MIXED MEDIA
Microsoft developing new Xbox, tech insider reports

By Marc Saltzman
Gannett News Service

Dean Takahashi, author of "Opening the Xbox" ($24.95, Prima Publishing), recently reported in the technology magazine Red Herring that Microsoft is developing a new version of the Xbox game console. The hybrid device not only plays video games, it also will be able to record TV programs on its built-in hard disk.

Takahashi said the Xbox with digital video recorder will sell for about $500 and could be in stores in 2003. The Wall Street Journal and technology Web site ZDNet also have reported on the Xbox project, code-named "Freon." Microsoft hasn't commented on it officially.

Takahashi also said Microsoft's internal estimates show the company could lose as much as $750 million on Xbox in the fiscal year which ended in June, and as much as $1.1 billion in this one. It has been widely reported that Microsoft is absorbing losses on the Xbox hardware in the hopes its software sales will drive future revenue.

According to a report by the British research enterprise Informa Media Group (www.informamedia.com), the video game industry is on track for a record 2002, with global sales projected to have increased 12 percent to $31 billion.

The spike is attributed largely to the success of the Sony PlayStation 2 (more than 30 million units have been sold worldwide) and the two new consoles: the Nintendo GameCube and Microsoft's Xbox. Recent price cuts on all three game machines also are expected to boost sales.

Console hardware and software are expected to make up about 70 percent of the entire gaming market. While consoles and related games are booming, Informa predicts computer and handheld games will dip a combined 8.5 percent to $8.5 billion this year.