Web browser available for Dreamcast (it sucks) -- but so far, the only Net-playable game is Sonic Adventure. Sega will be launching "classic" card and board games in an online-only format, and has announced plans for other Net-playable games, including a massively multiplayer game à la Ultima Online, but that project has been delayed. Developer Team 17, which is porting its Net-playable PC game Worms Armageddon to Dreamcast, says Sega is disorganized and confused about online gaming.

Playstation 2 will not include a modem. Nintendo at one point said that Dolphin would, but now wavers on the issue. X-Box -- who knows? Of course, it remains to be proven that console gamers want to play online at all; previous attempts to get them to do so (Sega's Saturn NetLink, Catapult's X-Band for the Sega Genesis and SNES, the Sega Channel and Sony's Net Yaroze) all failed miserably. Online gaming is, so far, an exclusively PC phenomenon.


Dreamcast uses its own disc format, "GD-ROM," essentially a CD-ROM with one gigabyte of storage, rather than the standard 660 megabytes. All the other systems will use DVD-ROMs (although they'll also read CD-ROMs). Playstation
2, in fact, will be able to play movie DVDs -- meaning that for $299, you get a machine that works as a DVD player and a game box and will also play audio CDs. For someone contemplating the purchase of both a next-gen console and a DVD, that may be a compelling proposition.

Nintendo has decided that keeping its system's launch price low is of primary importance, even if that means it can't play DVDs or audio CDs. Interestingly, Nintendo has partnered with Matsushita, which will probably manufacture a more pricey box (under its Panasonic label) that plays Dolphin titles and does play movies and audio. So you'll have a choice.

The X-Box will basically be a sealed-box personal computer with high-end graphic hardware and a DVD-ROM drive; the operating system may well be a modified version of Windows 2000. It would be trivial to make such a system play movie DVDs and audio CDs.

In sum, as graded on pure technology, Playstation 2 clearly beats Dreamcast. Dolphin looks comparable to Playstation 2, but will probably be superior, because Nintendo knows what it has to beat. And the X-Box is a wild card.

But technology isn't everything.

One of the most egregious failures in console history was the 3DO REAL Multiplayer, a machine roughly comparable to the Playstation that launched two years earlier, in 1993 -- at $700. It was an impressive machine; but it died. People will pay that much and more for a personal computer that can do many things; they won't pay it for a game box. Typically, sales of a console system really take off when the price falls below $150; Playstation and Nintendo64 can now both be found for $99.

Dreamcast costs $199. Playstation 2's Japanese launch price of 39,800 yen is about $360 at current exchange rates -- and it will probably launch for $299 in the United States (although a recent story by Nikkei BizTech holds out the possibility that the launch price may be as low as $199, which would be extremely competitive).

Many gamers have complained that $299 is too much. That's probably why Nintendo has backed off from promising DVD playability on Dolphin; it's hoping to keep its hardware cheaper, looking for a competitive advantage. The X-Box? Even Mr. Bill probably doesn't know; per rumor, Microsoft won't manufacture the machine itself. Microsoft will probably create what is known in the biz as a "reference platform," and personal computer manufacturers like Gateway and Dell will be invited to build their own machines -- and set the pricing.

If Playstation 2 does launch at $299, its relatively high price will deter some gamers, who will stick with Dreamcast (the price of which will steadily drop), at least until Dolphin comes out. But it's worth remembering that the original Playstation launched at $299 too -- and still managed to conquer the world.

But even the cheapest price doesn't always seal the deal. Nintendo64 suffered in the battle with Playstation because it was the last major console system of its generation to market -- after Sega Saturn and long after Playstation. By the time Nintendo launched, Playstation had a critical mass of games on the market. Nintendo never entirely recovered.

Dreamcast is a demonstrably inferior machine to its competition. Yet it is out now, close to a year before Playstation 2. Dreamcast has sold more than a million copies in Japan, and more than half a million in the United States. It
launched in Europe on Oct. 14, and is already outpacing initial sales projections there. In all likelihood, at least 5 million Dreamcasts will be in people's homes worldwide before Playstation 2 launches. (By comparison, Playstation has sold more than 60 million units to date.)

So Dreamcast has a first-mover advantage -- that may give it enough momentum to keep going after Playstation 2 launches. Nintendo will be late to market again -- the company will be trying to convince people who may already have bought Dreamcast or Playstation 2 or both to lay out another couple hundred bucks for another machine.

But no matter how cool the technology or how cheap the hardware, people won't flock to a new console unless the games are there. Sega's Saturn died a horrible death because very few titles were available when Saturn launched, Sega never got enough developers to commit to supporting the platform, and a mere handful of titles were published each year.

Sega learned from Saturn; the company had its ducks in a row before Dreamcast appeared. When Dreamcast launched in the U.S., 17 titles were available; 40 will be available before year end and (Sega claims) more than 100 by the end of 2000. So far,
only two -- Power Stone and Soul Calibur -- have gotten glowing reviews; Sega needs a hit to drive the machine, a Mario Brothers or Zelda or Pokemon, all games that spurred sales of their resident hardware. But throw enough crap at the wall and something will stick; Sega has sterling support from developers. It's cool on this score.

Sony actually has a bit of a problem. Its machine is so novel and so powerful that it's quite hard to develop for. Higher polygon resolution means more time spent creating images and models. Powerful processors enable more complex physical models, artificial intelligence and graphic effects -- but those require more time programming. And few programming tools -- software developer kits, programming libraries -- are available for Playstation 2 yet.

A typical Playstation game costs about $2 million to develop. A typical Playstation 2 game is going to cost more -- and one that takes full advantage of the hardware's abilities is going to cost a lot more. Square, the publisher of the Final Fantasy game series, says it expects to spend $40 million on the next installment -- the largest game development project in history.

According to Sony, 89 Japanese developers, 46 North American developers and 27 in Europe have signed to develop for Playstation 2. That sounds impressive, but what it really means is that 162 companies have signed a piece of paper that gives them access to information about the new system and allows them to develop for it if they want. You'd be morons not to sign. How many of them will actually bring games to market is another question.

Nintendo has clearly noticed Sony's problem with developers. The company has announced partnerships to "make [Dolphin] game development easier, faster" -- with MetroWerks to create a version of the CodeWarrior software development environment for Dolphin; and with Applied Microsystems to produce the development hardware. This is
something that ought to reassure developers -- but Nintendo won't say who or how many companies are working to produce Dolphin titles.

Of course, Sony has clout -- and more importantly, Playstation 2 will play old Playstation games. That's certainly comforting to people with large libraries of Playstation games -- and it means that 3,000-plus existing titles will run on the thing.

As for X-Box, it's basically a personal computer variant. In principle, it should be possible to run a great many PC games on the machine; in practice, that may be difficult, or even impossible. The X-Box -- like all three other machines -- will have both video out and VGA support, meaning you can connect it to a TV or computer monitor. The problem with this is that TV resolution sucks. Suppose you have a PC game with controls labeled in 12-point text; that will look fine on a personal computer, but it will be illegible on a TV.

Secondly, PC games are invariably designed for keyboard and mouse. Some games (notably first-person shooters) are easily adaptable to a console controller -- but others require wholesale change to work that way. Conceivably X-Box will come with a keyboard and mouse, in which case it
will probably be perceived as something you put on a desk instead of on top of your TV -- a "PC junior" rather than a game console. If it looks more like a true console, most PC games probably won't run on the thing.

Microsoft, of course, hasn't revealed what game developers it's working with, if any; it won't even admit the project exists. But European trade paper CTW reported that Microsoft was showing X-Box behind closed doors to developers at the European Computer Trade Show in London last month.

So depending on what the final machine looks like and how successful Microsoft is in lining up partners, the X-Box could run thousands of existing PC titles at the start -- or a handful of new games -- or nothing at all.

