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Sony Wheels and Deals at E3 Game Expo

Sony Computer Entertainment Inc. (SCEI) has been busy working the diplomatic channels to create alliances that ensure its PlayStation 2 game console is armed to the teeth with competitive might when Microsoft Corp. upsets the industry's balance of power with the introduction of its Xbox console.

SCEI started the deal-making at the E3 Game Expo in Los Angeles Tuesday with the biggest boy on the block, AOL Time Warner subsidiary America Online Inc. Sony cut a deal with the Internet giant that brings AOL branded instant messaging, chat and e-mail -- as well as a version of the Netscape browser -- to the PlayStation 2. And, on Wednesday, it debuted three more strategic alliances -- with Internet industry players RealNetworks Inc., Macromedia Inc. and Cisco Systems -- all designed to turn the game machine into a robust, all-purpose entertainment platform.

With Sega out of the console picture and Nintendo's plans uncertain, the field has been left to Sony and Microsoft and both are working feverishly to define the future of home entertainment. Sony's PlayStation 2 has been on the market since late last year, and Microsoft is exp ected to ship its Xbox in early November.

Both boxes offer DVD-Players, Internet connectivity and the ability to play music CDs, but Microsoft's offering has the advantage on the hardware side. It will feature an Intel 733 MHz processor, nVidia 250 MHz graphics processor, 64 MB RAM, DVD-ROM, a 10 GB hard drive and broadband connectivity. In contrast, the PlayStation 2 features a 300 MHz processor, 150 MHz graphics processor, 32 MB RAM, DVD-ROM, and a modem. The PlayStation 2 features a bay for the addition of a hard drive and an expansion unit for a network interface that will allow for broadband connectivity and integration with a home network.

But Sony apparently is not content to rely on its first-to-market (if you don't count Sega's Dreamcast) advantage. The deal with RealNetworks will allow Sony to embed RealPlayer 8 and other RealNetworks client technologies on the PlayStation 2 and the consoles Software Development Kit (SDK).

"Our goal is to revolutionize the home entertainment market and even communication itself with PlayStation and PlayStation 2, the most prevailing entertainment platforms in the world," said Ken Kutaragi, chief executive officer of SCEI. "Streaming media integration will vastly enrich the computer entertainment world PlayStation has built up to date. While envisioning the direct download of digital content from the network in the coming broadband era, we will obtain digital streaming and downloadable media using current networks, by integrating into PlayStation 2 the world's most popular Internet media delivery client, RealPlayer. As the world of gaming and the Internet merge, so too will entertainment and communication."

The deal also gives game developers the ability to incorporate streaming media into games.

As part of the alliance, Sony's new proprietary authentication system for PlayStation 2, the Dynamic Network Authentication System, will leverage RealNetworks' RealSystem iQ technologies.

Sony also secured an alliance with Macromedia which will bring that company's Flash Player to the PlayStation 2, extending "rich, interactive Web experiences" to users.

"The Macromedia Flash Player is essential for delivering the interactive Web experience that consumers have come to expect," Kutaragi said. "With support for Macromedia Flash Player, SCEI immediately gains more than 700,000 Macromedia Flash developers able to deliver Web content to PlayStation 2."

Finally, on the architecture side, Sony cozied up to networking industry leader Cisco Systems, which will provide Sony Internet Protocol version 4 (IPv4) software for incorporation with the PlayStation 2. The software is optimized for the PlayStation 2's unique architecture, and will also be incorporated with the console's SDK, giving developers the ability to create broadband-enabled entertainment content.

The two companies are also working together to develop an IPv4/IPv6 dual protocol stack for the machine which will give game developers the ability to utilize either version of the IP software.

"IPv6 is definitely the base for the broadband era," Kutaragi said. "And PlayStation 2 will be one of the first home entertainment platforms in the world to incorporate an IPv4/IPv6 dual stack."

It is too early to tell how Microsoft will respond to Sony's maneuverings, but the company certainly has access to internal resources that can ape some of the deals. Its MSN ISP and Internet Explorer browser can deliver many of the same features that Sony accessed through its deal with AOL, and the company is likely to turn to its Windows Media Player -- which already competes with RealPlayer -- to offer the same functionality PlayStation 2 will gain through the RealNetworks deal. And Cisco has long been one of Microsoft's strategic partners.