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Snuffing out disruptive microconsoles won't be so easy for the 'big three'
by Kris Graft on 09/12/13 08:38:00 pm   Editor Blog   Featured Blogs

The following blog post, unless otherwise noted, was written by a member of Gamasutra’s community.
The thoughts and opinions expressed are those of the writer and not Gamasutra or its parent company.

 

Kris Graft is EIC of Gamasutra

When the PS Vita TV was announced this week, the response from a lot of corners of the internet, both from video game developers and from players, was essentially "Welp, show's over for the Android microconsoles! We've got a real video game company to show everyone how it's done."

Typical, weird tech-brand loyalty aside, if you're thinking one of the big three console makers will just swoop in and snuff out an entire disruptive innovation, you're missing the big picture. And if history is any indication, you're also wrong.

More than Ouya

The nascent mobile console market is not just one startup -- it is not Ouya, it is not GameStick, GamePop, Mojo, etc. This isn't a brand vs. brand "race."  That's the small picture. This is about the old guard that will find it increasingly difficult to fend off -- and inevitably have to adapt to -- an entire disruptive innovation. This disruption is driven by mobile chips and hardware that are updated much more frequently than console hardware, by open app stores and operating systems, and by small agile companies for which it makes sense to work within lower-margin businesses.

If any of this sounds a bit familiar, it's because I'm taking a page (well, a few hundred pages) out of Clayton Christensen's book, The Innovator's Dilemma. If you read this book, the parallels between the video game console market and (other) disrupted industries are eye-opening.

Consider this: For a business that's new to an industry at the point of a given technological change (Christensen calls them "entrant firms") like Ouya, it's much easier to move upmarket (i.e. increase their product's performance and add new, fancy features; note rapidly-advancing mobile chip performance) than it is for a company like Sony to move down-market (i.e. decrease product cost and performance for a simpler experience to serve a smaller, emerging audience). Upmarket is where the high-gross margin, high-cost, high-performing products like Xbox and PlayStation reside; down-market is where there are lower margins, lower-performing products and a customer base that has yet to be defined. That's where Ouya et al are playing right now.

In the big three's race to satisfy demands of core gamers, Sony, Microsoft and even to a degree Nintendo ("established firms") are essentially held hostage by their customers, who've for years have demanded more power, more features and high-cost games. Serving this audience for the past decades has made perfect sense for the "big three": Spend the money to increase the performance of your product, continue to invest in the expertise, R&D, sales and administration that are ingrained into your current business. Outpace your competitor's tech, and move upmarket as far and as fast as you can, because that is where the best margins are.

The vacuum

But as we can see fairly easily, traditional console makers -- namely Sony and Microsoft -- have outstripped the needs of the customers they originally served -- the people who primarily want to play video games. As great as the features of Xbox One and PlayStation 4 are, we're getting to the point where we'll be able to video chat, play fantasy football, surf the internet, talk to your TV, connect to social networks, connect to your smartphone, etc. etc. etc. What this race upmarket has done is create a vacuum to be filled by new entrants who bring simpler lower-cost, and at first, lower-performing products.

It's likely that Sony sees the disruption happening, but it would make no sense for it to try to serve the mobile-based console market. The market is too small, the margins are too low. Sony has a mobile division, a game division, a mature digital distribution platform, partnerships with manufacturers and entertainment companies, and decades of experience creating electronics hardware. Sony, and Microsoft for that matter, could get into the mobile-based microconsole market if it wanted to right now, but they'll probably have to wait until other companies create a viable market first.

Meanwhile, if past examples of disrupted industries manifest in today's video game market (note: arcades were disrupted by home consoles, so disruption is nothing new for games), the microconsole sector, buoyed by the exploding mobile market, will continue to move upmarket and gain expertise in the business until, "all of a sudden," it begins to satisfactorily serve the kind of players who buy $400 or $500 game consoles, and companies like Sony, Microsoft and Nintendo are caught flat-footed. That's called disruption.

Therein lies the "Innovator's Dilemma": The "big three" console makers may know that they have to reposition in order to take advantage of emerging businesses that will inevitiably become big businesses. But they also have to stay in their current high-gross-margin business and serve their customers of today if they want to make money. For now, it makes sense to stay in the businesses that make money.

Disruption can take a long period of time -- years, perhaps decades -- though in tech sectors, it happens relatively fast. You can catch hints of this disruption every time you hear a core gamer say, "Wow, I'm really surprised how good that iPad game looks" or when someone is impressed when you connect your phone to your TV to a Bluetooth controller to play a video game.

PS Vita TV: New, but the same

We saw just a hint of disruption when the Wii caught fire a few years ago. While Nintendo and others threw the term "disruption" about, the Wii did not displace other traditional consoles. It tried to do fill a vacuum in the console market that it had helped create along with Sony and Microsoft, and it did fill that void to a certain extent. But it didn't finish the job because the Wii, as different of a console as it was, was still a video game console that operated within similar value networks as consoles have since the first generation of video game consoles.

That ecosystem includes companies that design and manufacture console hardware to last for several years (typically sold at a loss), a business model and distribution method that regards games as products and not services, very closed marketplaces, and a subsystem of content creators whose fates are often determined by whether or not a company can sell a whole lot of a proprietary piece of hardware.

The PS Vita TV is the same idea. This is essentially a pretty traditional business model wrapped up in a new form factor. This is a traditional video game console that is stripped down to the bare essentials, that is partially meant to fill a vacuum in the marketplace -- a vacuum that Sony, along with Microsoft and Nintendo, created while chasing the high-end market. These companies are hitting a point where they are outstripping the needs of their audience, and the value proposition is becoming an increasingly difficult argument to make.

With that in mind, PS Vita TV is a good idea, and probably the best move -- if not the only move -- that Sony is able to make in this situation.

