This Christmas, consumers in the US will face a choice that they haven't had to make since the 80s battle between VHS and Betamax. On the line are the fortunes of some of the world's largest software and digital entertainment companies; Sony (again), Microsoft, and Nintendo.
Competition will be fierce; the market for the new breed of 128-bit consoles in the US alone will be worth $60 million by 2005, it is predicted. Add to this the offerings coming from other sub-sectors in the interactive entertainment space (PC, Web, Mobile, digital TV, DVD) and it doesn't take a genius to see that the gaming industry is up for another one of its periodic phase shifts.
The sure bet of every analyst is the Sony PlayStation 2 (PS2), launched a year ago as the follow-up to the enormously successful PlayStation. Sony has a head start, an existing base of loyal users, and a killer range of titles - key ingredients that allowed the original PlayStation to trump Nintendo's N64 console.
These tactics are now well known entry requirements and Microsoft has concentrated on building up an impressive range of titles by leveraging its software industry influence against the difficulty of writing code for the PS2's complex parallel chip architecture. Suddenly, Tokyo's entertainment warlords are under attack from the beast of Redmond.
Sega's retirement from console production earlier this year has left only Nintendo in the foray and its GameCube (to be launched three days after Xbox) promises the capability to deliver the world's most popular titles (Mario, Pokémon and Zelda) in glorious 128-bit graphics.
There is little doubt that Microsoft is taking its latest foray into entertainment seriously. Xbox is a superior piece of hardware combining the fastest graphics chip in gaming with a DVD player, hard drive, and net access all backed by a reputed half-billion dollar marketing spend.
However, as a company, Microsoft is used to manipulating its distribution network very effectively but has little experience in bringing products into existing (and competitive) markets. The question on everyone's lips is 'will they deliver a compelling consumer proposition'?
There is little indication of this at the moment. Xbox fan sites continue to promote a proposition around a rational benefit that Microsoft's superior technology. It 'empowers game artists by giving them the technology to fulfil their creative visions as never before'. While this may work for the hard-core gaming heartland of middle-class America, it is unlikely to satisfy a subtler European mindset. More importantly, PlayStation is already way ahead with its hold on people's hearts. Having moved beyond games to delivering 'powerful experiences', Sony is now promising access to a cathartic, possibly transcendental state of mind, in what it's advertising calls 'the third place'.
Third place but not third rate
Sony's marketing is rightly legendary, and has taken the games market out of bedroom-ridden adolescence into to include fully fledged manhood. Cruicial to this marketing has been the ability to maintain what Nike call 'mass cult appeal', something that is being built on in a new brand campaign developed by TBWA.
Seven new brand commercials deliver a proposition based on Sony's 'the third place' strategy: individuals in different cultural milieus demonstrate unusual behaviour as a result of entering PS2's third place. Coupled with a good discounting strategy this could spark new interest in Sony's machine as well as make it the default purchase for dissatisfied Xbox hopefuls.
Indeed, dissatisfaction and confusion seem to be rife in the run up to launch of Xbox, which is expected to carry a price label of around $299. Reports from US consumers say that Xbox will need to be bought as part of a bundle with prices ranging from a minimum of $499 to a hefty $1,200. By contrast, Sony is bundling the PS2 with two to three games and peripherals for $299 - $399 or solus for Ł199 in the UK (a price point Microsoft will not be able to ignore for the European launch next March).
Two things may work in Microsoft's favour. First, America's IRS has been mailing out tax rebate cheques to households as part of George Bush's election promise of between $200 and $600. Second, patriotism is on the rise in the US, and some signs suggest consumers are responding to treasury pleas to shop for the nation.
But in the online chat rooms, customers are furious about the price of Xbox and comments like 'I guess Bill Gates was a little money hungry and decided to up it ' are rife. (This is one of the few on www.epinions.com).
Microsoft's association with toil in office and school, not to mention with alleged unethical business practice, could turn gamers off. Continuing efforts by Redmond to extricate the company from the worst effect of the Department of Justice case have kept its monopolising tendencies in consumers' minds. This contrasts with the perception of PlayStation as a powerful sub-brand that exists on the fringes of society. Microsoft would do well to disassociate its main work-based activities from the irreverent fun and leisure values of the gaming consumer.
That said, if Xbox lives up to its published specification it will be a superior machine. Microsoft hopes that the convoluted hardware of Sony's console will allow Xbox games to quickly out-perform those on PlayStation 2. Additionally, Xbox has built-in networking capability and a hard drive, whereas these are optional add-ons for the PS2.
Nintendo's GameCube also boasts an impressive specification backed up by game-design excellence and a culture of multi-player gaming fostered through smash hit titles such as Goldeneye.
Wary of these twin threats to its machine's capability, Sony has already announced its PS3, currently called GSCube, and reputed to have 1000 times the performance of the existing console. But will the PS2 deliver against the Xbox or will it merely act as a stepping-stone to the next generation of super consoles?
The truth is that the market is now big enough and mature enough to be able to support more than one game device. Last year Sony re-launched a slimmed-down version of the original PlayStation, recognising that not everyone would trade up to the PS2 and Nintendo continues to have success with its Game Boy format and the Pokémon franchise. To add to this complex mix, Internet gaming, mobile gaming and digital interactive television are delivering increasingly immerse experiences that compete with the consoles for share of market.
Despite the gaming industry's enthusiasm for zero-sum games - where somebody wins and somebody looses - the outlook is not one in which a victor will triumph any time soon. Likely scenarios involve a continuing struggle between the traditional houses in which roles are re-negotiated and consolidated as the contenders struggle to create value in the face of an increasingly sophisticated market.
Copyright © 2001 by Centaur Communications.