THE X-BOX: "THE TRADITIONAL SOFTWARE ROYALTY MODEL".(Product Development)

Soft-Letter, March, 2000

Is Microsoft irrelevant? Steve Ballmer posed that quasi-rhetorical question earlier this month at Esther Dyson's PC Forum, and then reassured the attendees that the world's largest software company still really, really matters. But Microsoft's relevancy isn't quite so obvious at the low end of the computing market. Here, in a world dominated by "appliance device" manufacturers like Palm, Sony, and Nintendo, Microsoft is all too often a fringe player.

Microsoft is especially vulnerable in the huge videogame segment: Some 30% of U.S. households already own videogame machines (compared to about 50% for PCs), and the newest generation of machines from Sony and Nintendo are increasingly PC-like in computing power and connectivity. When the new Sony PlayStation2 went...