phone, PDA, and even game consoleâ will soon be a digital ... Although IBM developer worksta- tions with the Cell will ship .... long-time rival Apple makes the.
ENTERTAINMENT COMPUTING
The Digital World’s Midlife Crisis
Jointly developed by 13 consumer electronics and PC companies—Dell, Hitachi, HP, LG, Mitsubishi, Panasonic, Philips, Pioneer, Samsung, Sharp, Sony, TDK, and Thomson—the format will enable recording, rewriting, and playback of high-definition television. Blu-ray makes it possible to record more than two hours of HDTV or 13 hours of SDTV on a 27-Gbyte disc. There are also plans for highercapacity discs that could hold up to 54 Gbytes of data. Sony tried to avoid a repeat of the Beta versus VHS format wars by team-
Michael Macedonia, Georgia Tech Research Institute
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f, like me, you’ve jumped from an airplane at night, you know what it feels like to be an executive at Sony, Microsoft, Nokia, Nintendo, or Kodak right now. These executives have jumped into the digital void, having no idea where they will land and scared to death their parachutes might fail. Circumstances now force them to make choices that will result in disaster or glory. Will they all suffer the camera industry’s fate, which has been eviscerated by the evaporation of its entire silver halide technology for film? By the end of this decade, the Instamatic will be Smithsonian material. Moreover, every digital device—cell phone, PDA, and even game console— will soon be a digital camera. Or will these players strike market gold as HP did, a company that bet its fate on the lowly printer and used its color inkjets to ride the crest of the digital camera wave?
SONY AT THE CROSSROADS Regardless, all the aforementioned companies now find themselves in a midlife crisis—wondering whether technology will be their salvation or doom. For example, Sony—a risk-taking company—has been hurting lately, recently laying off 20,000 employees (www.xbox365.com/news/news.cgi/ article/EpZVuuZyAFxbbnmPnl7693). Still the world’s second-largest consumer electronics company, Sony also 100
Computer
Sweeping changes in digital entertainment have pushed the industry’s biggest players into freefall. failed to win in the mobile phone arena, where Nokia, Motorola, and Samsung now dominate, and LG is nipping at Sony’s heels. Next, Sony withdrew from the US PDA market when its Clie fell prey to the cell phone integration trend (www.iht.com/articles/ 521467.html). Sony has now bet its future on two technologies: the Cell microprocessor— a teraflop-capable stream processor designed by IBM and manufactured by Toshiba—and the blue-laser DVD. The $2 billion Cell development effort represents Sony’s strategic move to retain the dominant position for its most profitable product—the Playstation game console. Sony has sold more than 100 million PS2s, far outstripping the roughly 15 million game consoles Microsoft and Nintendo have each sold. If successful, Cell will bring motionpicture-quality computer graphics to games and make each Playstation 3 a multimedia supercomputer. Sony’s Blu-ray Disc embodies the next-generation optical disc format.
ing with its old adversary Matsushita, but Sony’s ally on the Cell processor, Toshiba, has teamed with NEC for its own next-generation DVD, HD-DVD. The PS3 will have Blu-ray, making the console key to Sony’s strategy of proliferating the technology quickly, much as it did with DVD on the PS2. If you’re wondering why DVD is so important to Sony, consider that DVD movie sales gross more than theatrical movie sales and now generate $9 billion annually.
