December 8, 2003. Copyright, 2003, Graphic News. All rights reserved

Changing rules in the video games industry
By Joanna Griffin

LONDON, December 8, Graphic News:  This Christmas fogies can choose at least one electronic gift safe in the knowledge that it is unlikely to face rejection. SonyÕs new PXS is a home entertainment device that integrates the ever popular Playstation 2 with consumer electronics and proves that the Japanese media giant is more determined than ever to broaden its reach by bending the rules of the game.

With the PXS, Sony hopes to capture consumers who would never buy a stand-alone games console. The new device combines the PS2 with a DVD, hard disk video recorder, satellite and analogue television tuners, music playback features and a photo album. It marks the latest phase in SonyÕs strategy to shake up a video games industry that had replaced a damaging period of boom or bust with relative stability.

Until recently market leaders Sony, Nintendo and Microsoft had stuck fairly closely to rules that produced a cyclical pattern: new consoles brought three or four years of growth followed by a couple of years of transition when their successors were launched. The technology of the new consoles made not only the previous ones but also their games obsolete. That is to say: consoles only ever reached middle age before being wiped out by the next generation. With each cycle, the playing field was levelled and console makers effectively started from scratch.

At the moment, the market is dominated by SonyÕs PS2, MicrosoftÕs Xbox and NintendoÕs GameCube. Sony is far ahead overall -- it sold 980,000 PS2s in the first two days of sale and nearly twice as many gamers own a PS as an Xbox or GameCube combined. But a drop in profits and a growing challenge from Microsoft have led Sony to rewrite the rulebook.

First, the Japanese company made its PlayStation 2 console Òbackwards compatibleÓ with the first one. This meant that games written for the old console also worked on PS2, giving customers a reason to stay loyal. The company plans to do the same with Playstation 3 when the new cycle starts in 2005 or 2006. In addition, Sony bucked the trend of killing off its old console, and sold more than four million Playstations in 2002. 

SonyÕs new strategy sets the scene for a showdown between MicrosoftÕs Xbox 2 and its own Playstation 3 in the next Òconsole cycleÓ. Microsoft faces pressure to make its next console backwards compatible to maintain its customersÕ loyalty. By integrating its PS2 into other products, such as the new PXS, Sony has upped the ante by fighting on more fronts.

All this is bad news for Microsoft but good news for consumers. You are unlikely to go wrong if you buy someone a PXS, but there is now no reason to return an old console to the shop either.
/ENDS