New Game

They oohed as animated football players threw one another to the ground. They ahhed as vividly colored martial artists gouged each other's eyes. The crowd huddled around ultrathin TVs earlier this month at the Metreon, a four-story Sony entertainment palace in San Francisco, was getting a sneak preview of Sony's much-touted PlayStation2. And they were loving it.

But this Sony-sponsored launch party was hardly a tough audience. Many of the well-dressed game gawkers were actually foot soldiers in the Sony empire, loyally cheering on a product crucial to the company's future. The real test for Sony comes this week when it rolls out 500,000--mysteriously down from a promised 1 million--of the $299 black boxes in stores across the U.S. Game magazines and Internet sites are already buzzing with the question of the season: Is PlayStation2 the great hope of computer gaming or the great hype?

For Sony it's not just fun and games. The economics of computer gaming have come a long way from the drop-a-quarter-in-the-slot days. It's now a $20 billion-a-year worldwide business. Last year games contributed more than $6 billion to Sony's sales and $730 million in operating profits. The Japanese giant has sold a mind-boggling 75 million first-generation PlayStations, 27 million of them in the U.S. And with game consoles grabbing an ever larger share of the game market from PCs and Macs, sales of PlayStation2 could get even bigger.

But PlayStation2 is being launched into the most competitive gaming environment ever. Sony is locked in a high-stakes platform war with Microsoft, Sega and Nintendo to lay claim to electronic outposts in living rooms worldwide. Right now the fight is over who will cater to the virtual sniper-attack and dune-buggy needs of legions of young gamers. But before long, these companies are betting, game consoles like PlayStation2 will become broad-ranging digital home entertainment centers used by everyone for everything from music playing to video watching. Still, the corporate battle for digital dominance in the years ahead will be determined in no small part by what happens this week, as junior high students everywhere reach a collective decision on just how way-cool the graphics on Smuggler's Run really are.

Even before this Thursday's official launch, Sony has lost goodwill, not to mention sales, for PlayStation2 with its glitchy product rollout. The company's recent announcement that it was cutting the number of PS2s available on launch day by 50% was a cruel blow to parents who had promised Junior one of the first units. And it is a headache for the 20,000 retailers selling PS2s--many of which began taking orders six months ago. The stores are bracing for hordes of irate customers. "There will be people lined up in front of the doors," sighs Dan DeMatteo, president of Babbage's Etc., the nation's largest specialty video-games retailer. Babbage's has prepaid orders from five times as many customers as it will have units for this week. A sign of the frenzy to come: a week before launch date, bidding for the $299 PlayStation2 on eBay had hit more than $500.

Sony won't explain what went wrong. Sony Computer Entertainment president Kazuo Hirai will say only that PlayStation2 is a "very complex machine that requires a lot of components." But the guessing in Japan is that the company botched the production of graphics chips. Skeptics in the gaming community are flooding the Internet with charges that Sony has created an artificial shortage in a calculated attempt to make PS2 this year's Furby, the gotta-have-it toy of the holiday season. But Sony says it isn't so. "It's absolutely ridiculous to suggest that by limiting our audience we would successfully be pursuing our business goals," insists Andrew House, a Sony vice president.

The gawky black PlayStation2 has all the visual charm of a low-end VCR. But it is packed with processing power. PS2's 128-bit processor (Sony calls it an Emotion Engine) is a big step up from the original PlayStation's 32 bits. That means the new units can play CDs and DVDs, and can accommodate add-ons for broadband Internet, digital cameras and digital music players. No modem is included with PS2, which puts it behind Sega's Internet-ready Dreamcast. But PS2 does have one feature parents will appreciate: it is backward compatible, meaning it can play the original PlayStation's 800 existing games.

The proof of a game platform is in the playing, and by that measure PS2 is getting mixed reviews. The gaming community has been grousing about the lack of top-grade games available at launch. There are only 26 PS2 software titles, and Sony is promising about 50 by the end of the year. The list contains some reputed standouts, including Madden NFL 2001 (which some are calling PlayStation2's killer app) and the snowboarding game SSX. But many of the most eagerly anticipated titles, like Metal Gear Solid 2 and the Bouncer, won't be available until spring at the earliest.

The early word on the playing experience--outside of Sony's launch party--is not particularly enthusiastic. "There is nothing on the PS2 that I've seen that gave me that jaw-dropping feeling I got with the Sega Dreamcast last year," says Dan Clark, 29, CEO of a New Hampshire credit union and an active gamer. Madden NFL 2001 is good, he says, but no better than games currently available on Dreamcast.