Microsoft Faces Threat of Internet Access Via Game Consoles

To live up to its slogan of software services “anytime, anywhere, on any device,” Microsoft needs a presence on electronic game consoles. Sega’s recently released Dreamcast game console and rival consoles on the horizon from Nintendo and Sony have the potential to be more than mere video game machines; they enable access to the Web and Internet services. Millions of these devices will be sold in the next few years, creating huge Internet communities of console game players. Internet portals are therefore scrambling to strengthen their gaming offerings and Microsoft’s Gaming Zone has acquired a new importance within MSN. More dramatically, reports indicate that Microsoft has developed its own “X-Box” console to go head-to-head with Nintendo and Sony.

Consoles are powerful, dedicated electronic games devices that are directly connected to a television set, bypassing the home PC. Several players may be hooked up to a single console for multi-player games. The two giants of the industry are Sony and Nintendo, with Sega a distant third. Sony’s Playstation console has sold more than 40 million units; Nintendo 64 console sales approach 20 million. Next-generation consoles jump from 64- to 128-bit processors and are Internet-enabled. In September, Sega launched its Dreamcast console in the U.S. market (the original Japanese release was almost a year earlier), and by year-end Dreamcast will have sold 1.5 million units in North America. By next year’s holiday season, the bigger players Sony and Nintendo will have shoved Sega aside with even more powerful consoles. Sony’s Playstation II (demonstrated at Comdex in November) and Nintendo’s Dolphin are in the pipeline for U.S. release in fall 2000. (Playstation II will debut in Japan in the spring.)