Third Generation Video Game Consoles: Xbox 360 and PS3

The new generation of video game consoles represented a dramatic technical advance. These consoles would have dramatically increased processing power and speed, allowing games to be presented in very high definition. They also incorporated a substantial amount of memory, which would be required due to the high data content of new games that would take advantage of the enhanced processing and graphics speed. These systems would provide a greatly enhanced experience for gamers, but to take advantage of this power would require a much greater effort on the part of game developers.

The Xbox 360 central processing unit used three separate core processors, each running at 3.2 GHz, compared to the single 733-MHz processor of the original Xbox. For graphics, the Xboх 360 used a custom designed processor, running at 500 MHz. For gamers, this meant that the console could create high definition graphics that were nearly lifelike. The new system was designed to work with high definition televisions.

Sonyís PS3 would have even more power than the Xbox 360, using more advanced technology, which was also riskier. In particular, it would incorporate the cell microprocessor, which Sony had developed together with IBM and Toshiba, and the Blu-ray optical disc which it developed in partnership with Panasonic and other companies. Sony had invested about $2 billion into the cell technology, which promised to be 35 times as powerful as the CPU in the PS2, with 2 teraflops of computing performance (compared to the fastest IBM supercomputer at the time, with 36 teraflops). The graphics processor in the PS3 would also provide higher resolution than the Xbox 360.25

Blu-ray was one of two competing formats for high-definition DVD. Sony hoped that including Blu-ray in its PS3 consoles would seed the market, and help establish the technology as the standard.26 However, Blu-ray was complex and expensive, with first generation units expected to cost $1,000, forcing Sony to heavily subsidize the cost in its PS3 sales. The other technology, HD-DVD, developed by Toshiba, was simpler and less expensive. Blu-ray discs would hold 25 gigabytes of data, compared to 15 gigabytes on the Toshiba format and 4.7 gigabytes on existing DVD discs. Microsoft initially did not take a position on high definition formats, but in September 2005 announced that it would support the Toshiba HD-DVD. This led a number of other major companies to either support HD-DVD or withdraw support for Blu-ray. Microsoft introduced the Xbox 360 with a standard DVD player, but planned to include HD-DVD players in the Xbox 360 by late 2006.27

Microsoft offered two versions of the Xbox 360. The core system, selling at $299 in the U.S., included the Xbox 360 console, a wired controller, cables, and an Xbox Live Silver membership.

The premium edition with a price of $399 in the U.S., consisted of an Xbox 360 console, wireless controller, detachable 20 GB hard drive, Xbox Live headset, Xbox Live Silver membership, and Ethernet cable.

Internet access had been an important part of the Microsoft gaming strategy beginning with the original Xbox, and was an area in which the company had a competitive advantage. The Xbox Live Silver membership allowed users to access online games, and to buy game add-ons, such as new game levels. For an annual subscription fee, users could purchase Xbox Live Gold membership for $50 per year, which allowed them to play multi-player games developed exclusively for Xbox Live Gold subscribers. At the time of the Xbox 360 launch, there were already 2 million subscribers to Xbox Live, at $50 per year.28 Peter Moore, the Microsoft vice president responsible for Xbox marketing, commented, We truly believe the future of gaming is online Ö bringing together massive communities from around the world to play or just hang out.î29