Microsoft Preps Freon Upgrade to Xbox

Microsoft's long-rumored HomeStation--a combination Xbox and UltimateTV device--never made it past the planning stages, but a follow-up to the company's Xbox game console is indeed in the works. Dubbed Freon because it's the "coolest" project at Microsoft, the Xbox successor adds important consumer-oriented capabilities such as pausing live TV and hard-disk-based digital video recording. This description sounds suspiciously like the HomeStation. What differentiates Freon from other efforts (including HomeStation), apparently, is the fact that it has the backing of Microsoft Chairman and Chief Software Architect Bill Gates, who is reportedly a "big fan."

A combination Xbox/DVR is almost a no-brainer. The first-generation Xbox was the first video-game system to ship with a hard disk as standard equipment, meaning that most Xbox owners already have gigabytes of unused hard-disk space. And, like the UltimateTV project, the Xbox has sold far below Microsoft's predictions. Perhaps combining the two devices would jumpstart sales. It would almost certainly lower prices: Purchasing an Xbox and UltimateTV device today would cost consumers $500 to $600; presumably a combination device would cost much less.

But Freon, which will probably ship in late 2003 or 2004, isn't just about saving money or consolidating Microsoft's product line. The company expected to make a big splash in the video-game market, and although it's definitely a player, Microsoft is also in third place behind Sony and Nintendo. Freon will help to technologically differentiate Microsoft from the competition and, perhaps more important, reduce the traditional 5-year lifecycle of most video-game systems to a time period more in line with Microsoft's successful PC software lifecycles, which average about 2 years.