Will PlayStation 3 be the new Betamax?

It is the most eagerly awaited gadget of recent years. Sony's futuristic PlayStation 3 games console is already selling by the planeload in the United States and Japan, following its launch earlier this month, and is expected to do well in the United Kingdom when it appears in Europe early next year.

But while retailers and consumers can't get enough of the sleek $500 (R35 000) black machines, Sony is suffering a huge financial loss. Analysts believe the company will lose £1,7-billion (about R24-billion) on its PS3 business over the next two years.

The launch in the US and Japan will barely make a dent in these losses. Analysts predict that, partly because of manufacturing difficulties, only 750 000 consoles will have been sold in the US by the end of the year, despite Sony chartering planes to airlift new orders in from Asia.

To rub it in, its arch-rival Nintendo launched its own console this month in the US, the Wii. Analysts at Lazard Capital Markets estimate that Nintendo could ship up to 200 000 of these consoles every week until the end of the year, the most important period for retailers.

Sony is taking a gamble that its investment in PS3 and the step change in technology that it represents will pay off. In particular, it hopes that by incorporating Blu-ray technology - which allows the console to double up and play high-definition DVDs - it has backed a winner.

Research by Thomson Scientific for The Independent on Sunday shows that developing, assembling and transporting the console to the shops has been a huge global undertaking, involving dozens of component suppliers and partners, mainly in Japan and the US.

Some say that the scale of its ambition could prove to be Sony's downfall. As analysts like to point out, the video battle of the Eighties - VHS vs Betamax (championed by none other than Sony) - shows that picking a winner is not always straightforward. Betamax was technically superior, yet lost out to VHS and so became obsolete. So has Sony bitten off more than it can chew?

As the name suggests, the PS3 is the third in the PlayStation series and competes against Microsoft's Xbox 360 and Nintendo's new Wii.

The top-of-the-range PS3 model, which comes with a 60GB hard drive, is 40 times more powerful than the PS2, allowing it to play ever more data-intensive games.

Its Blu-ray technology offers higher resolution than any other technology, including the rival HD television platform promoted by Microsoft and Toshiba. For owners of high-definition televisions, this enhances the picture for games, as well as for movies, because the console - like the Xbox 360 and Wii - also doubles up as a DVD player.

But DVDs made for HD TV are not compatible with Blu-ray, and vice versa. At the moment, most film studios produce two versions of DVD, which are compatible with the competing technologies. But this is unlikely to continue indefinitely and Sony hopes that - unlike Betamax - it is Bluray that emerges as the triumphant format.

Sony is taking a different approach to Microsoft, whose Xbox 360 does not come with a built-in high-definition disc-playing capability (an external add-on HD DVD drive has just been introduced). Because high definition television has yet to take off, in the short term most buyers of PS3 will not see the full benefits of Blu-ray.

But Sony is taking the long-term gamble that incorporating Bluray into PS3 will give the technology a head start. As Paul Jackson, of Forrester Research, says: "Sony is playing a long-term game for consumers' living rooms and future entertainment beyond gaming."

The incorporation of Bluray has held back the rollout of PS3. For example, problems with the Blu-ray laser diodes have restricted production. Jackson adds: "Sony is pushing the envelope of innovation here. In terms of production it has made a rod for its own back. The newness of the technology makes the console expensive to assemble and means that components are in short supply."

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