ITS launch has generated more frenzied speculation than the new Star Wars film. Now the wraps are off Bill Gates’s little white box which promises to revolutionise home entertainment.

Officially, the Microsoft Xbox 360 console, unveiled by Lord of the Rings star Elijah Wood on the US MTV network, is merely the most powerful computer gaming machine yet produced. But the ability to video-conference with other gamers through wireless headsets will still leave plenty of its 3.2 gigahertz processors to spare.

Mr Gates has promised a new console so powerful that it can become the all-purpose digital entertainment hub in many homes. It can download films, music and photos then transfer them directly onto the next generation of high-definition television screens — converting your television into a large-screen PC.

Due to go on sale in November, the new Xbox is the result of a $1 billion (£536 million) Microsoft investment designed to halt the dominance of Sony’s PlayStation.

Microsoft has taken design lessons since launching the chunky black-and-green first generation Xbox in 2001. Leaked pictures present a sleek silver-white concave console which neatly stands on its side. Expected to retail for £230, it attracted favourable comparisons with Apple’s iPod design classic. “Microsoft would love the new Xbox to be the next iPod,” said Matt Rosoff, analyst at research firm Directions on Microsoft. “The next Xbox is going to be Microsoft’s spear into the living room.”

David Hemler, the president of Microsoft Canada, said that the box would be “a key adjunct in the digital home — a terminal where people store their information, pictures, do their work, record their television, so on and so forth.”

But Mr Gates admitted that Microsoft’s 2001 Xbox, which lacked a strong initial offer of games, had been no match for Sony, which has sold 87 million PlayStations. Sony has invested heavily in the development of a chip for its PlayStation 3 that promises to be even more powerful. The Cell chip, a joint partnership between Sony, IBM and Toshiba, can carry out 16 trillion calculations per second and is ten times more powerful than existing processors. Sony and Nintendo are to unveil their latest products at an industry gaming convention in Los Angeles next week.

PlayStation 3 will provide feature-film quality graphics but gamers may pay extra for the privilege. American analysts predict that the price of games will rise by £5 next year to cover development costs. Bill Gates issued a challenge yesterday to both Sony and Apple, declaring that the runaway successful iPod portable music player would become obsolete.

“As good as Apple may be, I don’t believe the success of the iPod is sustainable in the long run,” the Microsoft founder told Germany’s Frankfurter Allgemeine Zeitung newspaper.

He predicted that mobile phones which integrate MP3 files would win out as top choice of portable music player. Microsoft is trying to sell its mobile Windows software to handset makers. Mr Gates admitted that his gaming gamble may not produce returns. “The consumer is always unpredictable. In principle, you can only throw products onto the market and then learn from your mistakes,” he said.

XBox launch show: MTV Europe tonight 8pm, cable and satellite

IT STARTED WITH TENNIS

1958: The first video game, Tennis for Two, is played on an oscilloscope at Brookhaven National Laboratory in New York

1972: Maganavox Odyssey is the first home game console for commercial sale. Memory too small to support game backgrounds and players had to write their scores on paper

1977: The Atari 2600 Video Computer System, top, sells 20 million units. Arcade paddle tennis game Pong (now with “topspin” button) is top seller and scores displayed on screen

1980: Namco releases Pac-Man, first animated main game character. Biggest ever arcade hit but Atari left with 7 million unsold cartridges as first handheld games arrive

1989: Nintendo releases the handheld Game Boy in Japan. Russian mathematician Alexey Pajitnov invents falling bricks game Tetris. Fifty million Game Boys sold over 5 years

1991: Atari 2600 finally axed; record longevity for a console

1994: Sony unveils 32-bit CD-Rom-based home video PlayStation. It is no longer compatible with Nintendo game cartridges and quickly becomes a bestseller

2000-01: PlayStation 2, below, sells 87 million consoles Microsoft XBox, Nintendo Game-Cube compete for a $1billion market. Broadband capability is key to multi-player games

2004: Xbox 360, PlayStation 3 and Nintendo’s Revolution promise to revolutionise home entertainment. Wireless connections, downloading and video cameras standard

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