"Aureal and Creative are facing off on [audio software interfaces], products, and distribution," said Dean McCarron, an analyst at semiconductor watcher Mercury Research in the US. "Creative is trying to cover everything; Aureal is clearly aiming for the top." And, for the moment, Aureal has succeeding in grabbing territory away from Creative. In early 1997, the company unveiled A3D, its "psychoacoustic" technology for fooling the ear into believing a sound from two speakers actually comes from anywhere in 3-D space. While many analysts ignored the offering as a blip on the radar screen, for the gaming community, it was the atomic bomb. The reason: With only two speakers or headphones, users can hear sounds that seem to come from behind, above, or below them. In a game such as Quake 2, hearing an opponent's footsteps from behind means the difference between life and death. "This lets us fully immerse the player in the game," said a producer for a major gaming company. "3-D graphics is being pushed to its limits -- 3-D audio is the next way to add atmosphere to games." Fearing his comments might sour relations with Creative, the producer asked to remain anonymous. With a combination of solid hardware and strong developer support, A3D quickly signed 50 developers on board -- now it has over 100. In June, Aureal's bread-and-butter product, Vortex -- a chip for accelerating A3D-compliant games -- won the Best New Technology, Hardware award at the US Electronic Entertainment Expo '98. In July, the company added power to its arsenal when it signed a joint marketing agreement with Creative's arch-rival Diamond Multimedia. "Creative was asleep at the switch," said Toni Schneider, vice president of Aureal's advanced audio division. "Sound Blaster became the lowest form of audio, while we defined the high-end." On August 6, the company unveiled its second-generation audio processor, Vortex 2. The new processor can model up to 16 direct audio sources and create 64 reflected "phantom" sources in CD-quality sound. Products based on the board are expected to ship in October. But on the same day as Vortex 2 was introduced, Creative struck back, announcing its own high-end solution for the PC: Environmental Audio. Environmental Audio promises to deliver high-fidelity 3-D audio and sound effects on the PC. The technology is the basis for its $200 (£120) SoundBlaster Live! audio board that hit American store shelves on Friday. Creative has flexed its market muscles and lined up support from prominent game publishers Activision, Dreamworks, and Electronics Arts but admits it was a bit slow off the starting line. "(Aureal) was in the right place at the right time," said Micah Stroud, audio product marketing manager for Creative Labs. "But since then, we have had time to look at the problem." Creative's strategy bears some resemblance toAureal's. It uses a core technology (Environmental Audio), a software interface (Environmental Audio Extensions, or EAX), and hardware (the EMU10K1 processor). There, the similarity ends. Creative has the ability to market its own board -- the Sound Blaster Live! -- while Aureal depends on third-party distributors and their brand names. The core technology differs as well. Environmental Audio approximates room size in 3-D games and uses special audio effects to create the illusion of a 3-D environment. Aureal's A3D models the 3-D environment and essentially "renders" the virtual sound waves, electing to do real physics rather than artful approximation. The effectiveness of the approach depends on the application, analysts say. For games, Aureal's technology can better model an environment through which a player may be moving, said Rob Enderle, an analyst at PC market watcher Giga Information Group. Meanwhile, Creative's technology offers more flexibility for high-end audio editing and music systems. "There is nothing else out there with the quality of the Creative technology," said Enderle. Ultimately, the user won't notice a difference, especially if only two speakers are in use. "I am not convinced that there is a major difference between the two products," said Enderle. "That means users will go with the brand they know." Still, Creative is not willing to let users settle on two speakers. A key tactic in its Sound Blaster Live! assault is pushing PC users towards surrounding themselves with four or more speakers. While Aureal supports two- or four-speaker arrangements, two is generally enough, according to Aureal's Schneider. "Creative has started this fallacy that you need four speakers or more to do 3-D sound," he said. "Maybe they need that many, but we don't." Despite Schneider's assertions, both Giga's Enderle and Kimball Brown, an analyst at market researcher Dataquest believe that high-end users will want the full surround-sound-like experience. "Two speakers are nice, until you move your head," said Brown. "Then you lose the 3-D experience." Through its hi-fi audio subsidiary, Cambridge Soundworks, Creative markets surround-sound products to PC users, including one with four speakers that debuted in July. Cambridge Soundworks will soon have a Dolby Digital 5.1 speaker system available. "Surround sound is the future," said Creative's Stroud. "Today, it's just gamers, but this could go into the living room."