Console war winner....? and why Sony will lose

COMPETITIVE STRATEGY 42001

Gaming Consoles

Date: June 4, 2006

Overview

This report analyzes the gaming console industry from 2000 to 2006 focusing mostly on the three main competitors during that period – Microsoft, Sony, and Nintendo. The report will address a brief history of gaming consoles, a detailed industry analysis, analysis of the strategic position of the three major competitors and changes in the industry during the analysis period.

Brief History

The video game industry has gone through many cycles since its inception. The industry has mostly followed a classic razor blade model, proprietary consoles with many developers developing games for the console to sell to end consumers.

One of the first players to enjoy huge success in the industry was Atari Corporation. Atari collapsed because of a flood of low quality software for the Atari console. Atari was almost a monopoly but surprisingly, it did not control the software royalties from the games, following a commodity model rather than a razor blade model.

This collapse gave way to the dominance by Nintendo from 1985-91. Nintendo did not act fast enough with changing technology, paving way for Sega to enter the competition. Sega and Nintendo were head to head in console wars till Sony came along. Sega was way ahead in terms of technology, providing things like network games, one on one plays etc – features that have become contemporary in games only after the internet boom (post 2000). Sega made strategic mistakes, such as releasing its console without any games and this ultimately led to its exit in 1999. The mistakes paved the way for Sony, a home electronics giant to enter the industry with some of the most advanced features in 1996. Sony’s consoles – PS1, PS2 and PSOne have been the only ones to have crossed the mark of 100 M consoles sold.

Given the similarity of console operating software with consumer operating systems, it was only a matter of time till Microsoft, the world’s largest software company, decided to enter the industry. Microsoft initially faced resistance from game developers – it even developed games itself in the beginning, before becoming extremely popular in the core gaming segment.

Industry Analysis

Rivalry among competitors

The industry presently is dominated by three major players, namely, Sony, Microsoft, and Nintendo. The video gaming industry has seen several shifts – a once dominant player, Sega, has exited the industry. Similarly, Microsoft, which traditionally has been a software giant has entered the industry and has notched up critical successes in the last five years. There is a severe fight for dominance with Microsoft launching Xbox 360 ahead of Sony’s PlayStation 3 and Nintendo’s Wii. Apart from these three, peripheral players such as Dell, traditionally a PC manufacturer, have come out with PC based gaming console and others such as Atari plan to re-enter the industry.

Barriers to entry

Learning curve is one of the biggest barriers to entry in the industry. R&D capabilities give each firm a cutting edge in the market place. The firms compete based on the features of the consoles. The features govern the quality and variety of the games developed for the console, which in turn governs the popularity of the games. The game developers will not develop games for all consoles. This also implies that an entrant needs to be a well established hardware or electronics player, with capability to develop software in order to break this barrier.

There is easy access to inputs for the console makers. The subcomponents required for manufacturing the consoles can be procured readily from different markets across the world. The cost of manufacturing consoles is not a large barrier to entry. The biggest challenge is to assemble, brand, and market such a product.

Brand identity is a very important part of this business. While people are affected by the games available for the different consoles, there is a huge brand loyalty. Buyers of consoles have been found to be brand loyal, and would wait to buy the more advanced versions of the consoles that they have. There is also a network effect prevalent in the market, which leads to an indirect brand building.

There are hardly any government regulations on the gaming industry, particularly for the console manufacturers. There is however a rating system in place to monitor the games developed and marketed, thus implying a low entry barrier.

Given the console costs, incompatibility of games of one console with the other, and the library of games available for each console, the switching costs are high for consumers in this industry. Further, most consumers would buy only one console and thus are locked in with one of the three major competitors.

Access to distribution channel is a source of competitive advantage in the gaming industry.

Finally, it is of critical importance to have good successful games for the consoles. This translates into relationships with game developers or writers being a vital source of sustainable advantage for the competitors and hence an important source of entry barrier. Overall, it is clear that the barrier to entry in this industry is high.

Buyer Power

The buyers are highly informed about the product variety, prices, and the games available. This high level of information, though, ensures that the end customer always wants only their own brand and nothing else, leading to low buyer power.

There is a range of prices in which the three major competitors in the industry play in: Nintendo’s Game Cube - $ 150, Sony’s Play Station 3 - $ 499-599 and Microsoft’s Xbox 360 - $ 350-450! The buyers of these systems are looking at different aspects of the console and are price insensitive at the moment – to the extent that for the first few months, Xbox 360 was being resold for $1000 at auction sites because of the bragging rights associated with the ownership. The buzz created by first ownership, and bragging rights leads to significantly reduced buyer power.

The retailers have limited buyer power, but the existence of 3 manufacturers provides them considerable leverage. They have to carry (though in limited quantity) a stock of game consoles in order to encourage the sales of games. Further, in case of toy retailers, there is competition from other technology and toy products for shelf space. There exists a symbiotic relationship between the retailers and three game console majors. There is no credible threat of any of the channel members integrating backwards to produce gaming consoles. This gives the trio of Sony, Nintendo, and Microsoft upper hand in their dealings with retailers: one big contribution to the lower retailer power is the strength of the parent company; Nintendo is the weakest in this regard.

