No market in the consumer electronics industry has more at stake this holiday season than the hotly contested video-game market, which Microsoft, Nintendo, and Sony dominate. PC and video-game titles generate more than $25 billion a year—more than all Hollywood movies combined. That's as much money as the entire toy business and greater than the gross national product of many countries. With year-over-year growth of 120 percent from 2000 to 2001, video games have bucked economic trends and logged record sales in one of the toughest financial climates in history. With that much money on the line, holiday season 2002 will be one of the most closely watched selling seasons ever.

From a consumer standpoint, today's video-game systems are unparalleled. Sony's PlayStation 2, Microsoft's Xbox, and Nintendo GameCube offer processing power and graphics quality that match the mightiest PCs and interactive experiences that surpass content available in other media. The systems are inexpensive, too—about $200 for the PlayStation 2 and Xbox and $150 for the GameCube. But games for the systems aren't cheap: New mainstream titles typically cost about $50 each, although you can find bargains on last year's titles and other games.

But how do you decide which system, if any, to buy? First, consider versatility. The PlayStation 2 doubles as a DVD player, although you need to purchase a remote control (about $30). The Xbox can also play back DVDs, although the device requires a DVD adapter kit, which includes a remote (also about $30, although Microsoft has a deal right now that essentially gives you the kit for free). The Xbox includes networking capabilities, and next month Microsoft will launch an online service, Xbox Live, that costs about $50 a year. Sony has also launched an online service of sorts, but the Sony service isn't centralized the way the Microsoft service is (i.e., each game has to handle online features individually) and requires a separate, hard-to-find network adapter that costs about $50. I'm evaluating the online prowess of the PlayStation 2 and Xbox and will report back by the end of the year.

A second way to judge the systems is by their capabilities. Technically speaking, the Xbox is the king, with a PC-like CPU, 64MB of RAM, 8GB to 10GB of hard disk space, 3-D video adapter, and networking capabilities. The machine also includes four game-controller ports, which are key for multiplayer gaming and especially fun for sports titles. Coming in second place is the PlayStation 2, with an Emotion Engine graphics processor. The Sony machine lacks hard disk storage and features only two game ports, although you can purchase a separate port expander for about $40. The Nintendo device features an ATI-based graphics processor and an IBM PowerPC processor but also lacks a hard disk; it does feature four built-in game ports, however. All three systems are quite capable. I doubt that any user would find any of these systems underpowered or graphically poor. All feature high-end 3-D chips, decent processors, and high-speed action. But if bragging rights are important, the Xbox is the system of choice.

Another important criterion is game availability. The Xbox and GameCube originally focused on niche markets—mature adult-oriented games and children's games, respectively—but have since adopted Sony's broader strategy of catering to all gamers. Still, Sony seems to have a much wider and deeper catalog of titles, and if you have a range of gamers to keep happy—children and adults—the PlayStation 2 might be your best choice.

But each system is well represented by software titles. On the GameCube, Super Mario Sunshine, Resident Evil, and Eternal Darkness: Sanity's Requiem are popular, with Nintendo describing the latter as an innovative psychological thriller in which players use dwindling "sanity meters" that cause them to question their grasp of what is real and what’s illusory. Sony boasts excellent sports, action, and racing titles, including such games as the ultraviolent Grand Theft Auto III, Metal Gear Solid 2: Sons of Liberty, and Gran Turismo 3: A-spec. On the Xbox, companies under Microsoft's umbrella publish many of the best games, such as Halo, NFL Fever 2003, and Project Gotham Racing. Some games, such as the best-selling sports title Madden 2003, are available on two or more systems. And PlayStation 2 and Xbox owners can soon buy The Two Towers, a faithful adaptation of the upcoming movie.

Finally, you might consider market share when shopping for a new system. With 40 million units sold, Sony is the runaway market leader. Microsoft had sold only 4 million Xboxes by June 2002, but the company says it will sell 10 million to 11 million units by the end of the year. Although Nintendo hasn't issued any recent sales figures, IBM, which supplies the GameCube's PowerPC processor, revealed this week that it has shipped 10 million processors to Nintendo. And Nintendo says it's on track to ship 16 million GameCubes by the end of 2002. Sony obviously dominates the video-game market, leaving Nintendo and Microsoft to pick up the slack. Is the market big enough for three players? Maybe not in the past, but with more than $25 billion at stake this year, Microsoft, Nintendo, and Sony are all in it for the long haul.

Less certain is the fate of third-party software developers, many of whom can't afford to develop titles for two or more systems. With Sony increasing its already huge lead, many of these game makers will simply decide to create PlayStation 2 games and ignore the Xbox and GameCube. For this reason, combined with the PlayStation 2's expandability and depth of software, I have to choose the PlayStation 2 as the system to own in 2002. But that opinion doesn't mean that the Xbox and GameCube are losers, per se. As I noted, both systems are capable. In the end, no choice is bad, and all three systems offer years of cutting-edge entertainment and interactivity.