NEXT-GENERATION CONSOLE WARS Although IBM developer workstations with the Cell will ship this fall, the PS3 will not arrive until 2006. In a preemptive strike, Sony’s two main competitors will likely beat their rival by a year with their own next-generation consoles—Microsoft’s Xbox2 or Next and Nintendo’s Revolution. Moreover, Microsoft may be acting as the spoiler with blue-laser DVDs. In June, the DVD Forum steering committee (www.dvdforum.org/forum. shtml) approved version 1.0 of the
physical specifications for HD-DVD read-only discs. The forum voted to require makers of HD-DVD video playback devices to build in three video codecs, including the VC-9 technology used in Microsoft’s Windows Media Video 9 (www.microsoft.com/ windows/windowsmedia/9series/codecs/ video.aspx). It’s also a good bet that Microsoft’s console will have an HDDVD drive. In a dramatic departure, Microsoft—whose game division has never shown a profit—will switch manufacture of its Xbox’s CPU from Intel to IBM. It will also switch the Xbox’s graphics chip vendor from Nvidia to ATI. Moreover, Microsoft will likely scrap the original’s hard drive and offer no backward compatibility with games for the first machine. For ultimate irony, consider that long-time rival Apple makes the Xbox2 developer’s workstation, a G5 Macintosh. This radical strategy may well be short-sighted: In its race to beat Sony, Microsoft could alienate its current Xbox user base, who will soon be buying heavily hyped titles like Halo 2—which will not play on the Xbox2. Nintendo already has the GameCube, manufactured by Matsushita, Sony’s ally in the Blu-ray DVD effort. This console has an IBM Power PC chip and ATI graphics. Its Revolution console will also have an IBM Power PC chip and ATI graphics—factors that likely prompted Nintendo’s president, Satoru Iwata, to make these stunning comments at the 2004 E3 (www. gamespy.com/articles/523/523168p1. html): Better technology is good, but not enough. Today’s consoles already offer fairly realistic expressions so simply beefing up the graphics will not let most of us see a difference. So what should a new machine do? Much more. An unprecedented gameplay experience. Something no other machine has delivered before. ... I could give you our technical specs, as I know you’d like that, but
I won’t for a simple reason: they really don’t matter. The time when horsepower alone made all the difference is over.
HOLDING ON WITH HANDHELDS Although Nintendo’s GameCube sales have been lagging, its highly profitable Game Boy Advance has been a leader in handhelds. Game Boy has been the platform for more than 12 million unit sales of Pokemon in the past two years. At $40 apiece, that’s almost half a billion dollars in revenue from a single game.
Microsoft will switch manufacture of its Xbox’s CPU from Intel to IBM. To maintain dominance, Nintendo demonstrated its two-screen DS as this year’s E3. But Sony counterattacked with the announcement of the Playstation Portable for 2005. The PSP has a larger screen, DVD-quality movies, and Wi-Fi 802.11. Both the Sony and Nintendo handhelds will let users connect to the Internet, send messages to friends, or compete against one another without cables or phone lines. Both will also compete with Nokia, which is trying to build a following with its N-Gage handheld cell phone game system. As Zelos Group senior analyst Billy Pidgeon noted (www.hollywoodreporter. com/thr/columns/tech_reporter_display. jsp?vnu_content_id=1000552950), “We expect to see $230 million in game purchases and subscription fees in the US in 2004, up from $77 million last year. And total US market revenues will reach $616 million in 2008, at which time almost 30 million consumers will pay for wireless games.” N-Gage has not, however, set the world on fire. Still, it may presage the possibility that within the next five years most of the 500 million cell phones sold each year will have 3D graphics accelerators courtesy of Nvidia and ATI, 4G broadband con-
nectivity, GPS, and a library of games. Nokia, which releases 60 new models a year, is evolving its cell phones into anywhere multimedia machines. The challenge for Nokia is to build a market big enough and fast enough to beat Sony and Nintendo’s entrance into the wireless game market through their handhelds.
e are in the midst of a convergence between high-definition television and game consoles and between handheld game machines and mobile phones. This market shift will create both big losers and big winners. Currently, IBM occupies the most favorable position, with chip designs for all three next-generation consoles. But all the contenders find themselves facing an uncertain future. In essence, the players in this market are contending with what Clayton M. Christensen calls the “innovator’s dilemma” (www.businessweek.com/ chapter/christensen.htm): Leading firms are “held captive by their customers, enabling attacking entrant firms to topple the incumbent industry leaders each time a disruptive technology emerged.” For Microsoft that disruptive technology might be Sony’s supercomputing console running Linux; for Nintendo, it might be Nokia’s N-Gage; and for Sony, it might be the Chinese high-definition format, Enhanced Versatile Disc (http://zdnet.com. com/2100-1103_2-5150373.html? tag=nl). One thing is certain, however: Each of these firms is already immersed in an internal midlife crisis to redefine its identity so that it can triumph in the external struggle against its rivals in the game market. ■
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Michael Macedonia is a senior scientist at the Georgia Tech Research Institute, Atlanta. Contact him at macedonia@ computer.org. August 2004
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