Microsoft's Xbox 360, the latest in the software giant's series of high-tech gaming consoles, is going to beat the Christmas holiday rush--but can it beat the dominating market leader, Sony Corp., which will unveil its PlayStation 3 sometime in 2006?
Still, even if Microsoft fails to make a big leap with the Xbox 360, it won't be as bad off as Sony will be if PlayStation 3 loses significant ground to the Xbox, several analysts say.
Microsoft's home and entertainment sector, which is largely Xbox-related, normally makes up about 8 percent of the company's revenues, and of course loses money.
At Sony, gaming accounted for 13 percent of sales in Sony's most recent quarter. More important, gaming is "an important profit center," said analyst Cole.
In the console war, "the stakes are higher for Sony," Cole said. "They have more to lose. They have nowhere to go but down."The better Sony fares in its console battle with Microsoft, the better off it may be in another war: The fight over the technology behind the next-generation DVD player.
Sony's Blu-ray format is up against Toshiba's HD DVD technology. Only one format is likely to survive, analysts say, and the sooner one wins, the better for consumers.
Here's why this matters in the game console war: Video games are played on DVDs. A Blu-ray DVD player will be standard on Sony's PlayStation 3, the coming rival to Microsoft's Xbox 360. The more PS3s sold, the more potential demand for Blu-ray discs, some analysts say.
On the other hand, tech industry heavyweights Microsoft and Intel support HD DVD because it allows video content to be copied from discs to computer hard drives.
Microsoft's Xbox 360 hits stores this week with a current-generation DVD player, but Microsoft has indicated that future versions may come with HD DVD technology.
But PlayStation 3 could help "tip the scales" toward Sony in the DVD war, said Michael Gartenberg, a consumer electronics analyst at Jupiter Research in New York.
Few gamers are likely to choose the PlayStation 3 specifically because it has a Blu-ray DVD player, but when they realize they have it, they'll have an incentive to buy content in the Blu-ray-format, he said.
"PS3 has the potential to be the Trojan horse in that format war," Gartenberg said.
Chris Kwak, a stock analyst at Susquehanna Financial Group in Pennsylvania, agreed.
He noted, too, that PlayStation 3 effectively allows Sony to subsidize the spread of the Blu-ray standard. The next wave of DVD players, be they Blu-ray or HD DVD, are expected to hit stores next year and cost $800 to $1,000.
The PlayStation 3 is likely to cost around $500, Kwak said. Sony can price the Blu-ray game console lower because its video game profits come primarily from the sale of games, he said.
Technological format wars are nothing new. Sony was involved in one of the more famous ones in recent years, the videocassette battle of the 1970s and '80s.
Sony's Betamax format lost to Matsushita's VHS standard. While many thought Betamax technically superior, it failed at least partly because Sony's strict licensing terms turned off movie studios.
In the current DVD fight, though, Sony has plenty of allies in Hollywood. While most studios have said they will use both Blu-ray and HD DVD, Sony's Blu-ray technology has more piracy protections than HD DVD, a big plus to moviemakers.
But HD DVD entails less retooling of the DVD manufacturing process than Blu-ray.
But Blu-ray discs will hold five times that of conventional DVDs, compared to three times for HD DVD.
Analysts see no truce between the two camps.
In fact, the PlayStation 3 gives Sony an extra reason not to compromise, said Paul O'Donovan, a London-based technology analyst for market researcher Gartner Inc.
Well be getting many more articles such as these with "analysts" perceptions of things. I just wish Sony would just shut them up again (remember PSP?)
and i bet if you asked him why he felt it would be $500 us he would say "kataragi said so"
EVER HEARD OF MARKETING!
Less invasions, more equations!
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