The Nintendo Wii U and revised Sony PSP have done poorly in the market and only the Xbox seems to be holding on in the face of declining console game sales. PC games have also fallen off sharply, though if you see hit titles like BioShock Infinite, they play vastly better on a PC than on the aging console alternatives. The next Xbox and PlayStation 4 are due out this year but they come at a time when people are increasingly playing games on their tablets and smartphones, though most of these don’t have the performance needed for a truly great gaming experience.
This is creating an opportunity for new entries -- something we haven’t really seen yet this century. The new players come at the market with vastly different resources and with vastly different products, though both are using the same platform, Android. Android, ironically, comes without much real support from Google which, despite being a company of geeks, apparently doesn’t have any real gamers on staff. The two platforms are very different but both are trying to drive the next wave of gaming.
Ouya: Old School
The Ouya game console will launch in early June, and it approaches the market traditionally with a low-cost connected set-top box. With a controller that looks like a more comfortable version of the PS3 controller with the addition of a central touchpad but no indication of any motion interface, this product leads on the promise of value because it lists at around $100 with one controller and additional controllers at about $49 each. The device is tiny and it comes with a connection to OnLive so that, assuming you have enough bandwidth and a low latency connection, an additional portfolio of higher performance games are available at launch.
Native games are based on Android and the console will launch with a number of unique titles. This appears to be a relatively fast-cycle product with new platforms coming out much more rapidly than traditional consoles, allowing it to remain favorably priced while not falling too far behind the performance curve.
While it doesn’t have motion capabilities initially, those could be added later. Most of the games people continue to play still use traditional controllers and there isn’t a lot of consistency between the motion-controlled games on different consoles anyway. The $100 entry price point has been historically a very successful one largely because folks will take risks at that price they won’t take at $200 or $300. However, Ouya will need to deliver a continually compelling experience because products at that price level are also more easily abandoned for the same reason.
NVIDIA Shield: Breaking the Model
NVIDIA’s Shield product is a mobile platform that plays like a console. This is a very different and more expensive approach to the opportunity. At an estimated $250 per controller (the controller doesn’t need a console), this product allows for a level of portable performance not yet seen in a game system. It is also Android-based and one of its initial and unique uses was as a controller for personal drones. This appears to be an ideal use because they are designed to work with smartphones and tablets and work far better with a physical gaming joystick interface than they do with a touch screen (much more sensitivity and range of motion).
This gives Shield a use that no other product in market currently has: the ability to be a universal remote control for wireless toys, robots, and drones. Even if gaming never took off for the device, this secondary use could find a smaller but equally lucrative market as a high-end remote control device. Also launching in the next several months, this product would also be an ideal client of for the products NVIDIA is positioning against the cloud gaming opportunity. At NVIDIA’s latest developer forum, there were two companies that announced support for their cloud hardware and Shield could turn out to be a good client for either if you have access to a strong Wi-Fi network connection.
The Shield will rely heavily on the Android mobile gaming portfolio initially, though the company historically has had a great relationship with gaming companies and is likely to fund one or two strong titles for the launch. At this higher price point, NVIDIA will need at least one compelling unique game to pull buyers to the product.
Wrapping Up: Two Very Different Offerings
Ouya’s big weakness is the very limited resources of the company, which is a tiny startup. NVIDIA’s big weakness is the price of their controller, which sits just outside the current sweet spot for 7” tablets. Both products are going to need at least one strong unique title, and NVIDIA’s offering has a lifeline as a remote operated device controller which could bring a lot of folks to the platform that might not otherwise buy it. Nintendo may be out of the running outside of Japan, but neither Microsoft nor Sony is going to give ground easily to either of these products. So 4th quarter is likely to be a major rumble point with Ouya and Shield battling the aging but refreshed Xbox and PlayStation platforms. This almost sounds like an interesting plot for a new game called Console Wars.
President and Principal Analyst, Enderle Group
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