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Should you wait for the PS3?
Even if the Xbox 360 is a rousing success, Sony will likely still dominate the console universe.
November 22, 2005: 4:49 PM EST
By Peter Lewis, FORTUNE senior editor
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NEW YORK (FORTUNE) - More than 96 million PlayStation 2 consoles have been sold worldwide since the PS2's debut in 2000, compared with some 25 million Microsoft Xboxes sold since 2001. Even if the new Xbox 360 is a rousing success, as it appears to be, Sony's dominance of the console universe is likely to continue, and there's a powerful new PlayStation coming next year.

The PS3 is scheduled to be introduced in the spring of 2006; unlike in previous launches, Sony has not said anything about a Japanese debut followed later by US and European rollouts. The new box will definitely include a high-definition DVD player intended to capitalize on the growing market for HDTV sets, which, of course, Sony also makes. (The Xbox 360 supports HD games, but it lacks the ability to play next-generation, prerecorded HD movies.)

Sony favors a next-generation high-definition DVD standard known as Blu-ray. If millions of Blu-ray PS3s find their way into living rooms, Sony figures, movie studios will be compelled to embrace it over the rival standard, known as HD-DVD. (See correction) Double-layer Blu-ray discs can hold approximately 50 gigabytes of data, more than enough for high-definition movies and games at video resolutions up to 1,080p (1,080 lines scanned progressively, the highest resolution in the current HD specifications). Double-layer HD-DVD discs can hold about 30GB of data. Yes, brace yourself for another Betamax vs. VHS standards war.

If history is a guide, the first standalone Blu-ray DVD players are likely to cost $1,000 or so, which raises the obvious question: How much will the new PS3 cost? Sony is not saying, although in July Ken Kutaragi, president and CEO of Sony Computer Entertainment, told a group of game developers in Japan that the PS3 will be "expensive." Kutaragi has also said that the PS3 is not just a gaming console, but rather more of a high-definition household digital media hub.

Of course, nothing is stopping Microsoft from adding a high-definition DVD player to the Xbox down the road, once the standards battle has been resolved. But for now, it is reasonable to expect that the PS3 will cost significantly more than the Xbox 360 (currently $299 for the basic system, $399 for a premium bundle that includes a hard disk drive), especially if Sony includes not just the Blu-ray DVD-ROM but also a detachable, 2.5-inch hard disk drive. Sony has not said whether the HDD is standard or optional.

It is standard strategy for Microsoft and Sony to sell the game consoles at a loss, hoping to earn money on sales and licensing fees for game titles, but Sony's appetite for subsidizing the PS3 is not known.

How else does the PS3 stack up against the Xbox 360? It's based on a powerful Cell processor developed by IBM along with Sony and Toshiba. Although Sony describes the Cell as delivering 2 teraflops of processing power, which approaches supercomputer levels, actual comparisons with the IBM PowerPC custom chip used in Microsoft's Xbox 360 will have to wait.

Sony has also tapped nVidia to supply the graphics engine in the PS3. On specs alone, the PS3 should have a graphics edge over the ATI-based Xbox 360, according to game developers with whom we spoke.

Fancy hardware doesn't mean anything, though, if the people who write the games for the hardware can't take advantage of it. (Exhibit A: The PlayStation 2 is technically inferior to the original Xbox, but it's still the world's most popular gaming platform based on the selection of compelling game titles.)

At its launch the PS3 will be backward compatible with thousands of earlier PlayStation titles. The Xbox 360 launched this week with 18, a number that is expected to swell into the low hundreds next year, partly with the inclusion of older Xbox games that have been reprogrammed for the 360. Although Sony has a big edge in the number of existing game titles, Microsoft is at its heart a software company, and game developers are praising it for providing them the tools and support to build new titles for the Xbox 360.

So should you wait a year for the PS3 or buy the Xbox 360 today? Current Xbox owners are likely to upgrade to the 360, and current PS2 owners will probably stick with Sony, unless it is wildly more expensive. New gamers, however, have little reason to wait nearly a year for the PS3, and Microsoft is almost certain to gain some ground on Sony.

The one wild card: Sony could slash the price of the PS2, currently $150, perhaps to $100, making the $400 Xbox 360 seem less attractive. Sony says it has no immediate plans to lower pricing for either the PS2 or the PSP, but after the holidays, who knows?

Strike, counterstrike: It's all playing out like a good videogame. Only in this game, billions of dollars are at stake.

Correction: An earlier version of this story appeared with statements erroneously attributed to Sir Howard Stringer, CEO of Sony Corporation, regarding pricing and availability of the PS3. Stringer has not commented publicly on how much the PS3 is expected to cost, or how soon it will appear in the US after the Japanese launch in spring 2006. (Return to story)

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How does the Xbox 360 stand up? Read our review.  Top of page

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