Substitutes

There are several forms of entertainments available to the buyers of the game consoles. These are in the form of computer based games, computer emulators, outdoor entertainment, and other forms of traditional entertainment.

Changing demographics and preferences could however alter the equation significantly. The industry will witness changes as the demographic profile of the gamers changes – for example as the young users of Nintendo age more, they might wean away from video games to other forms of entertainment. A similar pattern would repeat as boredom or fatigue with the games set in.

Complements

The industry lends itself wonderfully to a lot of complements. The first and the most prominent one are the games themselves. Buyers of consoles do not buy just one or two games. They typically keep adding to their collection as new games come out. The business model for the three players is also built around the “razor-blade” model and they earn significant revenues through the sales of games.

Given the popularity of gaming, other accessories and toys have become another complementary industry. Movies have been made that are based on characters from games. Sony, in particular, has been exploiting this avenue, in part because of its ownership of studios and relationship to other studios. Another interesting complement is the birth of gaming sweat shops. People are playing games and selling their produce/achievements online for avid gamers to buy and take a lead while competing with others. This is particularly true for Microsoft games that are network enabled and allow exchange of paraphernalia in games. This has set in motion a whole parallel e-economy!

Supplier Power

There are a large number of suppliers for most components that go into game consoles. This diversified supplier base implies suppliers wield little power over the console manufacturers. Minimum efficient scale is a critical parameter in the game console industry. Since volumes will give scale economies, this is a source of high power for manufacturers. However, since a lot of the game console manufacturing is outsourced, this would reduce the power manufacturers can wield.

Game developers are critical to the continued success of any gaming console. This set has a high power in the industry as is evident from Microsoft wooing many game developers to make games for Xbox, and few original games being written for PlayStation. Thus, game developers possess considerable power as an entity, but their large number and diversification prevents them from wielding most of it. This ensures a symbiotic relationship with the console makers.

Nintendo: High quality character based games

Strategic Position

Nintendo’s strength lies in its focus on high quality character based games. To quote, “But from Nintendo's perspective, we are first and foremost a game company. We don't have a massive consumer electronics division out there, we don't own film studios, we don't own a lot of record labels -- we're not really that concerned about having a piece of the online distribution of electronic media. We really want to make a great machine for gaming. That's what we do and that's what we know”.

Nintendo originally entered the game industry as a part of its diversification and started with coin operated games. Nintendo entered the home gaming market in 1983 with the launch of the Famicom. 1985 brought the Nintendo Entertainment System, and 1991 saw Super Nintendo consoles that were the state of the art consoles of the time.

Nintendo is in a position where trends in the industry affect its bottom line directly. People often look at Nintendo’s half dozen or so Mario games every year and assume them to be clones, though they’re radically different games across different genres. Nintendo gains its value from the ownership of the Mario brand, and not the ownership of a specific genre. Such companies, like Nintendo, rely on the creation of new genres since that helps them take the brand into the new genre with a low risk high profitability strategy.

Operating Model

Nintendo makes the majority of their money by leveraging their brand recognition during the early to mid-stages of a genre’s life cycle. The power of the Mario character can establish a Nintendo game as an early genre king and help tap into a new market segment. However, during the later portion of the life cycle, the standardization of the genre mechanics and the demands of the hardcore population reduce the power of the brand. A few major games dominate the mature genre and it is unlikely that Nintendo’s will be one of them. The brand identity also places Nintendo closer to younger kids segment, thus almost alienating the core gamers and adolescents.

Nintendo’s fixation on new genres and the unwillingness to address the existing hardcore audiences has diluted their brand identity with many of the most vocal commentators in the game industry.

Focusing on product innovation at the expense of commodity markets is a classic business strategy that is used successfully in companies around the world. Here is a take on Nintendo’s strategy:

· The likelihood of getting a genre king early on in a genre life cycle if you invented the genre is quite high. Competition is limited.

· The cost of creating a genre king early in the genre life cycle is low. You can rely on things like simplified graphics and limited amounts of content. The neo-retro graphics of most Nintendo games has a lower cost of production than the realistic look of many of its competitors.

· The cost of creating a genre king late in the genre life cycle is high. Customers demand realistic graphics, voiceovers, cut scenes, loads of extra content, etc.

· The risk of having your game not becoming king of the genre goes up. The competition is greatly increased. Mario is a great game, but would it own the entire genre if it were forced to compete against Jax and Daxter, Sly Cooper, Prince of Persia and others?

Thus, Nintendo sells innovative products early on making more profits and taking lesser risks than commodity products. The Xbox, which focuses on highly mature genres catering to hardcore gamers, has production costs of $1.82 million a title. The Gamecube costs half as much at $822,000 a title. The real kicker is that the Nintendo DS only costs $338, 286 a title to develop for, even less than the Gameboy. Some of these costs have to do with the hardware and development kits, but for the most part they are derived from the scope of the projects. Being able to develop successful titles at 1/5th the cost of competitors is a major boost to the bottom line.

