Parents beware. The games console market is set to become even more crowded from next year with the arrival of a console from Microsoft.

The X-Box unveiled yesterday in California by Bill Gates, Microsoft's chairman, brings the world's largest software manufacturer into the console market for the first time as a challenger to the established manufacturers Sony, Sega and Nintendo.

The X-Box, which Microsoft promises will be three times more powerful than Sony's PlayStation 2, will be launched in the US in the autumn of next year and is expected to be available in Britain by Christmas 2001.

The announcement was welcomed by UK game developers. Jez San, chief executive of Argonaut Games plc, said: "It's very good for the entire industry. It will enlarge the video game business."

Like PlayStation 2, the X-Box can be connected to modems, giving access to the internet.

According to indepen dent industry analysts Datamonitor, consoles have the potential to become the sole conduit into the home for digital entertainment such as games, internet access, music CDs and DVD movies.

"Microsoft has realised that the personal computer, its traditional home ground, is increasingly threatened in its role as the dominant gateway to the internet by devices such as mobile phones, set-top boxes and gaming consoles," said a spokesman.

"The arrival of the X-Box will be Microsoft's Trojan horse into the living room."

The global video game market is worth £12.6bn annually. The games market is worth £1bn in Britain, and is expected to generate more money than the music industry this year.

The X-Box is expected to retail for less than £300. It will contain two hugely powerful chips equivalent to the power of two PCs, and Microsoft said it would deliver movie-quality graphics and better, faster games.