Anilrgowda

Hirai has a point: PlayStation 3 is as high tech as it comes in gameland. Thanks to the Cell, the console can transform raw computer code into imagery that looks startlingly, almost disturbingly, real – just ask the Tiger Woods simulacrum that popped up at E3. It can render virtual worlds of shimmering beauty and mesmerizing intensity, as Warhawk, the forthcoming update of Sony's classic flying shooter, amply demonstrates. Nonetheless, Hirai's upbeat assessment of the PS3's prospects seems dangerously at odds with the feeling in the videogame business. One prominent industry figure, not associated with a console maker, recalls having lunch a couple of months ago with a game-company development chief who wondered aloud if Sony was going to pull a Sega – that is, go from number one console manufacturer to out of the business.
At the root of Sony's precarious position – not just in the industry, but with gamers at large – is the company's overweening ambition. The PS3 is all about power. Sony has said curiously little about whether this amped-up Linux über-computer will actually be fun to play. Meanwhile, Nintendo wowed everyone at this year's E3 with the Wii, a console you can play simply by waving a wand at the screen. And Microsoft has upped the fun quotient by making it easy to play with all your buddies online.
Sony's response to online gaming is revealing. When Microsoft launched its Xbox Live online service in 2002, console gaming went from solo affair to global meet-up. Back then, Sony was actually the leader in online gaming, with over 400,000 subscribers to EverQuest, its massively multiplayer online game. But MMOGs were played on a computer, not a game console, and there was little communication between the San Diego-based EverQuest group and the Tokyo-based PlayStation group. Xbox Live now has more than 3 million subscribers worldwide; the only place it isn't big is Japan. Kutaragi never fully developed his PlayStation 2 online service, which still requires game publishers to run multiplayer titles on their own servers, because it wasn't something he saw as lacking.
Yet game developers certainly saw the need for technology that would take their games online. "It's a very important function," says Ichiro Otobe, chief strategist of the Tokyo-based game publisher Square Enix, "and we want it coming from the platform developer – otherwise, we have to build it ourselves." Eventually, PlayStation execs got the idea. For more than a year, San Diego and Tokyo have been working together to come up with an answer to Xbox Live. Even so, Hirai says, "the fundamental approach is different from Microsoft's. They name it Live and it's a big to-do. We look at it the other way: There's the entertainment experience, what you have in the box, all those good things, and – oh, by the way – we have an online component."
In Sony, Microsoft may have found the ideal opponent: large, slow, still fixated on hardware, still trying to find its footing in the networked world. When Microsoft decided to move into the game business, it was because a handful of execs saw an opportunity to do for gaming what Windows had done for personal computing: transform it from a hardware-defined industry to one governed by software. J Allard, the team's leader, argued that the success of DirectX – a Microsoft software suite that made it easy to program a PC – meant the company could simplify game development, too. Allard was just as committed to online services: If Microsoft could hook up players worldwide, it could change the nature of gameplay and make Xbox the way of the future.
"This business used to be about hardware and a cartridge you popped in," says Peter Moore, the new leader of Xbox, at his headquarters in an office park in Redmond, Washington. "But hardware is a tough business. You need it, but you also need great software and innovative services." A Liverpool native with an office full of autographed soccer memorabilia and a sleek new Aston Martin coupe in the parking lot, Moore knows the vulnerabilities of hardware all too well: He headed Sega of America when PlayStation 2 overwhelmed its Dreamcast machine and pushed Sega out of the business. Now he spends much of his time on what Microsoft calls "Dev Luv," an all-out effort to give game developers the software tools and engineering support they need to make Xbox the platform of choice.
Meanwhile, Xbox Live keeps gaining new features – most recently, user profiles that allow other players to check out your skill level and reputation within the community. (Too many "avoid this player" raps and you could find yourself shunned.) And because the Xbox 360 acts as a bridge to Windows Media Center PCs, the console can serve up music and video from your hard drive and play it on any device in the house. Still, Moore notes, "we're not driving the 360 as the hub of the home. Editing and manipulating media is better done with a keyboard and mouse."
Like the PlayStation 3, the Xbox 360 will get a hi-def disc drive, but it won't be built in, and it won't be Blu-ray. Last September, Microsoft and Intel announced they were throwing their weight behind Toshiba's HD-DVD, a move that prompted several companies from the Blu-ray camp to hedge their bet by accommodating both standards. Amir Majidimehr, Microsoft's point man on the decision, cites several reasons for siding with Toshiba, chief among them Blu-ray's move – largely at the behest of some copyright cops at Fox – to supplement the already draconian DRM mechanism adopted by both camps with yet another layer of protection. "We worry that this program could be hacked to do bad things," Majidimehr says, alluding to last year's Sony BMG fiasco. Blu-ray partisans say that's impossible – but in any case, Majidimehr argues, "if one or the other of these layers decides it doesn't like what you're doing, it won't let you play the movie." Was the competition with Sony a factor, too? "Of course," he says. "But our strategy is, people want to play games, so we build a game console. Sony is like, all or nothing. They're going to have a world of hurt waiting for them at the end of this year."
A couple of months ago, Howard Stringer and Ryoji Chubashi, Sony's president, reported to a luxury hotel in Tokyo's Shinagawa district to face 7,200 shareholders at Sony's annual meeting. It was not an enviable assignment. With the company in the red yet again in its most recent quarter, Japanese investors were in an unhappy mood. "I bought shares in mighty Sony," cried a woman whose holdings had lost nearly two-thirds of their value. "What are you going to do about this?"