Value Proposition

One of the easiest ways of creating a new genre is to invent a new series of risk mechanics and one of the easiest ways of inventing new mechanics is to create new input opportunities. Nintendo controls its hardware and they have historically leveraged this control to suit their particular business model. The original DPad, the analog stick, the shoulder buttons, the C-stick, the DS touch pad, link capabilities, the tilt controller, the bongo drums, etc, the list goes on and on.

Nintendo also bundles the controller innovation with attempts to create new genre games. By seeding a game and owning the key hardware platform that the genre lives on, Nintendo is able to maximize its competitive advantage.

Strategy Going Forward

Going forward, Nintendo is faced with two huge competitors with deep pockets and are ready to pour money into the console business. Nintendo’s strategy is to offer what the competition does not. Fans are eagerly awaiting the launch of ‘Wii” from Nintendo. Though most of the aspects of the Wii are unknown, one of the revolutionary aspects will be the unique controller (shaped like a TV remote). The controller includes many features, most important of which is the direct pointing device which allows the system to recognize six axes of movement. Nintendo is not focusing on the graphics of the game play – instead it is focusing on the quality of game play. While the Wii will not be graphically comparable to the Xbox 360 or the PlayStation 3, it will be significantly more powerful than the GameCube, Xbox, and PlayStation 2.Wii’s promise is anyone who picks up the controller can play even if they have never played a game before.

Because of a partnership with Sega, apart from the Nintendo games for Wii, the users will also have access to all of Sega’s games from the 16 bit era!

Microsoft: Creating Community and Convergence

Microsoft was a relatively new entrant into the gaming console market. It entered in late 2001 with the Xbox – much later than Nintendo, a major player since the 80s, and Sony (with Play Station), a major player in the 90s.

Strategic Position

Microsoft’s strategic position was to provide an advanced hardware platform to support complex video games where multiple players, internet connectivity and cutting-edge graphics are involved. This strategic position was defined by the firm’s value proposition, target market and operating model. Furthermore, its value proposition was derived from its capabilities (= activities + resources).

Value Proposition

Microsoft key resources were its software development team that has introduced the latest in operating systems for computers, internet/LAN network development team, relationships with chip provider Intel and relationships with hardware manufacturers/developers in order to integrate its software with compatible hardware. These key resources laid the foundation for Xbox’s advanced hardware platform. In addition, Microsoft’s key activity was to practice a robust corporate strategy that integrated knowledge across multiple teams, suppliers and manufactures. Moreover, utilizing its market position, it influenced game developers to focus on more complex games that allowed multi-player options. This resulted in the launch of the highly successful game Halo that resonated across all age groups. With these capabilities (= resources + activities), it comes as no surprise that Microsoft was at the top of the line in next generation gaming consoles with significantly advanced features (exhibits 1-5 compare hardware features of all consoles). The downside, however, was that Microsoft couldn’t compete on accessories provided by Nintendo. Its gaming controller or ‘joystick’ was considered less ergonomically designed and it did not have the touchpad/other accessories (except for the racing wheel). Most accessories were hardware related/online gaming related.

Target Market

Microsoft targeted more advanced gamers. Its games were more theme-based as opposed to character-based, which seemed to be Nintendo’s strategy. Its gamers were older (male, teens to forties) and had a high-level of knowledge about the industry and hardware options within consoles. Connectivity with other players was important to them and they took advantage of these options through the Xbox. Xbox players considered themselves as the ‘cooler’ video game player and this was important to their sense of worth. Ability to save games and resume playing later appealed to such users, as they could not always spend the hours required to finish the game in one sitting; in fact, some games didn’t even have a defined finish. They didn’t necessarily want hundreds of games as offered by Nintendo or Sony. They wanted fewer yet more selective games that they could play, save results and then play again. This required some patience since its consoles were not as prevalent as the other consoles and it took a while for them to have a niche base to play with. By 2004, Microsoft had sold $14.1 million Xbox consoles and captured a market share of 25%.

Operating Model

Microsoft took advantage of its robust corporate strategy. With so many strengths in OS, networking and relationships with chip provider Intel and hardware manufacturers, it was relatively easy for Microsoft to develop a top of the line gaming console. It also pursued gamers and game developers that had more of a theme-base or communal games (Halo, Splinter Cell: Chaos Theory, Sid Meier’s Pirates!, etc.). That has not precluded it from developing more conventional ‘solitary’ games like Forza Motosport or Just Set Radio Future. However, even these games had far better graphics and a more mature content. Many of Microsoft games were also developed in conjunction with Sega, a traditional video-gaming leader acknowledged for its advanced graphics.

Competitive Advantage

Microsoft’s competitive advantage remains its corporate strategy and its ability to integrate across its software, networking and hardware strengths will allow it to stay at the leading edge of console development. In many regards, Microsoft is leading the way for the convergence of the PC and the gaming console in entertainment while Sony views the gaming console simply as part of home entertainment and Nintendo views it as a must-have game. Moreover, its robust competitive strategy and network externalities from console adoption are the isolating mechanisms that make its competitive advantage sustainable.

