Son of Xboy?

A phenomenon which is commonly observed in the mainstream press - newspapers, television news, and so on - is the "silly season" that occurs each summer when governments take off on holidays. Here in the UK, when Parliament goes into recess, daft celebrity stories and recycled urban legends spring to the front pages of the newspapers, no longer shoved into the side columns and inner pages by the Proper News which generally occupies the more important slots, and similar phenomenon are undoubtedly witnessed around the world.

The videogames industry is no different; the weeks and even months after E3, once we've gone through the painful process of clarifying what exactly the various statements made by publishers and platform holders mean in the real world, are our very own silly season. We even have our own celebrity stories, in a sense - much of the news in the past fortnight has been about the back-and-forth face slapping contest being carried out by Sony and Microsoft representatives in the wake of E3, although thankfully nobody has quite stooped to the level of taking telephoto topless shots of any of the players in this particular space.

We're certainly not missing a few industry urban legends either, and they're all getting resurrected onto frontpages at a rate of knots. Witness last week's furore over Sony's apparent intent to shut down the second hand software market, an old chestnut which seems to get unearthed about once every six months; and this week, the industry urban legend being dragged from the mausoleum is none other than Microsoft's handheld games console project.

The original report, courtesy of well-connected author and journalist Dean Takahashi, simply said that Microsoft is working on a handheld device within the Xbox division, with J Allard heading up the operation. The claim, which appears in Takahashi's excellent new book about the Xbox 360, is fairly believable - after all, Microsoft has dabbled in handheld devices for some time, with recent projects including the Xboy, which was aborted before it ever reached market, and the Origami UMPC concept, which is currently reaching market (but has had a response so lukewarm that nobody's quite sure why they bothered). Plus, it answers the elephant-on-the-table "Where's J?" question that has sprung up over the recent silence of the firm's most flamboyant evangelist - although that might just as easily be a result of the backlash at the firm's rather obvious attempts to reinvent Allard as some kind of celebrity figurehead for Xbox, which was greeted with an entirely sensible level of cynicism in many quarters.

However, saying that Microsoft is working on an internal project which is aimed at the handheld console space isn't the same as saying that Microsoft is going to release a competitor to the PlayStation Portable - far from it. It's certainly not the same as saying that it's going to launch a portable Xbox, or that it's definitely going to enter the handheld market in 07/08 - conclusions which have been jumped to in a massive hurry by news reporters, soi disant analysts and the occasional research firm, such as The Diffusion Group, whose pronouncements on the matter have been received surprisingly credulously, given that this is a firm whose coverage of the videogames space extends all the way back to early May. That doesn't mean they're necessarily wrong, of course - just that they'll need to hit a few more strikes with their predictions before their words carry enough weight for us to start thinking they're right.

Consider, for a moment, why Microsoft wants to have a handheld. To compete with the PlayStation Portable and the DS? Well, perhaps, but why does it want to do that? Microsoft didn't enter the games space because it saw an opportunity to claim some of the revenue that Sony was monopolising with the PlayStation - if it had done so, it would have left again in a hurry, having lost billions of dollars on the original Xbox. Instead, its entry into the home console market was a strategic move aimed at preventing Sony from taking over the burgeoning market in home digital media and content access devices - a move whose full impact on the playing field won't be clear for a decade if not longer. Equally, Microsoft will not go into portable gaming just because Sony is there - it will go into portable gaming because it perceives a major threat or opportunity.

Is PlayStation Portable a major threat to Microsoft? Yes, in a sense; it is a PlayStation branded media device which takes the media experience out of the living room and into people's pockets. The potential of that device is only beginning to be explored, but Microsoft can undoubtedly see a future where people can consume media on the go by streaming it from a Sony LocationFree server or loading it on from a Sony media centre, such as the PlayStation 3 - a scenario in which there is no need, and perhaps even no place, for Microsoft software or services. In this sense, the PSP is a threat, although perhaps less of a threat than Apple's iPod - a much more popular device which is evolving slowly from being the dominant portable music device into being a very competent portable video and photo device, and one which, again, doesn't need a Microsoft service or software product at any point in the chain.

That, however, is an interesting part of this argument. Microsoft needed to counteract what the PlayStation was going to become by launching a competitor to PlayStation, and it found that the business models did not allow for simply creating the platform and licensing out its manufacture, sale and distribution, as it has always done before. What Microsoft needs to counteract in handheld is not just PlayStation, but iPod as well - and let's not forget that iPod and PSP are also competing with one another in some respects - and the way to challenge the iPod is almost certainly not with a PSP style portable gaming device which will be vastly expensive to create, manufacture and market, will win over some proportion of the hardcore and will ultimately leave Apple still being seen as the dominant force in mobile media, while Sony and Microsoft squabble over the mobile gaming crown. There's no need for the Trojan Horse strategy we saw with home consoles in the handheld space - the public is already buying portable media devices, and they don't need to be fooled into doing so under the guise of buying a portable console.

Microsoft knows this, and it knows that the last games market it launched into ended up costing nearly five billion dollars over five years just to get to a point where it was being taken seriously by the market. A handheld venture might not cost that much directly, but when you factor in the difficulty the firm would have in reconciling this idea with the many companies which use Windows operating systems or Windows-friendly interfaces for their portable media devices, it's hard to see a Microsoft-built handheld device as an attractive option for the firm. Besides; isn't the UMPC, formerly Origami, meant to be a handheld Windows device optimised for media?

There, perhaps, lies our answer - an extension to the UMPC specification to include videogames-related functions - but that is not quite the Microsoft handheld that is being eagerly talked about in the videogames media and around the industry. For Microsoft, perhaps, that is the point. It can chip away at the handheld market without having to launch another costly project on the scale of the Xbox; in the face of that option, it's hard to see the Son of Xboy ever leaving the gates of Redmond.