Let the Battle Begin

By Jim Frederick/Tokyo

Get ready for all-out war. Microsoft may beat Sony and Nintendo to market with Xbox 360, but the two Japanese competitors will unveil their own updated game players this week too.

Sony, whose PlayStation 2 dominates the U.S. market, has the most to lose in this battle. PS2 has contributed 40% to 60% of Sony's operating profits over the past several years. With Sony's core electronics business cratering and no obvious successor to the Spider-Man franchise in its entertainment pipeline, Microsoft's renewed assault on this bedrock business could not have come at a worse moment.

Like Microsoft, Sony--whose next-generation PlayStation might not hit store shelves until next spring--hopes its machine will become a home-entertainment hub. Sony is banking on the muscle of the PlayStation's new Cell processor, which the company has called "a supercomputer on a chip" with 10 times the power of the latest PC processors. The new console may employ Sony's new high-density "Blu-ray" DVDs, allowing for longer and more cinematic games. But Sony's online strategy remains unclear.

Despite being outspent and outmarketed during the last round of game-box wars, Nintendo has defied predictions that it would exit the TV-top gaming business. The company, whose GameCube is running third in market share, plans to launch a new machine (code-named Revolution) next spring. It may have voice-recognition, wi-fi and touch-screen controls similar to the technology in its newest handheld, the DS. Satoru Iwata, Nintendo's president, has criticized the ballooning money spent on game and console development. Unfortunately, it's a bit late for that. --By Jim Frederick/Tokyo