Microsoft's X-Box is more than a wild card -- it's a loony card. Since the 1980s, video games have been dominated by the Japanese -- and the market for quick-response "twitch" games is a long way from Windows 98 and Microsoft Office. What is Microsoft thinking?

One thing it's thinking is, "Windows everywhere" -- a Microsoft slogan. The company wants Windows running not only on personal computers, but on palmtops, cable-system set-top boxes -- and game consoles, too. It wants to own the very concept of the operating system. One motivation must surely be to get Windows into the console market, even if that means Microsoft has to go it alone.

But perhaps a stronger motivation is fear of Sony. Playstation 2 will play DVDs and audio CDs. Shortly after its release, Sony will produce an ethernet-plus-hard-drive add-on that will enable Playstation 2 to connect to a cable modem. It's announced that Playstation 2 will be a "platform for
Internet-based electronic distribution of digital content in
2001" -- beginning with downloading games via broadband, but ultimately including video on demand and God knows what all.

The suits are dreaming of convergence. Sony wants Playstation 2 to be more than a game machine; it wants it to be the center of your electronic life, your cable set-top box, your video and audio player, your Web browser, your
e-commerce machine. The dreams may be based more on corporate arrogance and lip service to the mantra of "convergence" than on any hard analysis, but Microsoft takes it seriously. It views Playstation 2 as a threat -- not
to Microsoft's own game business, which is tiny, but to Microsoft's ambitions, because Microsoft wants to be the center of your electronic life.

Why should anyone draw a moral distinction between the two? From a developer's standpoint, there's a vast one. Sony, like all the console manufacturers, keeps developers on a very short leash. If you want to develop for a console, you sign agreements with the console manufacturer that tie you up six ways to Sunday. The manufacturer has ultimate approval over the game; if it doesn't like it, it never appears. If it wants changes, you make them, or else. The manufacturer decides what its marketing budget will be. You must manufacture
and distribute through the manufacturer, and it takes a cut. You must buy your development hardware and software from the manufacturer; you must pay it royalties. It's got you by the balls.

By comparison, PC development is liberty hall. True, Microsoft won't give you access to the source code for Windows, but Microsoft won't try to stop you from developing for Windows, either. You can do what you want. You can publish what you want. You can buy hardware and code and development tools from whoever you want. The same will presumably be true of X-Box.

Sony makes Microsoft look like the free software operating system Linux -- as a result, many developers are unquestionably rooting quietly for X-Box.

Ultimately, the market will decide. But here's the score so far.

Dreamcast has taken a beachhead, and is advancing on all fronts. It has a year of easy victories before the competition attacks -- but Sega's enemies have impressive ammunition. Dreamcast has a shot, but the real hostilities have hardly started.

Playstation 2 boasts the most impressive armament in this war -- lightning-fast, Playstation-compatible, the ability to play DVDs. It has one problem -- its price, higher than any of its competitors -- but Sony still commands the big battalions. It's hard to imagine Playstation 2 failing.

Dolphin has one advantage: Nintendo is watching the coming skirmish between Sega and Sony carefully, and will avoid their mistakes. It has one big problem, too; its assault will begin late, the last of the three (or four) big marketing attacks. Indeed, few in the industry believe Nintendo's launch date of winter 2000; most expect Dolpin to appear later. By that time, it may just be too late.

X-Box? High in the fastness of their Pacific Northwest redoubt, the secretive forces of Chairman Bill prepare to open their own front in the war. Their intentions are unknown; indeed, their secretiveness means that, like the Soviets faced with an American lunar landing, they can plausibly deny they ever intended to compete if they wish. But X-Box, if implemented right -- able to play existing PC games, with power comparable to Playstation 2, with developer support, with a marketing campaign that (unlike Microsoft's normal P.R.) appeals to the intended market -- has an outside chance of conquering the world.

The armies are massing and the first shots have been fired. The war has begun.

By Greg Costikyan

Greg Costikyan's 27th commercially published game, Fantasy War, recently launched on Sony's Station; he also recently completed a report on the future of online games for Good Reports.

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