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Microsoft unveils X-Box
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March 10, 2000: 4:30 p.m. ET
Software leader launches war against Sony for control of the living room
By Staff Writer Chris Morris
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NEW YORK (CNNfn) - Microsoft is getting into the console gaming business.
The company on Friday formally announced its X-Box, which will pit Microsoft against Sony in what is expected to be a heated battle for home video game enthusiasts. The winner will get bragging rights and a significant portion of the $7 billion electronic entertainment industry.
Microsoft Chairman Bill  Gates introduced the console Friday at the Game Developers Conference in San Jose, Calif. Expected to hit stores by the second half of 2001, the system will be powered by Intel's Pentium III CPU chip and feature graphics generated by a new custom processor from chipmaker nVidia.
"Building on our strengths as a software company, X-Box will offer game developers a powerful platform and game enthusiasts an incredible experience," said Bill Gates, chairman and chief software architect at Microsoft. "We want X-Box to be the platform of choice for the best and most creative game developers in the world."
Microsoft has not yet determined what it will charge for the X-Box. Analysts say that initial price point could be a big factor in how well it is received by consumers. Anything over $299, they say, will drive people away.
Intel's selection as the processor provider is somewhat surprising. Earlier reports had speculated that the console would feature AMD's new 1-gigahertz (GHz) Athlon chip, but Microsoft officials say that would have proven too expensive.
"You have to remember that the cost of those chips puts them out of the range of the console market," said Robbie Bach, vice president of Microsoft's home and retail division, the unit that is heading up X-Box development.
Bach says the X-Box will be powered by a 600-MHz+ chip, though that number might increase as the company gets closer to releasing the X-Box.
The machine will also feature an 8 GB hard drive, boast 64 MB of memory, an Ethernet card and a DVD player that will play movies, as well as games. The inclusion of an Ethernet card, rather than a modem, is somewhat unusual, but the company says it didn't want to lock itself into a communication device that could become outdated in years to come.
"Putting a 56K (modem) in there wouldn't say much about our vision of the future," said Bach.
Analysts applaud the decision. "I think that's a very smart move," said John Taylor, managing director and analyst at Arcadia Investment Corp. Taylor notes that high-speed online gaming hasn't really been done well yet. With the Ethernet card, the X-Box should be able to handle cable modems, DSL lines or other high-speed connections as they become available.
It's also worth noting that though this is a Microsoft product, it will not be totally dependant on the Windows operating system. Bach said X-Box will have a "kernel" of Windows, which will alert the main system when a game is coming in, but the bulk of the work will be done by DirectX, Microsoft's long-standing platform for running games.
It's all about the games
The  key to a successful console gaming system is a driving title. Nintendo has Pokemon, Mario and Zelda. PlayStation has Crash Bandicoot and the Final Fantasy series. While there's never any way of predicting which characters or games will capture the public's imagination, several top name developers seem to be lining up alongside Microsoft for the X-Box. The company has spent the past six months getting developer feedback on the box, trying to hone it to their specifications.
While no developers have formally signed agreements to develop titles for the X-Box, they are enthusiastically voicing their support for the system.
"Eidos is excited to be involved with the new console platform from Microsoft, and we plan on providing content for it," said Mike McGarvey, chief operating officer of Eidos Inc., creator of Lara Croft and the Tomb Raider series, in a written statement. "Our developers are enthused by what they have seen in this technology."
Other publishers who said they plan to work with Microsoft include Hasbro, Bungie and Acclaim.
Microsoft sees the home entertainment market as being an untapped goldmine. Sony has made millions with its PlayStation, and is expected to make even more with the just released PlayStation 2.
Microsoft's previous attempts to crack the market, though, have fallen somewhat flat. In 1998, the company announced plans to team with Sega, which used Windows CE on its Dreamcast units. And while Dreamcast sales have been moderately strong, game developers haven't embraced CE, opting instead to write their code using Sega's own language.
Games and movies
The X-Box is more than just a gaming device, though. Like the PlayStation 2, it includes a DVD player, which will allow owners to watch movies or listen to music CDs on the machine when they're not playing games. This integration of entertainment modes has been predicted as a model for the future. Rather than several separate machines, you'll be able to own one that can take care of all of your home entertainment desires.
"There is a piece of real estate in the household that is increasing in value - and that's the place right above or right below the TV set," said Taylor. "It sounds to me like Microsoft sees this as strategically important enough to them that they are willing to make the investment."
"Microsoft is a technology company with resources that are the envy of other companies," Taylor added. "They're definitely going to make some waves, but its not going to be easy."
While the X-Box has the strength of Microsoft's name behind it, the company faces a tough battle to get into America's living rooms. Sony will have a one-year head start with its powerful PlayStation 2, which has received glowing reviews from both industry and mainstream media outlets.
The PlayStation name brand is also the most recognized in the gaming world. Its "backward compatibility" feature, which allows games from the PlayStation's first incarnation to be played on the new system, is seen as a significant strength. The X-Box will not be compatible with PC games, but few see that as a major detriment.
"For Microsoft, that's a non-issue," said Taylor. "Their intent is to build an installed base. That said, it (compatibility) is going to help Sony maximize its software unit sales this year for the PlayStation 1. It makes sense for Sony. It's a good marketing hook, but it won't have a real impact on sales."
Meanwhile,  Nintendo plans to launch its own next generation console soon. Dubbed "Dolphin," the machine is still something of a mystery. Nintendo announced its existence last year at the Electronic Entertainment Expo in Los Angeles, but did not show any screen shots or gameplay footage. Since that announcement, the company has remained silent on the Dolphin. No images have leaked out yet, something that's rather astonishing in the leak-prone world of electronic gaming.
Nintendo insisted until late Thursday that the Dolphin would be available worldwide for the 2000 holiday shopping season. The company did an abrupt about-face that evening, changing the North America and Europe launch date to the first half of 2001.
Despite the formidable competition, analysts say you shouldn't count out Microsoft.
"This is not about technology," said Taylor. "It's about fun." 
-- Click here to send e-mail to Chris Morris
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