Something of a war of words was underway as market-leader Sony Corp. stalwart Nintendo Co. Ltd. and upstart Microsoft Corp. jostled for pride of place in the media spotlight trained on the industry's major trade show, the Electronic Entertainment Expo in Los Angeles.

Sony, which has already sold some 30 million of its PlayStation 2 consoles, took an early shot at rivals, declaring victory in a battle most analysts expect to rage for years.

"Officially, the console wars are over," Kaz Hirai, the president of Sony Computer Entertainment of America, said on Tuesday, to the cheers of a packed crowd at a movie studio in downtown Los Angeles.

Peter MacDougall, executive vice president of sales and marketing for Nintendo of America, drew cheers for GameCube loyalists at a separate event. "I think they know now the battle is on," he said of Sony.

Behind the talk is a serious point: the company that can demonstrate staying power and build a loyal and large audience of users can win over game publishers to work on its platform.

That's key because all three game box makers have been drawn into a price war in recent weeks, cutting console prices in a bet that the profits on more lucrative game software will more than make up for the discounts, analysts said.

Microsoft, the newest entrant, has been equally determined to show it has staying power, promising to invest $2 billion in the Xbox. "For us, this is about defining the future of digital entertainment," Chief Xbox Officer Robbie Bach said on Monday.

PS2 LEADS MARKET

Sony's PlayStation 2 console is the global market leader having generated sales of 160 million units of software worldwide.

PS2 came out about a year before Microsoft's Xbox and Nintendo's GameCube machine, building a head start both in the United States and internationally.

Nintendo had a virtual stranglehold on the video game console business from the mid-1980s well into the 1990s. Its consoles fended off challenges from the likes of Sega Corp. and NEC Corp. and the company's name became synonymous with video gaming.

That changed in 1995, however, when Sony released the first PlayStation console and quickly began eating up market share.

Games for the PSX still crack the monthly top-20 game sales charts in the United States, while games for Nintendo's last system, the N64, which came out in 1996, have all but disappeared.

For companies like Nintendo and Sony that produce both hardware and software, the games are the real key, because while the hardware often sells at a loss, or break-even, margins are fatter and volumes higher for the software.

PRICE CUTS SPURRED SALES

Sony cut the U.S. price of the PS2 to $199 from $299 on May 13, which was followed by an equal price cut by Microsoft on the Xbox two days later. Nintendo cut the price of the GameCube to $149 from $199 on Sunday.

Sony's Hirai said initial data from retailers showed a sales spike of as much as 800 percent for the console last weekend after the price cut.

For Nintendo's part, MacDougall said "GameCube in this market is currently showing a healthy momentum," with sales expected to spike dramatically later this year when it releases "Super Mario Sunshine," the latest title in its historic franchise.

Microsoft's Bach told Reuters he did not have any hard data about the effect the price cut had on sales but said "the feedback we've gotten from retailers is very exciting."

For 2002, Sony plans to spend $250 million on marketing for the console, and Hirai said the company was unveiling a new slogan: "Live in Your World. Play in Ours."

Nintendo's marketing budget for the remainder of the year will be 25 percent larger than the same period last year, the company said, with major pushes expected around Mario and other top titles like "Metroid Prime" and "Resident Evil Zero."

Microsoft said it will spend $2 billion over the next five years on both the current Xbox platform and any future versions that may arise.

by Ben Berkowitz, Reuters