Organization Structure

Bill Gates was the founder of Microsoft and is currently the Chairman and Chief Software Architect of the firm. Robert Bach, a Stanford MBA, heads the Home and Entertainment division that oversees Xbox.

Sony: From studios to living rooms

Strategic Position: 1996 - 2005

Sony came to market with the Play Station 1 (here after referred as PS1) in 1995, following it up with PS2 in 2000. Sony was the only system with a mass appeal at that time – Sega was on a decline, Nintendo had wide appeal in the younger segment but did not have universal appeal.

By not targeting any segment but positioning as the game and entertainment machine, Sony successfully positioned itself to exploit the mass gaming segment – one not too bothered about games but cared about the complimentary products in the home entertainment segment. The capability to play DVDs, CD and high sound quality – features desirable in any home entertainment product appealed to the decision makers at the consumer level – the parents: and it could play most popular game titles of the time too. The slim looks designed to fit in the drawing room helped carry this image forward (exhibit 7).

The hardware compatibility and easy programmability of systems ensured that over the years, Sony had more delay releases than the competing systems. The larger install base due to its mass appeal helped Sony convince game developers to release games for PS as well as other consoles. This helped Sony solidify its relationships with all game developers and generate appeal among the late adopters of new technology. The whole cycle became a self feeding one – developers pushing for more games due to mass appeal and more games ensuring consumers continue buying the console.

The easy software development made porting to Sony consoles easy. Matching hardware provided for the game experience similar to other consoles, thus ensuring that Sony was never at a disadvantage due to delay release. The larger install base ensured that developers always wanted to release the game on Play Station after testing waters with other consoles. This maximized game developers and consequently Sony’s returns. It also ensured that games were already popular, thus reducing the risk of game not being well received. The late adopters were also price sensitive and would play games that are already popular – either with the hard core gamers or with the younger segment.

Sony was also the first to develop games based on movie themes and vice versa. By doing so, Sony was able to ride on success of one to ensure success of another. In addition, it saved costs related to writing the script and promotion. This complimented Sony’s brand and strengthened it as a home entertainment giant.

Strategic Position: 2006

Sony is poised to come out with the latest version of its console, Play Station 3 in late 2006. Following on its previously tested strategy, the console will include an impressive line up of games and would be backward compatible with the earlier versions.

One important change is that it is becoming difficult for Sony to match the hardware from both Microsoft and Nintendo in order to breach the hardware specifications barrier set up by its rivals – it has incorporated networking and extra hard drive features from Xbox and motion sensors from Wii, but the systems are so different that the porting play might not work effectively in future.

In addition, Play Station will include Blu-Ray DVD player, making it one of the cheapest Blu-Ray DVD format player available. This couples success of two of the most awaited Sony products together. If PS3 becomes as popular as its previous incarnations, Blu-Ray will become the dominant DVD format, thus helping Sony reap benefits from two different sources. On the other hand, if the format does not become popular or the player fails, Sony will face the prospect of two simultaneous failures, since not many would like to buy a player for which media is not available.

Sony strategy is more of a cost optimized bundling strategy than technological innovation in games. By combining various products together, it tries to give the users a complete home entertainment package at a cost lower than what they would pay if they bought everything from different manufacturers. If it was pure gaming, the DVD format would have been left for the consumer to choose from. In addition, the player has traditionally had better audio, video and graphics support and pales in terms of hardware specifications of the other two consoles – but is far better to play movies on compared to the others and gives a cinematic realistic experience in games, something ancillary to gaming but core to entertainment.

Operating Model

Sony followed the razor and blade model – many new and original titles were released along with Play Station 1 in 1996. The hardware specifications of the Sony systems have always been at par or better than the hardware specification of other popular consoles. By making sure that each version of the product was compatible with the previous version, Sony always inherited a huge game library that appealed to the late adopters of the game and consoles.

The world wide distribution capabilities and excellent relationships with the retailers such as Best Buy, Circuit City and Wal-Mart etc provided the shelf space necessary to push the new system in the market. The relationship with Movie studios gave Sony themes for games and vice versa, helping Sony build upon its brand equity.

Sony has always had more delay releases than the competing systems. By positioning the console in between game console and a home entertainment system, Sony was added value to the console, thus pushing the perceived price lower, while offering a comparable system.

Over the years, Sony has developed relationship with a large number of game developers, thus ensuring that every game was released for Play Station as well as other consoles, even if it came out early for other consoles.

Going forward, Sony systems would offer online characters and item exchange, a service pioneered by Microsoft Xbox. They would also include motion sensing similar to Nintendo Wii. These are examples of how Sony consistently tries to lower the technology barrier with the competitors in order to appeal to the broader market.

Value Proposition

Sony’s strength lies in the home entertainment segment – TV, audio and video systems. Sony owns movie studios, record labels and a big chunk of electronic hardware industry. Through innovative high quality home entertainment products and excellent sales and marketing, Sony successfully developed a strong brand identity – one identified with high quality products priced at a premium. The good design team was able to design systems that could be installed in living rooms proudly.

