The shift from cartridges to discs rebalanced the industry. The next shift redefined what a console was allowed to be:
- an appliance (DVD player, DVR, AV component)
- a network terminal (accounts, friends lists, voice chat, downloadable content)
This is where the modern expectation of “a console has an OS and a service layer” really begins.
Online Arrives Early, Then Leaves
Sega Dreamcast — First Out, First to Fall
The Dreamcast launched in 1998 (JP) / 1999 (NA/EU).
- Hardware:
- Hitachi SH-4 CPU and a PowerVR2 GPU, making it very efficient at 3D rendering.
- Visual quality close to contemporary arcade boards.
- Media & Online:
- Proprietary GD-ROM discs (~1 GB).
- Built-in modem for dial-up online play; Phantasy Star Online became one of the first console online RPGs.
- Early experiments with downloadable content.
Dreamcast felt like a machine from the future, but Sega was weakened financially, and the looming PS2 hype (plus rampant piracy later) squeezed it out.
In 2001, Sega discontinued Dreamcast and exited the console hardware business, pivoting to third-party publishing.
The DVD Trojan Horse
Sony PlayStation 2 — DVD Player of the World
The PS2 (2000) is often called the most successful console ever for a reason:
- It played PS2 games, PS1 games, and DVD movies out of the box.
- For many households, it was the first affordable DVD player.
- It built on the existing PlayStation developer community and third-party relationships.
Technically, the “Emotion Engine” CPU and GS GPU were quirky but powerful in the right hands.
Commercially, the combination of backward compatibility, huge library, and media playback made PS2 the obvious default choice for an entire generation.
PSX — DVR Ambition Built on PS2 Silicon
In 2003 Sony tried to fuse home video recording with the PlayStation brand via the Japan-only PSX (models DESR-5000/7000 and later revisions).
- Under the hood it was effectively a PlayStation 2 motherboard paired with large hard drives, analog TV tuners, and DVD burning for archiving shows.
- The machine debuted the XrossMediaBar interface that later appeared on PSP and PS3, along with features like Memory Stick slots and in-home video editing.
- High launch prices (¥79,800 and up), sluggish firmware updates, and the rise of cheaper DVRs kept sales modest, and Sony never exported it beyond Japan.
PSX foreshadowed the “all-in-one living-room hub” pitch that would resurface in later generations, even if the hardware itself became a niche collector piece.
Nintendo’s Hardware: Focused, But Not the Default
Nintendo GameCube — Compact, Efficient, and Overshadowed
The GameCube (2001) was Nintendo’s small cube with a comfort-focused controller.
- Hardware:
- IBM “Gekko” CPU and ATI “Flipper” GPU — straightforward, potent hardware for the time.
- Mini-DVD discs (1.5 GB) that balanced capacity, load times, and piracy resistance.
- Strengths:
- Very strong first-party titles: Metroid Prime, Super Smash Bros. Melee, Wind Waker, F-Zero GX.
- Excellent analog triggers and ergonomics on the controller.
Yet in the marketplace, it struggled against PS2’s overwhelming momentum and the allure of DVD playback.
GameCube felt like “the enthusiast’s second console” more than the primary system.
Panasonic Q — GameCube Meets Living-Room AV
Nintendo licensed the GameCube hardware to Panasonic (then still Matsushita) for the Japan-only Panasonic Q (2001).
- It packed standard GameCube guts inside a brushed-metal chassis with mirrored front panel, adding DVD-Video playback and beefier home-theater audio outputs.
- A backlit front display, bundled remote, and multi-region capabilities positioned it as a premium AV component rather than a toy-like cube.
- Pricing landed around ¥39,800—more than double a regular GameCube—which, combined with its Japan-only release, kept sales niche.
Panasonic Q showed Nintendo experimenting with partnerships to answer the DVD feature gap without redesigning the core console, but the cost premium proved that style and functionality alone can’t overcome market momentum.
The Service Layer Becomes Real
Microsoft Xbox — A PC in Console Clothing
The original Xbox (2001) was a direct incursion from Microsoft:
- x86 CPU, NVIDIA GPU, and an internal hard drive.
- Built to look and feel like a console but think like a PC.
Its most important contribution was Xbox Live:
- Unified online service, friends list, voice chat, digital content.
- Halo turned into the definitive console FPS experience.
Xbox didn’t win the generation in raw sales, but it defined a networked services model that everyone else would eventually follow.
What Comes Next
By the mid-2000s, the next baseline shift was obvious: HD TVs were everywhere, and the service layer was no longer optional.