Introduction

Alan's comments in BLACK
Ben's comments in BLUE

Alan: Today we're bringing back the FiringSquad Face Off. Our topic for today is to figure out whether the original Xbox was a good or bad thing for PC gamers. Joining me for this Face Off is Ben Escoto, a FiringSquad reader who caught our attention after posting some well-written comments at FiringSquad. Ben, why don't you introduce yourself to everyone else?

Ben: Hi Alan, thanks for inviting me. I'm the stereotypical Guy On The Internet who apparently has nothing better to do than post anonymously on Firingsquad's horrible comments section. I'm not a game programmer or designer, but I have played a few computer games, and that's why you should spend your valuable time reading whatever I write. Oh, and it turns out I have a degree from the same elitist left-coast institution as Alan.


Alan: Go Cardinal! Actually, being invited to a Face Off is one of the perks of being a registered user (with an up-to-date email address). How else could we send you an invitation? Well, let's get started. Since this is your first Face Off, I'll start.

Fundamentally, PC gamers benefit from the rivalry between GPU manufacturers. As ATI and NVIDIA joust for your dollar, they need to introduce faster GPUs at more aggressive prices, meaning that PC gamers will benefit. As expensive as a SLI 7800 GTX 512MB or a Crossfire X1800 XT is, it would be even more expensive if either company had a monopoly. It was Microsoft's money that helped NVIDIA take the lead in the GeForce 3 and 4 era. It was also NVIDIA's pre-occupation with Microsoft that led to the GeForce FX stumble, allowing ATI to catch up and take the lead with the Radeon 9700. The evenly matched rivalry between ATI and NVIDIA that exists today was a result of Microsoft's meddling.

Ben: This has to be the first time anyone has congratulated Microsoft for encouraging competition. I admit that some of the money Microsoft pours into the gaming industry eventually trickles down to hardware advances. But you could have made the opposite point on competition just as easily—that the Xbox stifled competition by using NVIDIA exclusively for years when they had the upper hand.

At any rate, the 3D graphics market has never seemed monopoly-prone. Years before anyone had heard of the Xbox (e.g. 1998), gamers could choose between 3Dfx, NVIDIA, ATI, and maybe Matrox and S3 for your graphics.

Alan: Well, I wouldn't say that Microsoft intentionally wanted to encourage competition. Even so, if someone donates money to a good cause or volunteers for selfish reasons, it doesn't diminish the impact of their money.

By 2000, graphics technology was moving so fast that only the best engineers could keep up. S3 and Matrox (and PowerVR) had fallen far behind. 3Dfx would have collapsed on its own weight through feature creep and poor management. NVIDIA was already on their way to the top and this had so concerned ATI that they bought-out ArtX, the company that would give ATI their Radeon 9700.

The exact impact on Microsoft on the ATI/NVIDIA rivalry is difficult to know. NVIDIA received $200 million up-front from Microsoft for the Xbox. That was as much as the entire 3dfx company was worth in 1998, when the Voodoo2 was at its peak. Likewise, the original plan was for DirectX 8 to provide an API for the pixel shader in the GeForce 2 GTS. But something happened to the DirectX8 spec where all of a sudden, the minimum level of support was the GeForce 3. That something was Microsoft.

Without Microsoft, it's possible that the GeForce FX could have come out earlier. Then again, if NVIDIA never received that $200 million investment from Microsoft, maybe ATI would have had an even bigger lead on NVIDIA when they launched the Radeon 9700.

Ben: Agreed, let's not discuss what Microsoft intended. Do companies even have thoughts and intentions? (Do they have feelings? If so, I don't want to know.) But the prima facie case is simple: the Xbox funneled money into NVIDIA in 2000-2001 when they were strong. This extra money helped them develop Xbox's NV2A GPU and its PC brother the GeForce 3, giving them an even larger lead in the PC graphics market. Unfortunately, Microsoft and NVIDIA got into a disagreement about what the original Xbox contract entailed. Essentially, Microsoft came up with a legal argument that would have forced NVIDIA to sell chipsets below cost due to a “requirements obligation.” NVIDIA argued that no such obligation was present in the original contract. A third party arbitration panel agreed with NVIDIA, but the Microsoft/NVIDIA relationship wouldn’t be the same.

Alan: Did you know that at the time the original $200M deal was signed, Microsoft and NVIDIA thought they could sell 100 million Xbox units? It's no wonder that NVIDIA was disappointed when sales, especially after Microsoft refused to accept delivery of a batch of chipsets because of a change in the security codes.

We shouldn't forget that for Xbox 360, it is Microsoft's investment in ATI that will probably make unified shaders reach the gaming market earlier. The dollar amount for the investment is unknown, but the combination of Microsoft and Nintendo is only about $37.5 million! Compare that to the annual R&D budgets of $270 million for both NVIDIA and ATI (almost 4 times what VIA spends annually). Given the huge R&D costs for a graphics company competing for the flagship position, the GPU market may not be big enough to allow increased competition without causing a negative effect to NVIDIA and ATI's R&D budgets.

Do we really want three mediocre graphics companies instead of two stellar ones? The Xbox may have failed to increase competition in the global sense, but it certainly increased the innovation in the field.