Trailing Sony, Microsoft Xbox Bets On The Web

Thanks Josh for this bit.

To understand how much Microsoft Corp. has riding on the new online service it plans for its Xbox video-game console, pay a visit to a vast and ultrasecure building the company runs here.

The facility, a data center south of the Seattle airport, houses 130 of the 500 computer servers that will power the games for Microsoft's new Xbox Live, a service it expects to unveil next week that will let Xbox users play over the Web. No expense has been spared and no security precaution left unconsidered: Only 12 Microsoft employees are permitted access to the 20-by-40-foot black cage holding the computers. Each time the cage's door swings open, a motion-sensor videocamera records the scene. Sitting 25 miles away, at Microsoft's Redmond, Wash., headquarters, are at least three employees who monitor the network at all times for glitches and hacking attempts.

Microsoft hopes that running its own data centers will close the gap with archrival Sony Corp. The Japanese company already lets owners of its game machine, the PlayStation 2, play online. And sales of the Xbox have gotten off to a slow start since it hit the market a year ago, while Sony has continued to attract hot titles, such as the Grand Theft Auto car-thief series, that run only on the Sony machine.

Industry executives and analysts say online gaming probably won't generate significant revenue until the latter part of the decade, after the release of machines that replace the current Xbox, PlayStation 2 and Nintendo Co.'s GameCube. Xbox executives acknowledge that the number of Xbox Live players could range from just tens of thousands to more than 100,000 by year-end.

But Microsoft says it has to bet on online gaming now if it expects to build an Internet gaming business for the long haul. "It's really about setting the foundation and setting the agenda," says J. Allard, a general manager of the Xbox business.

Total U.S. sales* of video-game consoles, in millions of units: