The Sega Dreamcast was the first console to feature connected online features and initially shipped with a 56 Kbit/s modem that it was possible to upgrade with a broadband adaptor. Phantasy Star Online (2001) was the first online role playing game for consoles as the president of Sega at the time pressed for the installation of modems as Isao Okawa, President of SEGA noted:
I forced [Sega] to put in modem functions. At that time, I had a lot of opposition that said it was ridiculous to stick in a modem that cost several thousand yen. But, I managed to get it my way.
Despite the clear innovation within the console, it signalled the end for Sega as a console manufacturer and they withdrew from the market in 2001. The primary reason often cited, for why the Dreamcast failed is competition from the Sony PlayStation 2. Sony had changed the gaming market with the launch of the PlayStation in 1994, a hugely successful console that would sell 102 million consoles worldwide over its lifespan.
Sony came from a consumer electronics background having famously launched the Betamax Video Cassette and the Walkman. They proved to be a highly disruptive force in the home console market, challenging incumbents that were long established. The Sony PlayStation 2 launched in 2000 and is the most successful console to date having sold 140 million units. The PlayStation 2 had online functionality, called Central Station, but it was not supported by Sony administered architecture, rather it was run by publishers and third party servers. This was considered to be successful primarily due to third party support as Chip Lange from Electronic Arts commented:
We believe that the investment we are making in online will pay off as we head into the future, and we’ve already seen the benefits; online elements extend the value-proposition of a game for consumers, as well as the life of the game itself.
Central Station was not inherently built into the value proposition of the device. Whilst the functionality was present it was not a core feature, and was not promoted actively to consumers. This would prove to be the weakness of the PS2, despite its vast audience and reach. A press release in 2002, commented with (misplaced) optimism on the PS2 and its future online, Sony noted at the time:
With the largest and most loyal installed base at more than 27 million, or one out of every four U.S. households, Sony Computer Entertainment America is best positioned to bring online console gaming to the mass market.
The scale of the Sony online gaming community in 2002 is measured in the comment:
Even nine months after launch, SOCOM II: U.S. Navy Seals’ is still seeing more than 30,000 simultaneous users per day, far and away more than any other console title evidence that online capabilities extends the life of a game.
Compare that figure to recent landmarks in online console gaming, which followed the release of Gears of War 2 (2008) for the Xbox 360 which resulted in 1.5 million people logging in to Xbox LIVE and creating a new record for concurrent players on the service. The scale of online console gaming could only be imagined in 2002, whilst only 2 years later, DFC intelligence predicted that the market for online game revenue would be 2.9 billion in 2009. 2001 saw the launch of the first home console that was fully committed to online functionality, the Xbox. The Xbox was the first console from Microsoft. The commitment to online functionality was made clear by one primary fact. The Xbox shipped with an Ethernet cable that had 100mbit functionality and was reliant on broadband. A Microsoft press release in 2000 noted:
… 29 million console players, 11 million PC games players and 7 million who play both … [with a] limited customer overlap
The Xbox was also the first console to ship with a hard drive that could be used for game saves and other data, but crucially also as a repository for downloadable content (DLC). The Xbox was supported by a tethered service to each console called Xbox LIVE. Xbox LIVE was launched on November 15th 2002. Primarily the service facilitated connected game play between consoles, and it was not until later that the true potential of DLC was unlocked. The Xbox LIVE service, changed the perception of consumers about the online functionality of home consoles and ushered in a new era.