SAN JOSE, Calif. -- One thing

Bill Gates

has over

Sony

(SNE) - Get Report

in the battle to lure software developers to his upcoming

X-Box

gaming console is this: The chairman of giant software maker

Microsoft

(MSFT) - Get Report

is a gaming geek speaking to gaming geeks. But convincing the game-buying public, which spends $15 billion a year on game hardware and software, might be a tougher sell.

He's got the game makers. That was clear Friday, when he addressed about 10,000 of them at the packed San Jose Civic Auditorium, in an hour-long event that was a cross between a long infomercial and an evangelical gathering. To begin with, these jeans-wearing developers had to stand for about an hour on a line that snaked clear around the block just to hear Gates, but still gave him a rowdy welcome that

Al Gore

would dream of.

Gates got initial laughs and applause from the crowd by showing off a game his then-fledgling company sold in 1981 for the Apple 2 computer. It featured a stick figure diving off a platform so rudimentally drawn that it had to be labeled "platform." The game was a reminder that Gates has been in the gaming world a long time.

But it was the strength of the technology that won over the attendees here. "I was wowed," says programmer Robert Lee, who is starting up his own game company. "Normally, I'm really critical of stuff Microsoft has done in the past."

What's so great? A hard drive on the console, something no other console has. That will allow developers to add characters and upgrade or tweak games after a consumer has bought it. That could create a new model -- sell a game, then sell game extras. "You will be able to do some incredible stuff with that," Lee says. "That's the one piece that has been missing from game consoles until now."

The other allure of the X-Box, says Dan Duncalf, president of game developer

Pipeworks Software

, is that it is based on existing platforms --

Windows

and

DirectX

, and a programmer will be able to use existing tools and debugging programs. That will significantly cut time to market, which will save money.

Full development of a game will cost his company between $1 million and $5 million in engineering time to develop, he says, and using pre-existing tools can shave off months and bring that figure closer to the $1 million mark. Pipeworks has been working with Microsoft to develop games for the X-Box since October. "We thought it was perfect," says Duncalf. "We are putting our best product on the X-Box."

For Duncalf, this was no easy decision to make. His company, like the majority of game makers here, is a small start-up that's made up of a handful of programmers and artists and is self-funded. Not many venture capitalists open their purses to this scrappy industry -- even if combined sales of hardware and software produced $15 billion last year. To write first for Microsoft might make it more difficult to sell his programs to Sony, whose

Playstation 2

is already sold in Japan and will be on sale in the U.S. this fall, a year ahead of Microsoft's X-Box.

But whether the enthusiasm of game developers will translate to enthusiasm of game buyers is another story.

Watching demos of new games on a Sony screen, one game developer commented that no one can predict what games will sell. He pointed out that

Tetris

, a game in which a player arranges falling blocks, remains one of the bestselling games of all time, and lacks explosions, complex plots or fancy 3-D graphics.

Nick Moore, a fund manager at

Jurika & Voyles

, who is an avid video game player, says he doesn't expect to see consumers lining up to buy the X-Box. "The probability is that Microsoft won't get anywhere with it," he says. For the foreseeable future, he says, Microsoft's challenge won't be against Sony so much, because the Playstation will dominate the market by the end of the year, but against

Sega

and

Nintendo

for second place. But that will be just 15% or so of the market, he says.

Moore says that just because Microsoft might promise the best technology platform, it hasn't been able to deliver on that promise often.

Windows CE

for hand-held devices and

WebTV

have not been popular, Moore says, and there is no reason to expect that Microsoft will do any better on the X-Box than with those products.

And just because developers like Microsoft, doesn't mean they dislike Sony, he says. They don't. "Sony's developer relations are quite good," he says.

Duncalf acknowledged that he is working now on games for the Sony Playstation and plans to be on both platforms.

Once a gaming platform makes its way into living rooms, it will stay there for about five years, Moore says. And that means that Microsoft's best chance of dominating the market won't be until the next cycle, which might begin in 2003 or later. For this cycle, Microsoft is already too late, he says.