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Canny compromises make it a contender

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At its Analyst Day last week Microsoft announced that Xbox developer kits were now shipping, and we wondered where they were.

Well don't look in vain. The release of the developer kits - which officially now merits its own press release - is only aimed at the select handful of games publishers who've signed up to the X-Box program. The kit includes some rudimentary hardware - nothing that will resemble the finished X-box - for hooking up output to a TV.

Signing up to the program isn't trivial as the former DirectX chief Kevin Bachus, who's now in charge of third-party developer relations for X-box, tells us. But he describes it as an "all time, one time cost" that's roughly competitive with the other console manufacturers. Similarly, there's no free ride either: Bachus says that developers pay a royalty that's comparable to other consoles.

So Microsoft has raised the bar to keep frivolous developers away from X-box. Which isn't very Microsoft-like, as it's traditionally priced low at this stage in the cycle, in order to attract new developers.

The trouble is, says Bachus, is that the same logic isn't applicable to the games business. The distribution channels for games aren't comparable to the traditional channels for PC software, and the console manufacturers need to persuade retailers - who have limited shelf space - to take their wares. And by Xmas next year, Nintendo, Sony, Sega and Microsoft will all be fighting it out for that acreage.

"We've got to be pragmatic about it - we've got an installed base of zero," says Bachus. So Microsoft is aiming at publishers who can afford to take the platform seriously.

As we've discovered, this isn't the only way Microsoft is setting aside some of its usual business logic as it tries to gain support for its games appliance. And judging from the reaction of publishers, and even some serious rivals, it appears to be doing exactly The Right Thing.

Hark back for a moment to the notorious Brad Silverberg 'pissy email from billg' memo, where he railed that new platform initiatives within Microsoft were being compromised by the need for consistency with PC-based Windows.

"it's clear the team has to be completely separate and independent from windows," wrote the Caps Lock-challenged veep. "because the windows team's goal is to make new thing completely unnecessary . . . . [it] really needs to be a separate company within the company."

X-box's management do seem to have made some intriguing trade-offs and been given a surprisingly amount of leeway to produce a platform that obeys the console business economics.

Firstly, the X-box uses only a skeleton of the Windows 2000 codebase - "a surprisingly small amount", according to Bachus. The OS as such, which is burned into EEPROM, is involved in initialising the device and thereafter, for minimal I/O. There's no need for power management, for PCI Plug and Play support, so the system is pretty lean. And all applications run in Ring 0 (Intel-speak for kernel mode) - for better performance.

Bachus argues that the X-box won't cannibalise the PC games business, because console games are a social activity, with two people typically using the one console, while strategy and LAN-based PC games are a solo activity played by... er... well we're not trying to say loners here, but you get the gist of the argument. Now you might argue that the after-hours fragging that goes on in so many offices around the world is surely a social activity too, which suggests some overlap, but that's an overlap X-box thinks it can live with.

Nor has X-box been obliged to squeeze the PCI/AGP architecture into the new case. X-box uses a UMA (unified memory architecture) model in which the graphics processor and CPU share the same address space. That's the SGI approach, and one adopted by Nintendo in its earlier SGI collaboration, and also in its forthcoming Dolphin console. The expense, of course, is getting someone to build a custom graphics chip. And although Bachus wouldn't confirm that Microsoft paid NVidia somewhere in the region of $200 million to cook this up, he did say that a payment was made that reflected the work involved. Go figure.

And the other minor triumph the X-box team has achieved has been getting a hard disk into the box without ringing any alarm bells amongst Microsoft's traditional PC OEMs. The thinking seems to be that the colossal amount of texture information needed for a rich game would be compromised by peeling it off the DVD, and with broadband Internet still a minority pastime, it would be even dafter to expect it all to come from a network server.

More of a prickly problem is persuading games publishers that it isn't another Windows 3.0. "Yes, we've got our own games portfolio, and there's a fine line between hoping for market share and being too successful. If you're too successful you're not of interest to your partners."

Now for those of you who've been hoping that the games console will gradually morph into The Computer For The Rest Of Us - don't look here. PCs are in about 45 per cent of US homes, a figure that hasn't risen that much over the past few years. But X-box isn't a punt at the internet appliance business. Yes, it will be Net-enabled, there'll be no browser or email client. Microsoft thinks that mostly the same folk who buy PCs also buy consoles - it's about an 80 per cent overlap, according to Bachus. For now anyway. Given that it's got a hard disk and an Ethernet connection, and given that the hardware will be subsidised by the services its runs, it'll take some seriously crippling now if it isn't going morph into an Internet Appliance. But for now, Microsoft has given it far more of a chance at the console business than we could possibly have suspected six months ago. ®

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