Original Play Station was conceived because Sony wanted to push its proprietary CD format. When it shipped, it was positioned as a game console and a CD player. Play Station 2 launched with an in built DVD player, a technology Sony was a pioneer of, at a time when the adoption of DVDs was very low. DVD adoption is credited partly due to its inclusion with the Play Station and to Play Station’s appeal. Play station 3 is being launched with Blu-Ray capabilities and might be the biggest differentiating factor between the DVD media formats.

In addition to the electronics and hardware capabilities, Sony excels in research and software development that helps it churn out high quality products. Sony game systems are considered easy to program for and have hardware capabilities matching other consoles, thus helping minimize development time, effort and time to market.

Though the quality premium has helped Sony all along, things have started to change. Almost every other electronic manufacture is now able to match Sony in quality, thus minimizing Sony’s ability to command a price premium based on brand name and quality. This lowers the appeal of Sony products. Sony has already lost market share in high end HDTV market and needs new technological innovation to keep ahead of the competitors. It might even need to redefine its value proposition if it needs to stay ahead.

Changes in the industry

Before Sony entered, the technology in the gaming industry in general was behind the currently available PC technology. Sony brought a paradigm shift in the industry by putting together a system comparable to the then current PCs in processing power, while it was ahead in terms of video, graphics and audio technologies. The initial positioning was closer to high end entertainment systems than to PCs.

Initial target segment was also kids and youngsters, who found the system appealing and liked the character based games. By positioning it closer to entertainment than a child’s toy and making games available for all genres, Sony suddenly transformed the industry from a kids focus to one with mass appeal.

This over time led to unification of PC and game technologies, bringing flat panel monitors and Dolby sound to PCs and high end processors, graphics, network, games over the internet and hard disks into the gaming console. This technological shift brought in games that were more realistic, could be played over the internet, characters that could be exchanged for real money and games that could be stored and restarted as and when required.

The ongoing convergence of home entertainment, games, music, internet, videos and TV, enhanced imaged quality has lead to markedly different games and gaming experience than prior generations of consoles. Microsoft’s Chairman Bill Gates and President of Home and Entertainment, Robert Bach both believe in the convergence of PC gaming and gaming consoles, especially since they observed that PC gaming offers a completely different video gaming demographic – women. 65% of PC gamers (Zone) are women, hence the creation of Xbox Live. Actual PC game sales data seems to contradict this, PC game sales fell by 35% while of console games went up by 8% year over year (2003-04).

The game experience is more and more realistic. With the ability to see and talk to opponents, gaming has become more social (communal) than ever before. Creating games on popular movies and vice versa (popularized by Sony) tries to emulate the experience of the main movie or game character. Graphic Design has even become a major offered at universities and colleges across the country.

Most games are now developed and distributed on a universal media format – a CD or DVD and not on cartridges produced by a single company. Most consoles support playing over the internet and ability to save/pause/restart games. The complimentary industry of game – accessories – attracts equal business.

Internet and falling hardware prices have enabled console makers to develop more advanced yet cheaper versions of consoles, thus broadening the focus of the industry as well as providing a better gaming experience. High end PCs today offer greater competition today than they were a generation ago.

The technology shift has altered the balance of power. The capabilities required to create high end video game consoles and games are markedly different from the ones that were required earlier.

Strategy Recommendations

Microsoft has had operating losses in Xbox and gaming business since its inception. Gaming and console is only around 10-13% of Sony’s revenue. Its margins have gone down consistently - from12% to 6% in the last 3 years. On the other hand, Nintendo’s operating margins are at 20%. Convergence, as predicted by Sony and Microsoft, is not happening, as apparent from the fall in sales of PC games (35% decrease) and rise of console games (8% increase). Moreover, Nintendo’s target segment (new gamers) remains untouched, making Nintendo a virtual monopoly in its markets (exhibit 6).

Given that Microsoft’s strategy is most dependent on the convergence of PC and gaming console, non-convergence would hurt Microsoft the most. Its sustained operating losses makes them additionally vulnerable. Microsoft has been unable to leverage its success in the high end segment to gain popularity in the mass gaming segment. However, Sony benefits from Microsoft’s new game successes despite being a follower due to its larger console base.

Microsoft needs to find ways to prevent games developed for Xbox from porting to PlayStation and Nintendo. An exclusivity clause with game developers may help here. A way to provide incentives to game developer is to have licensing agreements to allow them to develop the same games for PCs as well. Hit games will create demand for delayed releases. Instead of Play Station capitalizing on that demand, PCs should be tapped for delayed releases. To counter the fact that PC gaming is going down, the experience of PC gaming has to be matched to that of console gaming. One way to achieve this would be to release a hardware adapter for PC that uses PC processing power, controls similar to Xbox and provides display on TV. This would not cannibalize the Xbox market, as the segment being tapped is not the core gamers but that of late adopters. Such adapters would generate huge interest among the late adopters of hit games and PC gamers.

Microsoft also needs to leverage its online presence. It has a huge installed base of network players. The larger is this community, the larger is the Demand Side Increased Returns and, consequently, profits. If developers make adequate use of network and Xbox Live in games, that would make porting games difficult and would help Microsoft generate sales from Xbox Live services to complement sales from games and consoles. Combining that with PC games, Microsoft can turn the gaming services segment into a real advantage for next generation gaming.

