Games consoles have often been cast in the role of the lost child of the new media age, scorned for years as mere electronic toys. But the games industry has quietly evolved into a multi-billion-dollar shining star in a gloomy multimedia sky. Worldwide sales of games software are now $10bn ([pounds sterling]6.1bn) and rising. A three-way battle for market share between Sony, Microsoft and Nintendo is driving this wave of growth.
The outcome of this battle will be important for all in the new media sector, as each company views its platform as the Internet home gateway of the future.
Sony has sold more than 50m PlayStation 2 systems worldwide since their launch in Japan three years ago. Neither Microsoft's XBox nor Nintendo's GameCube has yet reached one-fifth of that figure. In fact, this battle is a bit like watching the Falkland Islands play Greenland for the right to meet Brazil in the final. One of the minnows will win the match, but the odds on either of them beating the favourite would frighten even the most optimistic punter.
One of the reasons for PS2's dominance was that it launched 18 months before its rivals. But its strength also demonstrates the power of the PlayStation brand, which has almost become synonymous with the games console for many gainers young and old alike.
The PlayStation story is a remarkable one by any measure; it's difficult to believe that Sony launched its first console only eight years ago. By 1998 more than 40m units had been sold and PlayStation was well on its way towards market domination.
The games business has traditionally been characterised as a two-format market. In the 1980s and early 1990s Sega and Nintendo did battle. Then it was Nintendo and Sony. Now Microsoft has joined the fray, but all the signs are that the market can still only sustain two players. The cost of developing a leading title, which can now reach more than $10m, means that developers can't afford to support a platform unless it's likely to gain a substantial base of users. Strategy Analytics has estimated that the survival threshold for any games platform is at least 20m consoles installed worldwide.
Both Microsoft and Nintendo still have some work to do to reach that point. Neither platform has got off to an auspicious start. Microsoft made a crucial mistake in the early days by pricing its console too high. But it learned its lesson, and is now steadily increasing the range of titles available. It's also putting its substantial resources behind XBox Live, a service offering broadband users access to online games and, in the future, other services.
Whatever your views on Microsoft, it can't be accused of giving in, and we expect XBox to be around for years to come.
GameCube, on the other hand, appears to be in trouble. Nintendo has already revised downwards its sales estimates, and games publishers have revised down their forecasts for sales of GameCube software. In spite of Nintendo president Mr Iwata's assurance that the company will launch a successor to the GameCube in 2005/06, we remain doubtful. There's every chance Nintendo will eventually follow Sega's route and concentrate on developing titles for other platforms.
It will be fascinating to watch as new opportunities emerge from the arrival of online games on broadband consoles. Both Sony and Microsoft see their systems as replacing the PC for home Internet access, and will spend many more billions ensuring that their vision becomes reality.