Sony's PlayStation2 to Surpass Game Machine Capabilities October 18, 1999 (TOKYO) -- Sony Computer Entertainment Inc. (SCE) disclosed an array of details of its next-generation game machine, the PlayStation2 (PS2). The company will start shipments on March 4, 2000. As an initial step, SCE will aim to promote the PS2 as featuring a three-dimensional graphics processing capabilities, to be used at home as a game machine. For SCE, however, the PS2 isn't just another game machine. SCE will implement a second phase of marketing in 2001, when it will launch a digital content distribution business called e-Distribution. PS2 Will Offer Totally New Entertainment SCE aims to create a new type of entertainment experience, comprising a combination of a movie and a game, by distributing video game software as well as music and movies via the PS2. The PS2 will be transformed into a device to be used with such distributed content, as opposed to a mere game machine. In that sense, it's like a Trojan Horse, SCE said. However, the objective of SCE is not simply content distribution. "Content distribution is just another form of distribution," said Ken Kutaragi, SCE's chief executive officer. "It is nothing unique. What really matters is enabling users to enjoy various types of content on a single device. When the device can support interactive games in addition to movies and music, it can offer more interesting entertainment." For Kutaragi, the content distribution business will be step in that direction. Industry analysts say that game machines such as the PS2 are in an advantageous position in the content distribution business because they already are widely used in households. In Japan, a growing percentage of households use consumer game machines. The percentage is expected to reach 80 percent soon, and the figure is much higher than the percentages of Japanese household with personal computers and households with tuners for satellite TV broadcasting. CD-ROM Production is Profitable Business The widespread use of game machines is due to the relatively low prices set for such machines. SCE's PS2 will be sold for 39,800 yen. (106.98 yen = US$1) Some major chipmakers question the viability of such a price, saying that a microprocessor and a graphics chip together will cost about 40,000 yen or more. Even so, SCE will seek to reduce the price even further. "SCE will cut the price of the PS2 at the same pace as seen for the previous machine," said a staff member responsible for research and development at SCE. Market observers even anticipate that the price will fall to around 20,000 yen in the autumn of 2000, when the volume production system for PS2 is running smoothly. SCE will cut the price of the PS2 because the business model for game machines differs significantly from those for PCs and other consumer products. The game machine maker will not need to generate profits solely from sales of its hardware. It also can count on profits from software license fees and commissions stemming from allowing retailers to distribute video game titles. A source close to SCE explained, "Production of a single CD-ROM is like printing a 2,000-yen bill." Performance, DVD, Compatibility Will be the Main Strengths The next-generation game machine will feature a much more powerful microprocessor. SCE was involved in the development stage of the microprocessor, and has successfully developed a microchip capable of encoding MPEG2 for software processing. Also, the new game machine will be capable of replaying DVD-Video. SCE expects that first-time game machine buyers will purchase the PS2 as an inexpensive DVD player. The current PlayStation model has already become highly successful in the game market. The PS2 will be designed to run software developed for the previous model as well, for the first such time. SCE expects that this new capability will encourage users of the current PS model to switch to the new model. PS2 will have the complete backing of Sony Corp., its parent company. Under the corporate restructuring announced in April 1999, Sony President Nobuyuki Idei positioned the PS2 business as one of the company's four major pillars of business, and said that the utmost efforts will be made to support the PS2 business. "This is not a mere game machine, and all Sony group firms will support the innovative product," Idei said. Use of Cable Modem Expected To distribute content, communications equipment and a hard disk device will be needed. However, the PS2 devices to be released next year will not have either of them. SCE said it will supply such hardware in 2001. SCE plans to use CATV networks for the game machine's communications. "Networks will be the medium to supply content, and they will replace CD-ROMs and DVD-ROMs," Kutaragi said. "Thus, they must be high-speed networks. We don't plan to provide our services via regular telephone circuits." The game machine's hard disk drive will have a capacity of 50GB or more. Initially, it will have an external hard disk drive. SCE said it is considering equipping the PS2 with a built-in drive, later. SCE's PS2 machine will be equipped with a PC card slot, Universal Serial Bus and the IEEE1394 protocol, just like a PC. This interface will make PS2 highly transformable. The PC card slot will extend the hardware. Both the USB and IEEE1394 will connect the game machine to PC-related peripheral products. In addition, PS2 will have a memory card mounted with certification and encryption/encoding circuits in compliance with MagicGate, a new technology developed by Sony to protect content copyrights. Some Issues Remain SCE's blueprints do appear to have some blind spots. Some industry analysts wonder whether sufficiently compelling content for PS2 will be provided. It won't be easy to develop software to take full advantage of the game machine's high performance level. The expected high costs to develop video game titles also will be a concern because more users want to enjoy large-scale, movie-like video game titles. SCE had originally planned to release PS2 in December 1999, but only 10 video game titles will be available by then. Also, it is expected that customers will need to wait to buy other game titles beyond the initial ten titles. This concern encouraged SCE to postpone its release to March 2000, when more video game titles will likely be available. Technology for manufacturing the PS2 console is another source of concern. SCE announced it will produce 1 million units by the release on March 4, 2000, and it will have a monthly production capacity of 600,000 units by the spring of 2000. However, an industry analyst has expressed concern. He said that such efforts may not be enough, because when the product is in short supply in the market, it may put a damper on a PS2 boom. Upon its release, both the microprocessor and graphics chip for the PS2 terminal will be made using a processing technology based on the 0.25nm rule. Success in volume production will depend on reducing the size of the chip by adopting 0.18nm rule technology instead of the current 0.25nm rule. Production using the technology based on the 0.18nm rule will be launched this autumn for the microprocessor, and in the spring of 2000 for the graphics chip. Thanks to AsiaBizTech