Exhibits

Exhibit 1 Play Station 2 Specifications

I/O Processor (PlayStation 1 CPU) I/O Bus

· CPU: 128 bit "Emotion Engine" clocked at 299.4 MHz

• System Memory: 4 MB Direct Rambus or RDRAM (note that some computers use this type of RAM)
• Memory Bus Bandwidth: 3.2 GB per second
• Main processor: MIPS R5900 CPU core, 128 bit
• Co-Processor: FPU (Floating Point Multiply Accumulator × 1, Floating Point Divider × 1)
• Vector Units: VU0 and VU1 (Floating Point Multiply Accumulator × 9, Floating Point Divider × 1),
• Floating Point Performance: 6.2 GFLOPS (single precision 4-bit floating point)
• 3D CG Geometric Transformation: 66 million polygons per second (1)
• Compressed Image Decoder: MPEG-2
• I/O Processor interconnection: Remote Procedure Call over a serial link, DMA controller for bulk transfer
• Cache Memory: Instruction: 4KB, Data: 2KB + 4 KB (ScrP)

· Graphics: "Graphics Synthesizer" clocked at 1.47 MHz

• Variable from 256x224 to 1280x1024 pixels
• DRAM Bus bandwidth: 48 GB per second
• DRAM Bus width: 2560 bit
• Pixel Configuration: RGB:Alpha:Z Buffer (24:8, 15:1 for RGB, 16, 24, or 32-bit Z buffer)
• Maximum Polygon Rate: 75m polygons per second though with in game conditions (Lights, textures etc.) it performs up to 7m Polygons/second.
• Dedicated connection to: Main CPU and VU1

· Sound: "SPU1+SPU2" (SPU1 is actually the CPU clocked at 8 MHz)

• Number of voices: 48 hardware channels of ADPCM on SPU2 plus software-mixed channels
• Sampling Frequency: 44 kHz or 48 kHz (selectable)

· I/O Processor

• CPU Core: Original PlayStation CPU
• Sub Bus: 32 Bit
• Connection to: SPU and CD/DVD controller.
• Interface Types: 2 proprietary PlayStation controller ports (250KHz clock for PS1 and 500KHz for PS2 controllers), 2 proprietary Memory Card slots using Magic Gate encryption (250KHz for PS1 cards, up to 2MHz for PS2 cards), Expansion Bay (PCMCIA on early models for PCMCIA Network Adaptor and External Hard Disk Drive) DEV9 port for Network Adaptor, Modem and Internal Hard Disk Drive, IEEE 1394 (only in SCPH 10xxx - 3xxxx), Infrared remote control port (SCPH 5000x and newer) (2), and 2 USB 1.1 ports with an OHCI-compatible controller.

· Disc Drive type: 8x (PlayStation 2 format CD-ROM, PlayStation format CD-ROM) 4x (Supported DVD formats) Region-locked with anti-copy protection (Can't read "Gold Discs" aka normal CD-ROMs)

· Supported Disc Media: PlayStation 2 format CD-ROM, PlayStation format CD-ROM, Compact Disc Audio, PlayStation format DVD-ROM (4.7 GB), DVD Video (4.7 GB). Later models are DVD-9 (8.5 GB Dual-Layer), DVD+RW, and DVD-RW compatible.

(1) Polygons per second under ideal circumstances (e.g. no texturing, lighting, or vertex colors applied). Some criticize these figures for being unrealistic, and not indicative of real-world performance. The true polygons per second figure with full textures, effects etc. is around 7 million.

(2) IEEE 1394 (FireWire)port removed and Infrared remote port added in SCPH-50000 and later hardware versions.

Price history

North America

· US$299.99 (October 26, 2000, Launch Price) (CAD$455.99)

· US$199.99 (May 14, 2002) (CAD$311.99)

· US$179.99 (May 13, 2003) (CAD$249.99)

· US$149.99 (May 11, 2004) (CAD$207.99)

· US$129.99 (April 20, 2006) (CAD$147.99)

Exhibit 2 Play Station 3 (expected specifications)

Hardware specifications

The following specifications are based on a press release by Sony at the 2005 E3 Conference and slides from a Sony presentation at the 2006 Game Developer's Conference.

Central processing unit (CPU)

3.2 GHz Cell multi-core processor: 1 PowerPC-based "Power Processing Element" and 8 3.2 GHz Synergistic Processing Elements (SPEs). The PPE has a 512 KB L2 cache and one VMX (AltiVec) vector unit. Each of the eight SPEs is a RISC processor with 128-bit 128 SIMD GPRs and superscalar functions. Each SPE has 256 KB of L1 cache/software-addressable 4.8 GHz SRAM.

