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Forbes on the Consoles

Forbes reports on the videogame console wars:

More than anyone predicted, online gaming is driving the all-important software sales that are the profit engine of the $10 billion videogame industry. Dwarfed by Sony, which claims 60% of the North American market, Microsoft has bet far bigger and bolder to grab the online advantage as both feverishly race to get their next-generation consoles into stores by 2006...

The Xbox Live network launched in November and passed the 500,000 subscriber mark in seven months, beating, by 80,000, the number of people registered to play PlayStation 2 games online, despite the fact that Microsoft has sold only 9.4 million Xboxes to Sony's 51 million PlayStations. Nintendo, with 9.6 million GameCubes sold, has limited online ambitions.

Consider the case of Ghost Recon. This military-style shooting game was released on both Xbox and PlayStation 2 in November. The Xbox version was online-enabled, and the PlayStation version wasn't. Despite the enormous differences in installed base, more copies of the game have sold on Xbox, (650,000) than on PS2 (550,000).

Sony sniffs at the comparisons. "Online gaming is a very important part of our strategy, but not the end-all and be-all," says Kazuo Hirai, the president of Sony Computer Entertainment America. "When you're losing market share, you're tempted to talk about things down the road." ...

"Xbox is the superior online gaming platform, and by the next wave of consoles, Xbox will be the online brand," says Daniel Hsu, editor of Electronic Gaming Monthly magazine.

Sony had better be careful about sniffing at Microsoft, because Hsu could well be right: Microsoft could establish Xbox as the online game console brand, then carry that branding forward to the second-generation Xbox.

Look at what has happened in PC gaming. From real-time strategy games to first-person shooters, major titles (except those aimed at children) must be online-enabled to be successful. Even the hulking exception to this rule, The Sims, is now available in a separate online version. It would be foolish of Sony to think that the console market will evolve any differently.

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