SAN MATEO, Calif. Microsoft Corp. chairman Bill Gates will announce the company's long-rumored X-Box game console at the Game Developers Conference (San Jose, Calif.) on Friday (March 10). Still in its final stages of development, X-Box is touted as a killer consumer platform designed to compete against Sony Computer Entertainment's recently-launched Playstation 2. And Microsoft has decided to work with Nvidia Corp., its graphics chip partner, on the X-Box architecture.
Current plans call for an X-Box launch in time for the Christmas 2001 selling season.
The development of X-Box is crucial to Microsoft's effort to extend its presence into a TV-centric consumer market. Lately, the software giant has been leveraging its WebTV technologies to drive Web applications and Microsoft's TV platform on a TV set-top. A group of Microsoft engineers working on X-Box resides in Microsoft's WebTV building in Mountain View, Calif.
Among the many 3-D graphics chip companies scrambling to diversify their businesses into a non-PC consumer market, Nvidia and GigaPixel Corp. were the two finalists with 3-D graphics technologies for X-Box, according to George Haber, president and chief executive officer of GigaPixel. GigaPixel had even moved its entire engineering team to Microsoft's WebTV building a few weeks ago as part of a licensing agreement between the two companies, said Haber.
"Our project with Microsoft was moving full steam ahead," Haber said. "We were even ahead of schedule."
But on Monday (March 6), Microsoft selected Nvidia as the graphic chip provider for X-Box. Haber said he was summoned by Microsoft and told of its decision to work with Nvidia in order to minimize the variables and risk factors associated with the X-Box launch. "They obviously felt that Nvidia is a safer bet," he said, because it is a market leader and has closer relationships with software developers.
Out of place
Faced with the unexpected turn of events, Haber said that Microsoft assured GigaPixel that it would pay the full promised licensing fee, and continues to be interested in GigaPixel's technologies. "Based on the discussions we had today with Microsoft, we will probably stay in Microsoft's WebTV building for the next few weeks," Haber said. But GigaPixel is currently reevaluating its agreement with Microsoft, Haber said. "We are still hoping to work with Microsoft on the long term," he said.
One Microsoft defender, who spoke on the condition of anonymity, addressed Microsoft's decision to partner with one graphics chip vendor. "Not all graphic chips behave the same," the source said. "The performance of the game console depends upon the underlying architecture of the graphics capability. In defining X-Box, Microsoft needed to pick a hardware platform to which game developers can optimize their games."
It is unclear at present what features X-Box is designed to offer, aside from state-of-the-art game playing, or who may want to build X-Boxes. And it is uncertain whether a compelling enough business model exists that would encourage system OEMs to jump into the low-margin gaming console business. More important, if X-Box is based on the same 3-D graphics technologies that are available in the PC market, it's not clear what differentiation or added value the X-Box can offer.
Meanwhile, there is no shortage of explanations for Microsoft's eagerness to launch X-Box. Sony's Playstation 2 offers three key applications for TVs in the living room gaming, DVD playback, and network connections and neither Microsoft nor Intel wishes to see this huge segment of the consumer market dominated by Sony.
X-Box represents Microsoft's second attempt to crack the game console market. Microsoft once tried to drive its Windows CE operating system deeper into homes by partnering with Sega Enterprises Ltd. on its Dreamcast machine. But the Microsoft-Sega deal on Dreamcast has proven to be less than successful, because Windows CE has meant little to either game developers or the consumer electronics market in general. Game developers continue to write videogames to Sega's proprietary platform, rather than to Microsoft's Windows CE applications programming interface. No other consumer electronics vendors have positioned Windows CE as a must-have operating system for their platforms.
"Microsoft has already tried and failed once in the gaming market," said Peter Glaskowsky of Microprocessor Report. "If Dreamcast had been successful, there'd be no need for X-Box. Microsoft would simply encourage developers to port their PC games to Dreamcast instead. You've probably noticed that isn't happening. That's because Windows CE for Dreamcast is a developer's nightmare."
On the other hand, X-Box does hold promise for PC graphic chip companies, many of which are fiercely competing to get a design-win in the consumer market.
Many 3-D graphics chip companies want to diversify because they see the handwriting on the wall. As long as they keep designing chips for the PC market, their market would be limited to a high-end PC gaming field with a population of about only two million gamers. More important, many graphic chip companies are under tremendous pressure to re-define their roles, because the 3-D graphics market is quickly moving to more highly-integrated parts for PCs. Intel plans to launch a Pentium III-class CPU with integrated graphics and memory controller, for example.
Keenly aware of the changing industry landscape, graphic chip companies are eager to cut deals with consumer electronics manufacturers or with other chip companies. For example, Broadcom Corp., a leading silicon provider for cable set-tops, announced last week its acquisition of Stellar Semiconductor Inc., a 3-D graphics intellectual-property company. Meanwhile, ATI Technologies Inc., a graphic chip vendor the pursues both the PC and consumer cable set-top markets, last month snatched up ArtX Inc., a small company that pulled off a design win in Nintendo's next-generation videogame console, dubbed Dolphin.
Rich Nelson, director of marketing at Broadcom, said there was no link between Microsoft X-Box plans and Broadcom's acquisition of Stellar Semiconductor. "With or without X-Box, we've been working with Stellar Semiconductor less than a year, believing that 3D is becoming an important building block within a set-top," Nelson said. Having a local 3-D graphics processing engine within a set-top is a natural extension to the company's strategy, he said. Such a built-in 3-D capability opens up new service and application opportunities for both cable operators and game developers, he said.
Asked if Broadcom's system OEMs are considering spinning their set-tops into game consoles, Nelson said, "They certainly want to see such a capability, but business models still need to be worked out" before they can commit to a converged game console/cable set-top model design.