Only seven SPEs are active; the eighth is redundant, to improve yield. If one of the eight has a manufacturing defect, it is disabled without rendering the entire unit defective. Additionally, one SPE is reserved for use by the system's OS, leaving six SPEs directly available to applications

Graphics processing unit (GPU)

Custom RSX or "Reality Synthesizer" design co-developed by NVIDIA and Sony:

· Based on NVIDIA G71 architecture, otherwise known as NV47

· Clocked at 550 MHz

· 128-bit DDR memory interface

· 211.2 GFLOPS programmable (384 FLOPS per clock)

· 1.8 TFLOPS

· Multi-way programmable parallel floating point shader pipelines

· 136 shader operations per clock

· 74.8 billion shader operations per second (100 billion with CPU)

· 24 2D texture lookups per clock

· 1.1 billion vertices per second

· 128-bit pixel precision offers rendering of scenes with high dynamic range imaging

· Full high definition output (up to 1080p)

Memory

· 256 MB Rambus XDR DRAM clocked at CPU die speed (3.2 GHz)

· 256 MB GDDR3 VRAM clocked at 700 MHz

Theoretical system bandwidth

· 204.8 GB/s Cell Element Interconnect Bus (Theoretical peak performance) Cell FlexIO Bus: 35 GB/s outbound, 25 GB/s inbound (7 outbound and 5 inbound 1Byte wide channels operating at 5 GHz) (effective bandwidth typically 50-80% of total)

· 25.6 GB/s to Main Ram XDR DRAM: 64 bits × 3.2 GHz / 8 bits to a byte

· 22.4 GB/s to GDDR3 VRAM: 128 bits × 700 MHz × 2 accesses per clock cycle (one per edge) / 8 bits to a byte

· RSX 20 GB/s (write), 15 GB/s (read)

· SB 2.5 GB/s write and 2.5 GB/s read

Video

· Supported screen resolutions: 480p, 480i, 720p, 1080i, 1080p

· Multiple AV outputs

• Composite
• S-Video
• Component video (output up to 1080p)
• HDMI port (Digital video output; 60 GB model only)

Sound

· S/PDIF optical output for digital audio

· Dolby Digital 5.1 minimum

· DTS

· LPCM (DSP functionality handled by the Cell processor)

· Dolby-HD (Blu-Ray movies only; compatible sound equipment required)

Storage

· Blu-ray Disc: PlayStation 3 BD-ROM, BD-Video, BD-R, BD-RE. 2x (9.0MB/sec)

· DVD: PlayStation 2 DVD-ROM, DVD-Video, DVD-ROM, DVD-R, DVD-RW, DVD+R, DVD+RW. 8x (11.0MB/sec max)

· CD: PlayStation CD-ROM, PlayStation 2 CD-ROM, CD-DA, CD-DA (ROM), CD-R, CD-RW. 24x (3.5MB/sec max)

· SACD: SACD Hybrid (CD layer) SACD HD. 2x

· Hard Drive: Pre-Installed 20 GB / 60 GB (depending on package), 2.5", detachable/upgradeable, with Linux pre-installed.

· Memory card readers (60 GB model only)

• Memory Stick standard/Duo and standard/mini slots
• CompactFlash slot
• SD/MMC slot

Communications

· One Gigabit Ethernet Port

· USB 2.0 (x4)

· Bluetooth 2.0

· Wi-Fi (60 GB model only)

• IEEE 802.11b/g

Controller

At Sony's 2006 E3 press conference, a new PlayStation 3 controller design was revealed. The design was superficially very similar to a wireless version of the DualShock 2 controller, as opposed to the wireless "boomerang" prototype design showcased a year earlier.

The PlayStation 3 controller features a USB mini-B connector terminal at the top of the controller for charging the internal battery through USB, and also for wired play. There are four numbered LED indicators, to identify and distinguish multiple connected wireless controllers.

In addition to the basic design, the other major feature revealed at the press conference was the ability to sense rotational orientation and translational acceleration. A special version of the game Warhawk was used to demonstrate these new capabilities during the presentation of the new controller.

Power

Sony has stated that the power supply will be built into the console. A standard 3-pin IEC connector is present at the base of the console.

Overall floating-point capability

In a slide show at their E3 conference, Sony presented the "CPU floating point capability" of the PlayStation 3's Cell CPU, and compared it to other CPUs. In their official press release, the same statistic regarding the PS3 as a whole was reported to be 2 TFLOPS.

Miscellaneous

· High-definition IP video conferencing.

· EyeToy interactive reality game, Eyedentify.

· EyeToy voice command recognition.

· EyeToy virtual object manipulation.

· Digital photograph display (JPEG, PNG).

· MP3, Ogg and ATRAC download and playback.

· Simultaneous World Wide Web access and gameplay.

· Parental Controls

· The ability for the PlayStation Portable to connect to the PlayStation 3 as a video-enabled controller, similar to the Nintendo Gamecube - Game Boy Advance link capability.

· The font used for the Spider-Man movies is the font used for the Playstation 3 logo. Both are made by Sony.

