If you own a Dreamcast game console, you now know what it feels like to be an orphan.
Although the machine is a superb piece of technology with a healthy supply of entertaining games, Sega found that it couldn't compete in the hardware business with Sony, with Nintendo and - by the end of this year - with Microsoft. So Sega pulled the plug on Dreamcast last week, declaring that henceforth, it would concentrate on developing games for its former competitors and newcomers to the market.
Fans of Sonic the Hedgehog - Sega's most popular game character - don't have to worry. He'll find another burrow. But Dreamcasters, like the owners of Atari 2600, Mattel Intellivision, Magnavox Odyssey and other consoles that have fallen by the wayside, will feel like they've lost a friend - and a substantial investment.
Actually, the Dreamcast will not disappear. The 3 million Dreamcasts in homes worldwide will continue to do what they have always done, and Sega has promised to support the console with new titles for at least a year. Many third-party developers also have games in the pipeline, and they're likely to bring them to market. With Sega dumping its remaining inventory of 2 million machines at a fire-sale, $99 price, there should be enough demand for software to keep Dreamcast alive for a while.
But Sega's decision illustrates the strange orbit of the video game console in today's technological universe. More than 40 percent of the households in the country have a dedicated game machine (as opposed to a PC that can be used to play games). U.S. sales of video games and consoles accounted for more than $6.4 billion last year, according to NPD Group, which analyzes the market. That's almost as much revenue as the movie industry took in.
The newest consoles, including the Dreamcast and Sony's PlayStation 2, are actually sophisticated computers with more raw horsepower than many of today's PCs. But this makes them expensive to manufacture. If you tried to buy a PS2 over the holidays, you know that it's a hot machine - so hot that Sony's fabrication plant couldn't get a high enough yield on key chips to meet the demand.
Some industry analysts believe that game console manufacturers actually lose money on every piece of hardware they sell. They make their money selling software and licensing their technology to third-party game developers.
But the cost of developing increasingly complex and realistic games to take advantage of the new hardware has spiraled, too. Once produced by lone geniuses working 18 hours a day, video games now require entire development teams - creative designers, artists, musicians, animators and programmers. By some estimates, the cost of bringing a major title to market now runs between $2 million and $6 million.
And the market is a fickle one. After years of spectacular growth, sales of video games and consoles tapered off last year. One reason is that Sony and Nintendo (who account for almost 75 percent of the market) both had new consoles in development. When the hard-core, twenty-something gamers who fuel the industry get wind of a new machine, they're likely to wait for it and buy fewer games for their current consoles.
So what should gamers expect over the next 12 months?
It looks like a three-way battle between Sony (with 47 percent of the market), Nintendo (37 percent) and newcomer Microsoft, which wants to grab as much as it can from both of them. All three are bragging about better graphics and sounds, and the promise of online game-playing that only Dreamcast had managed to deliver on, before its demise.
Sony's PlayStation 2, introduced in the fall, was one of the most hyped products in game console history. I've tried it, and it's a great game machine that will play original PlayStation titles and double as a DVD movie player (if you spend a few bucks extra on a remote control). The main problem for enthusiasts has been getting their hands on one, and the shortage of inventory has battered Sony's bottom line.
Still, it expects to ship 11 million PS2s by the end of the year, and developers are working overtime to produce games for it. Their problem is that the PS2 is a difficult machine to program, and Sony hasn't done much to make their lives easier.
Meanwhile, in the fall, Nintendo will supplant its N64 - a favorite with the kiddies - with a new machine called the GameCube. Based on a 405 MHz variant of IBM's PowerPC chip, the GameCube will do away with the expensive cartridges that Nintendo has depended on for years in favor of a proprietary, miniature CD-DVD. The switch to disk could make Nintendo games cheaper.
The question is whether Nintendo is willing to give up some of its strict controls on developers, which limited the number of games available for the N64.
A bigger question mark is Microsoft's new XBox. Aside from selling mice, joysticks and keyboards, Microsoft has never ventured into the hardware business in a big way, but it's committing $500 million to a console it sees as a networked entertainment center in the wired home of the future.
Based on a 733-MHz processor from Microsoft's old pal Intel, it will have a movie-capable DVD player, and an 8-gigabyte hard drive that should make its games run faster and give it real computing capability. It will also have a built-in networking connection.
If the Xbox is a success, however, it will be the result of Microsoft's roots as a provider of tools for computer programmers. Microsoft's experience in this market will enable programmers familiar with PCs to develop games for the Xbox with much less trouble than those who write programs for other game consoles. If they get excited about it, the Xbox could be a very cool machine, indeed.