In the sixth generation of video game consoles, Sega exited the hardware market, Nintendo fell behind, Sony solidified its lead in the industry, and Microsoft developed a gaming console.The generation opened with the launch of the Dreamcast in 1998. It was the first console to have a built-in modem for Internet support and online play. While it was initially successful, sales and popularity would soon begin to decline. Production for the console would discontinue in most markets by 2002 and would be Sega's final console before they switched into becoming third party.The second release of the generation was Sony's Playstation 2, which would go on to be the best selling console at the time. Nintendo followed a year later with the Nintendo GameCube, their first disc-based console. Though more or less equal with Sony's system in technical specifications, the Nintendo GameCube suffered from a lack of third-party games compared to Sony's system, and was hindered by a reputation for being a "kid's console" and lacking the mature games the current market appeared to want.
Before the end of 2001, Microsoft Corporation, best known for its Windows operating system and its professional productivity software, entered the console market with the Xbox. Based on Intel's Pentium III CPU, the console used much PC technology to leverage its internal development. In order to maintain its hold in the market, Microsoft reportedly sold the Xbox at a significant loss and concentrated on drawing profit from game development and publishing. Shortly after its release in November 2001 Bungie Studio's Halo: Combat Evolved instantly became the driving point of the Xbox's success, and the Halo series would later go on to become one of the most successful console shooters of all time. By the end of the generation, the Xbox had drawn even with the Nintendo GameCube in sales globally, but since nearly all of its sales were in North America, it pushed Nintendo into third place in the American market. In 2001 Grand Theft Auto III was released, popularizing open world games by using a non-linear style of gameplay. It was very successful both critically and commercially and is considered a huge milestone in gaming.
The seventh generation opened early for handheld consoles, as Nintendo introduced their Nintendo DS and Sony premiered the PlayStation Portable (PSP) within a month of each other in 2004. While the PSP boasted superior graphics and power, following a trend established since the mid 1980s, Nintendo gambled on a lower-power design but featuring a novel control interface. Apple Inc. entered the realm of mobile gaming hardware with the release the App Store for the iPhone and iPod Touch in the summer of 2008. The greatest shift brought by Apple's entry was to abandon the traditional reliance on "brick and mortar" retail sales for software purchases; instead, the iPhone platform relies entirely on digitally-distributed content.
In console gaming, Microsoft stepped forward first in November 2005 with the Xbox 360, and Sony followed in 2006 with the PlayStation 3. Setting the technology standard for the generation, both featured high-definition graphics, large hard disk-based secondary storage, integrated networking, and a companion on-line gameplay and sales platform, with Xbox Live and the PlayStation Network, respectively. Both were formidable systems that were the first to challenge personal computers in power (at launch) while offering a relatively modest price compared to them. While both were more expensive than most past consoles, the Xbox 360 enjoyed a substantial price edge, selling for either $300 or $400 depending on model, while the PS3 launched with models priced at $500 and $600. Coming with Blu-ray and Wi-Fi, the PlayStation 3 was the most expensive game console on the market.
Nintendo would release their Wii console shortly after the PlayStation 3's launch, and the platform would put Nintendo back on track in the console race. While the Wii had lower technical specifications (and a lower price) than both the Xbox 360 and PlayStation 3, its new motion control was much touted. Many gamers, publishers, and analysts initially dismissed the Wii as an underpowered curiosity, but were surprised as the console sold out through the 2006 Christmas season, and remained so through the next 18 months, becoming the fastest selling game console in most of the world's gaming markets.