Exhibit 3 WII (expected Specifications)

Technical specifications

Nintendo has released very little detailed information at present concerning the technical specifications of the Wii console. Some details have however been released by Nintendo and other third parties involved with the console:

Processors

• CPU: IBM PowerPC processor codenamed "Broadway" (made with a 90 nm SOI CMOS process)
• GPU: ATI "Hollywood" (made with a 90 nm CMOS process, includes DRAM)

Memory

• Amount of RAM unconfirmed (probably 88 mb)

Ports and peripheral capabilities

• Up to Four Wii Remote controllers (connected wirelessly via Bluetooth)
• One SD memory card slot
• Two USB 2.0 ports
• One Sensor Bar port
• Four Nintendo GameCube controller ports
• Two Nintendo GameCube memory card ports
• Compatible with optional USB 2.0 Ethernet LAN adaptor

Storage

• 512 MB built-in flash memory
• Expansion available via SD memory card and USB 2.0 ports

Playable media

• Slot-loading disc drive compatible with:
• 12cm Wii optical disc (single or dual layer) (4.7 GB Single layer; 8.7 GB Dual Layer)
• 8cm GameCube optical disc
• DVD Video (dongle required)
• Virtual Console games accessed from flash memory

Networking

• Wi-Fi by Broadcom
• Standardized Bluetooth by Broadcom

Video

• Up to 480p and will work with a computer monitor as well as any TV or projector
• Component including Progressive scan, composite or S-Video output
• 16:9 support

Audio

• Main: Stereo - Dolby Pro Logic II-capable
• Controller: Built-in speaker

· Virtual Console

A variety of classic games are scheduled to be available (design subject to change)

This service will allow users to download and play games from the NES, Super NES, and Nintendo 64, as well as Mega Drive/Genesis and TurboGrafx 16.

· WiiConnect24

At E3 2006, Nintendo announced WiiConnect24, a feature that will allow the user to remain connected to the Internet in standby mode.

· Internet connectivity

Nintendo has partnered with Opera Software to provide the Opera web browser for the system.

· DS connectivity

Wii will support connectivity with the Nintendo DS.

· Player caricatures and profiles

· Parental controls

Exhibit 4 X Box 360 Specifications

• 90 nm process, 165 million transistors (65 nm process SOI revision in 2007)
• Three symmetrical cores, each one SMT-capable and clocked at 3.2 GHz
• One VMX-128 SIMD unit per core
• 128×128 register file for each VMX unit
• 1 MB L-2 cache (lockable by the GPU) running at half-speed (1.4 GHz) with a 128bit bus
• 34 GB per second of L-2 memory bandwidth (256bit x 100 MHz)
• dot product performance: 9.1 billion per second
• 98 GFLOPS theoretical peak performance
• ROM storing Microsoft private encrypted keys
• The Graphics processing unit has 315 million transistors total
• Memory - 512 MB 700 MHz GDDR3 RAM]
• Audio - all games must support at least six channel (5.1) Dolby Digital surround sound using optical output
• Support for 48 kHz 16-bit audio
• 256+ audio channels
• No voice echo to game players on the same Xbox console; voice goes only to remote consoles
• Voice communication is handled by the console, not by the game code. This allows players to communicate online even if they are playing different games.
• Video - The GPU can cross convert the native game resolution to other display resolutions (480i SDTV, 480p, 720p, and 1080i) depending on the native resolution of the display it's connected to, and dynamically crop or scale 16:9 to fit 4:3 screens.
• Supported codecs - VC-1 at non-HD NTSC and PAL resolutions
• DVD drive
• Physical characteristics - Weight 3.5 kg (7.7 lb), dimensions 30.9 cm (L) x 25.8 cm (W) x 8.3 cm (H) (12.16 x 10.15 x 3.27 in)

Exhibit 5 Xbox Specifications

§ Built-in Ethernet adapter.

§ Comparable graphics processing power

§ First console to incorporate a hard disk drive

§ Stripped-down version of the Windows 2000

§ The Xbox itself is much larger and heavier than its contemporaries.

§ Thomson TGM-600 DVD-ROM drives

§ Philips VAD6011 DVD-ROM drives

§ CPU: Micro PGA2 733 MHz Intel Coppermine Core

§ Intel IA-32 instruction set

§ 133 MHz FSB Unified Memory Subsystem

§ Total (shared) Memory: 64 MB DDR SDRAM running at 200 MHz, supplied by Hynix or Samsung

§ Graphics Processor: 233 MHz custom chip developed by Microsoft and nVIDIA

§ Storage Medium: 2-5x DVD (XFAT)

§ 8 gigabyte hard disk

§ Audio Processor : nVIDIA MCPX

§ Audio Channels: 64 3D channels (up to 256 stereo voices)

§ Broadband Enabled: Yes (10/100base-T ethernet)

§ DVD Movie Playback

§ Maximum Resolution 1920(vert.)x1080(horiz)

§ Controller Ports: 4 proprietary USB ports

§ Weight: 3.86 kilograms (8.5 lb).

§ Dimensions: 320 × 100 × 260 milimeters (12.5 × 4 × 10.5 in)

Exhibit 8 Bibliography

1. Microsoft.com
2. Sony.com
3. Nintendo.com
4. Wikipedia.com
5. www.ign.com
6. CNet network entertainments - www.cnet.com
7. www.gamespot.com
8. www.gamedev.net
9. www.gamefaqs.com
10. www.wsj.com
11. E3 overview from various blogs