Playing the PC game
Next-generation video game consoles are sprouting PC functions.
By Delia Craven
From the October 1999 issue
Some futurists would have us believe that almost any consumer device can behave like -- and replace -- a personal computer. More rational thinkers predict that PCs will remain office tools and that consumer devices will develop into intelligent, networked machines capable of the simpler tasks that consumers rely on PCs to do. In the latter, more likely, scenario, one such device is the video game console. With separate input devices, CPU boxes, and display monitors, the platform closely resembles the PC's traditional three-piece setup. The potential of these similarities is not lost on video game console manufacturers that will soon introduce new products offering many computerlike functions.
Even though some pundits will trumpet the video game console as one of many devices that herald the post-PC era, these products won't contribute to the downfall of the PC just because they are hardware alternatives. Rather, the subtle but significant impact of video game consoles will be visible in the way users and manufacturers begin to view home computing devices as cool, consumer-oriented machines instead of highly technical productivity tools.
With more than 125 million units sold worldwide by Sony (NYSE: SNE), Nintendo (OTC: NTDOY), and Sega (OTC: SEGNY), the video game console platform has achieved remarkable market penetration. In 1998 the three companies shipped 16.3 million units, worth more than $2 billion, in the United States alone, according to IDC, an IT consultancy. At the end of this year's first quarter, video game consoles had penetrated 38 percent of U.S. households vs. 49 percent for PCs.
PLAYSTATION BREAK
The Big Three's current models -- the Sony PlayStation, Nintendo 64, and Sega Saturn -- are merely game machines and pose little threat to the PC business. By contrast, the next-generation video game consoles are practically PCs in disguise. Based on sheer processing power and communications capabilities, these machines will be as powerful as low-end graphics workstations (see "Low-Fat Chips"). Take Sony's PlayStation 2, expected to arrive on U.S. shores by the end of 2000 and sell for roughly $400. The machine can crunch numbers, play DVDs and CDs, connect to the Internet, manage email (including video email), act as a cable television set-top box, and run a word processor.
In essence, the computing abilities of the PlayStation 2 are superior to those of most PCs. The box will have a built-in modem, Dolby Digital and Digital Theater System sound, 32 MB of memory, and FireWire and Universal Serial Bus ports that can connect the console to an external hard drive or almost any other peripheral device. It all runs on a custom-designed CPU called the Emotion Engine, whose processing power approaches that of large-scale supercomputers used for scientific simulation. Sony claims that the PlayStation 2 can show a game character's hair and clothing rippling in a digital wind calculated and processed in real time. Other feats, according to the company, include the dynamic calculation of gravity, friction, and an object's mass for rendering materials such as water, wood, metal, and gas.
Although the PlayStation 2 will probably be the most powerful and versatile of the new game boxes, the first next-generation machine to hit the market will be Sega's Dreamcast, which was expected to go on sale in September for $199. The Dreamcast console features a Hitachi (NYSE: HIT) processor surrounded by an NEC (Nasdaq: NIPNY) PowerVR chip set capable of rendering more than 3 million polygons per second -- about four times faster than a Pentium II -- giving video games a high-resolution, DVD-like quality. It also features a 1-GB CD-ROM drive, a Yamaha audio processor, 26 MB of various types of RAM, and a 56-Kbps modem whose port can also accommodate digital subscriber line or cable modem access. The Dreamcast will be comarketed by AT&T (NYSE: T); consumers will have the option of using AT&T WorldNet as their Internet service provider and have access to an online gaming network where they can compete with other players via the Internet.
Nintendo, which is still enjoying strong sales of its Nintendo 64 video game console, is developing a new platform called Dolphin that will incorporate the PowerPC chip architecture through a billion-dollar agreement with IBM (NYSE: IBM). The new 400-MHz chip (called the Gekko) will be made using a cutting-edge 0.18-micron copper semiconductor process technology, and will be paired with an advanced graphics chip designed by ArtX, a small California company. Nintendo plans to begin shipping the Dolphin by the 2000 holiday season. The company will also break its reliance on cartridge-based software and use a DVD drive instead.
REPLACEMENT PLAYERS
The growing popularity of the sub-$500 PC contributes to the video game console's viability as an alternative to desktop computers. "From a hardware perspective, there seems to be no reason why these devices cannot replace a low-cost PC," says Keith Diefendorff, an analyst at MicroDesign Resources, a market research and consulting firm. He points out that with the addition of a hard drive, the PlayStation 2 essentially becomes a PC. "Even without one, the PlayStation 2 can do most of the functions for which many people buy PCs: email, Web access, and games," he says. It also helps that game consoles are easy to use; plug right into a television set; and don't look out of place in a living room, unlike many computers.
A look at how consumers use their PCs shows that video game console makers may be delivering what people want. According to Forrester Research (Nasdaq: FORR), an IT research firm, 91 percent of people who buy a home PC use the machine to send email, and 56 percent use it to access the Internet. More telling: 58 percent use their home machines for playing video games, but only 45 percent use them for word processing.
Nevertheless, for those who spend many hours at home working on spreadsheets and computation-intensive applications, the video game box still can't rival the PC. The console platform's other limitation is its operating system. While Sega's Dreamcast will use a version of Microsoft (Nasdaq: MSFT) Windows, existing consoles run on game operating systems that still don't support many PC-like applications. This development issue has been a difficult one for the console makers. Mr. Diefendorff says that although developing operating systems for video games comes naturally to companies like Sony and Nintendo, developing an OS for PC-like applications -- one that could conceivably replace Windows and run on any video game console -- won't be easy for them.
[But how hard would it be for Microsoft to do? - DiViT]
Given the current lack of application software for these game consoles beyond Internet access and email, it is unlikely that they will directly replace PCs. Instead, game boxes will change what people expect from computing devices. Consumers won't settle for mere productivity applications; they will also demand fun things like DVD movies and games, which some analysts predict will spark competition between parents and their children for control of the console. The traditional family battles over what programs to watch may be replaced by a struggle over which Web site to visit.
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