Console wars: next generation devices to spark competition

Microsoft and Sony are to go head-to-head for the first time in the console market as both prepare to release next generation games devices before the end of the year.

The pair will be playing catch up to Nintendo, which started selling its Wii U console in November 2012. But sales of the Wii U haven't quite reached projections, with the latest figures showing it sold 3.45 million by the end of March, short of its 4 million target.

It’s indicative of a tough market. The $65 billion pot has looked a little shaky of late, with smartphone and tablets eating into the lucrative revenues. But the games manufacturers are hopeful that the new consoles might be just what gamers want, and will be enough to persuade them to start investing in hardware.

“I think the market is incredibly healthy for console gaming, it continues to grow,” said Microsoft’s European boss Chris Lewis. “The whole ecosystem of entertainment continues to attract discretional spend; I think it frankly does better relative to other spend patterns even in times of awkward economic climate.”

It's a tough proposition. But the console makers are pulling out the stops to try to lure consumers, from Sony's streaming gaming to Microsoft's intelligent TV.

Entertainment hub
Microsoft's ambitions are clear: it wants to be your entertainment hub. That means one box for everything, from gaming to DVDs and even live TV. The Xbox One is the start of a new generation, Microsoft's games boss Don Mattrick told attendees at an event at the company's Redmond headquarters in Washington on Tuesday.

“Today we put you at the centre of a new generation in the living room – where your games look and feel like nothing else, where your TV becomes more intelligent, where all of your entertainment comes alive in one place,” he said.

The Kinect is the central part of Microsoft’s offering. The company has improved the capabilities of the peripheral, from the quality of the visuals to its ability to pick up sound for voice commands.

The new Kinect addresses many of the gripes the original triggered. It’s more responsive and sensitive, measuring more joints on a human body, distinguishing the force of a movement, and being able to take account of small movements such as turning your wrist. It can even measure your pulse rate, which will be useful for fitness games in the future. It will also be pressed into service for Skype, which will be integrated into the new console.

But one of the most important jobs it will have is allowing individuals to log in simply by looking at the Kinect camera, something Sony also plans with its enhanced PlayStation Eye camera for the PS4.

Neither of the new consoles – PS4 and Xbox One – will support games from their previous systems. So all those downloaded games, that impressive library you built up with your PS3 or Xbox 360, for the time being will have to stay with your old console.

The reason is in the inner workings of the machines. Both the Xbox 360 and the Sony PS4 are built on x86 architecture, radically different from the current consoles.

While emulation is a possibility for both companies, similar to the way that older PS2 and PS One games can run on the newer Sony systems, Sony's link-up with streaming games firm Gaikai could help it in that regard.

Xbox 360 to stay
There are no similar plans for Microsoft as yet, executives said, but they reiterated that the Xbox 360 isn't going anywhere any time soon. The Xbox 360 has been largely a success for Microsoft. The company has sold 77.2 million units worldwide since its launch in 2005, and despite the addition of Kinect in 2010, which gave the console a new lease of life and a few extra years, it's still long overdue an update.

“We’re very focused on the 360 business still. We see that going for multiple years. Our third party publishing partners remain committed,” Lewis said. He promised “great things” for the Xbox 360 platform, with more announcements expected at E3 in just over two weeks.

So you could conceivably have two Microsoft consoles in your living room for a while – not quit the one box approach that Microsoft was going for.

It’s not without precedent. Sony only stopped shipping the PS2 in January this year, and it’s likely that the existing PS3 will continue to be supported by the Japanese firm for some time. It may take some time or the new console to reach the same level of success of the Xbox 360, but Microsoft isn’t willing to put a timetable on it.

“We have very ambitious targets for our business. The business continues at a very healthy rate and our market expectations are high,” said Microsoft’s Lewis. “You can be sure we’re ambitious in what we want to achieve, and we’ll achieve that by bringing great things to consumers.”

Those great things include intelligent TV, personalised TV guides based on what you have previously watched, tighter integration with mobile devices and cloud functions – although the internet connectivity that will require means it’s not entirely clear if it will a good thing for all consumers. Switching between live TV and your games by voice, as easily as changing channel on a TV, is also intended for the console, although the roll out will depend on regions.

Despite much of the presentation concentrating on US specific programmes and partnerships – including a deal with the NFL to provide more interactive TV – the company said it is committed to bringing the new functions to a global audience. There’s no tolerance to do anything but be highly successful in Europe, Lewis said. “In order for us to achieve our global ambitions, Europe has to be successful. It is; we enjoy great success in large swathes of Europe,” said Lewis.

"We're growing faster year over year in some European countries than anywhere. That's not enough; we want to do more. Our ambitions remain high. There will be a rich array of entertainment partnerships that are meaningful and relevant across Europe. We have a loud voice here in terms of what we need for Europe and it's heard."

Consumer wrath
But there could be a stumbling block ahead, with Microsoft risking the wrath of its customers over plans for second-hand games on the new console.

It isn’t clear what will happen. Persistent rumours that the new Xbox wouldn’t allow players to use second-hand or even borrowed games were still going strong when Microsoft unveiled the console. And the company didn’t do much to dispel the rumours. The official word is that the Xbox One will support preowned games. The actual details are a bit hazy.

“Today is a good day for the gamer for lots of reasons. We’ve got very good news in that regard,” said Lewis. “We will support [preowned games], it’s important for our consumers, it’s important for our retailers. It’s part of what they do and it’s a huge part of their relationship with their customers. I’m not going to be specific in terms of how that works, and the mechanics of it, but it will get clearer over time.”

However, corporate VP Phil Harrison was more specific in other interviews, claiming that there would be a fee involved to allow consumers to play previously owned games. But the official Xbox Support account was telling consumers the rumours of such fees were unfounded. Eventually, Xbox Live executive Larry Hryb posted a clarification of sorts online.

“While there have been many potential scenarios discussed, today we have only confirmed that we designed Xbox One to enable our customers to trade in and resell games at retail. Beyond that, we have not confirmed any specific scenarios,” he said.

“Another piece of clarification around playing games at a friend’s house – should you choose to play your game at your friend’s house, there is no fee to play that game while you are signed in to your profile.”

The reaction, as expected, was furious, with consumers pledging to avoid the new console if they were unable to buy preowned games or loan them to friends without paying a fee.

If Sony opts not to go down a similar route, it could be a major boost for the Playstation 4 and a disaster for Microsoft.