Xbox vs. PS3

August 2005

WORDS BY RHYMER RIGBY

For gamers, it’s been the most exciting few months since, well, this time four years ago. In fact, if you look back at the gaming press from 2001, it all sounds remarkably familiar. To great fanfare and within days of each other, Sony and Microsoft have unveiled their new consoles: Playstation 3 and Xbox 360.

Both consoles boast tantalizing power, connectivity, playability and pretty much everything else on a scale that is dozens of times more powerful than their predecessors. Ken Kutaragi, head of Sony Computer Entertainment, introduced the PS3 as “a supercomputer for computer entertainment.” Meanwhile, Microsoft’s chief Xbox officer, Robert Bach, said that the product’s glitzy MTV launch was “a signal to the world that the next generation of gaming is here.”

So, no lack of modesty here, then. But the business behind the hype is at least as interesting and impressive as the grandiose claims made for these new machines. Much has changed since the beginning of the millennium, when PS2 and Xbox debuted. To use an oft-quoted statistic, the gaming market is now worth more than the movie market. Okay, this figure does not include DVD sales, but it does equal boxoffice receipts—some $6 billion—which is pretty impressive. In five years’ time, analysts predict the market will be worth over $10 billion.

Nor is the market by any means saturated. In the US, around 30% of households have a console, but in southern European, the figure is around 20%, and in Germany just 7%. And this is before we even look at games-mad Asia. There is also the remarkable sex-skew to be taken into account: 80% of gaming is done by men.

Before we talk about a straight Xbox vs. PS3 duel, however, it’s worth remembering that there is a third player in the game. Last time around—the video console industry operates in roughly five-year cycles—the battle was more Playstation vs. the Nintendo GameCube, with Microsoft’s Xbox as the new kid on the block. From a more-or-less standing start in 2001, Xbox has beaten Nintendo back to third place, where it is currently languishing with the tag of “console for kids’ games”—an unfortunate tag, as the average age of gamers is now 23 to 25. However, Nintendo hasn’t given up: after the bigger two unveiled their offerings, it started making noises about its new “Revolution” console, although, at the time of writing, these were rather vague.

To the casual observer of media hype, it might appear that Sony and Microsoft are neck and neck. But this is far from the case. According to JupiterResearch, Playstation 2 leads the field in the US, with 43% of the console market, Xbox comes a not-terribly-close second with 19% and Nintendo follows with 14%. Worldwide, the Japanese lead is even more pronounced: Playstation 2 has sold some 80 million units and commands 70% of the market.

Both companies’ boasts that their new offerings are vastly more powerful than their predecessors are correct. In terms of processing power, they are up there with the most powerful home computers available, and in terms of graphical abilities, they surpass them. They also offer much more in terms of home entertainment than their predecessors did—both in terms of functionality and connectivity.

This is the way gaming seems to be going. Sony’s Kutaragi describes PS3 as “a system to be placed in the center of living rooms around the world,” and Microsoft’s intentions in this area are very similar. Both have the ability to connect with other sorts of consumer electronics, such as digital cameras, and both have wireless functionality. Indeed, it is instructive that in Japan, where the future of gaming tends to emerge, Sony released a machine last year called PSX (a version of PS2), which is a home server. “Both Sony and Microsoft,” says Gerhard Florin of Electronic Arts, the world’s largest game publisher, “want to own the living room. That’s the next big area and that’s the strategy.”

This is also where the biggest differences lie. In these early days, pundits seem to think that Xbox has a broader mass-media appeal, while, in terms of raw power, PS3 wins. When it comes to living room functionality, Xbox is a great one-stop shop for everything from acting as a high-definition (HD) video recorder to playing MP3s. Xbox will also burn DVDs, a capability PS3 does not have. MS has invested a lot in Xbox Live, its online gaming service, and both companies have ideas in this area, including online game marts.

Test Drive Unlimited

Storage is another differentiator: PS3 will use Sony’s Blu-ray Discs, which hold 50GB, and Xbox 360 will use dual-layer DVDs. While Blu-ray is a relatively new format, its inclusion in the PS3 could help it take off against Toshiba’s HD-DVD formatted discs, which hold 30GB but are cheaper to manufacture as they can be made by current DVD production machines. Sony dominance in the console market could help end what has been a fierce format war between Sony and Toshiba for the past three years (think back to the ’80s Betamax vs. VHS battle, a costly duel that Sony lost). The high-capacity storage discs are also set to be the medium for HD home video viewing. With film studios and home computer manufacturers split almost evenly between the two formats, a win in the console war could create a substantial break in the deadlock.

A further area of competition lies in the graphics card department, between long-time rivals Nvidia and ATI. Nvidia, which powered the graphics for MS’s original Xbox (and reportedly clashed with the software giant over pricing of the console), now have their RSX chip in the new Sony console, while ATI’s Xenos GPU will be in the Xbox 360. The fact that both consoles will allow high-definition standard graphics will likely be a driver for HDTV, which has had a slow start thus far. An interesting side effect of vastly improved graphics (on whatever console) is that characters whose faces are currently zombie-like, will be able to react in ways similar to real human beings. “Your opponent will cry or sweat,” says Florin. It is thought in some gaming circles that the ability to put “emotional content” into games may be the key to the 50% of the population—women—who have remained largely immune to the siren call of the consoles.

One thing that is almost certain is that the new wave of consoles will add to the overall number of gamers: historically each new console cycle has added about 30% to the total. It’s also a pretty safe bet to say that it’s going to be a while before each of these machines really shows what they’re capable of. “At the beginning of a console cycle,” says Florin, “they use 40% to 50% of the available hardware on the machine, and at the end they use almost 100%.”

Right now, we’re a long way from there. Xbox is expected to go on sale in the fourth quarter of 2005 and Playstation 3 (and Revolution) in early 2006. Both are likely to have a similar price (around $300) and both have strengths and weaknesses, depending on their intended use. How this will pan out across tens of millions of gamers worldwide remains to be seen. Going on history and market dominance, it’s tempting to guess that PS3 will carry the day. But really it’s anyone’s guess as to who will “own the living room” in five years.

© 2005 Sony Computer Entertainment Inc. © 2005 Microsoft Corporation