Let's have fun and speculate for a moment. It's not difficult to imagine that future iterations of the PS Vita line of handhelds could evolve into hardware that adopts the models and value network of mobile businesses. (Sony's Xperia line has already dabbled in this area, and Sony already has PS Mobile for Android, which works with PS Vita TV.) Then you can maybe imagine a new iteration of PS Vita TV that is based off of that mobile hardware, which can also deliver a living room experience.

It's not unheard of for an established business to weather a disruptive innovation, though many times, the incumbent is left with a smaller slice of the new market, because it waited so long to enter. The PS Vita TV announced this week is merely a stop gap that will help Sony learn a bit more about this new marketplace, and maybe get a foothold (if it's ever released in the West...).

The elephant(s) in the room

It will make sense for Sony and its current competition to invest in disruptive innovations more seriously once that market is big enough and when the audience for these devices is better defined. That brings us to the elephant in the room: Along with the early entrants like Ouya and GameStick -- neither of which is guaranteed success -- there will be major companies entering the microconsole market. Amazon and Google will get into this market, and when they do, realize that they do not rely on the same business, distribution, content creation, sales, or hardware models as the big three game companies. They own enormous app stores that feed into the most ubiquitous devices on the planet, have strong partnerships with content providers and have the visibility to promote and sell their products. If you think about those fundamental aspects, you can begin to get an idea of how these companies have big potential to upend today's video game industry.

One last thing to note: Nintendo is hard to predict. When we talk about companies like Sony and Microsoft, they are adding power and features to their products, evolving their sustaining technologies in order to serve a market that demands higher technical performance. Nintendo traditionally has chased a different kind of audience -- one that primarily is looking to play games. Nintendo, with the Wii, took a chance and moved down-market, even if just a little, and found an audience. There was a flash of disruption there. 

The mother of necessity

There's that old saying, "necessity is the mother of invention." But that's proven throughout history (not just the history of consumer tech) to be false so many times. Innovation often comes from tinkering and building upon previous innovations, with no clear idea of the innovation's application or who the audience for it might be. Who's going to want a microconsole? That's a really good question.

But what people should realize is that it's not up to the inventors or creators to define the use or the value of these innovations. It's up to the marketplace. And once a new innovation finds its application, it will find its audience, and entrant firms will continue to chase that audience until, if Christensen's observations hold true, they become established firms, and are disrupted themselves.


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Comments


Kujel s
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Very awesome write up. It always brings a smile to my face when I see people actually using that computer between their ears.

Bob Johnson
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i dont think ms and sony have outstripped the needs of gamers. i think they have outstripped the needs of the more casual types and nongamers.

these microconsoles should be targeting casuals with software that appeals to them and multimedia features that appeal to them.

you dont need a powerful console to (do) multimedia stuff

Kris Graft
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Ok, I'll bite. :)

I'm not sure how you can say that console makers haven't outstripped (or at least started to outstrip) the needs of gamers (i.e. people who play video games), when the name of one of the consoles is "Xbox One," your all-on-one entertainment device that can do everything and -- oh yeah -- also play video games. How many gamers have you seen on the internet say, "Keep the Xbox One Kinect, save me $100"? Perhaps it's just the beginning of this overshooting phenomenon, but I really do not think it's just "casual types" that the consoles are overshooting.

Bob Johnson
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@Kris

In terms of hardware power and thus pricepoint, the Xbox One or the PS4 far outstrip the needs of the non-hobbyist gamer. The extra features you talk about don't require a $500 piece of hardware. See Chromecast, AppleTV, Roku, ...


The Kinect decision may come back to bite MS in the arse. The other non-gaming features were all software features like Netflix or Xbox music or ESPN3 etc that didn't affect the pricepoint. They were a value-add for gamers. But Kinect is a piece of hardware that adds at least $100 to the price point while its value is questionable by many a gamer.

But that's where Sony comes into the picture. They are essentially providing the same box without Kinect for $100 less.


Christian Nutt
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Also saying "casual types" and "nongamers" in that way is needlessly elitist. I love video games but I don't want consoles that are focused almost to exclusion on triple-A western shooters.

There was a much, much higher diversity of content in the PS2 generation on consoles then there has been in this generation, and the next generation, I suspect, will be worse (at least when it comes to packaged software.)

That narrow focus squeezes a lot more people out of the market than "causals."

Now, of course there are exceptions, and hopefully digital publishing's expansion plus talent splitting off from the few remaining mega publishers / first parties will allow more different types of games to get made.

Harry Fields
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I have a short memory. Do you have any examples on how the last gen was more diverse in content than current gen? No disrespectful tone implied here, I'm just genuinely curious how you came up with that statement (really), because I'd think accessibility and diversity have actually increased this gen.

Russell Carroll
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I tend to agree, but it depends on how you frame the question.
In terms of AAA titles, I do feel we are *much* less diverse in content. AAA is narrowing down to a small group that is rarely added to and rarely divergent.

In terms of all titles, I think we are more diverse than ever, but it's largely due to the rise of indie on the downloadable channels (which didn't exist a generation ago on console).

Bob Johnson
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@Christian

Xbox Live Arcade added a ton of diversity to the 360. It seems like this only gets better next gen.

Josh Neff
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It does seem like the XBox one and the PS4 attempts to cast a wider net, but the higher price point places them in less populated waters. Casual types most likely already have devices to cover most of what these two systems want to accomplish... making them somewhat redundant.

Johnathon Swift
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The same people that buy the most microstransactions are the people that buy triple A games as well.

The "cheap X for casual gamers!" is not a winning proposition, these people simply don't exist.

Josh Neff
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"The same people that buy the most microstransactions are the people that buy triple A games as well"

If true, I'd love to see where you get your data from. Everything I've read thus far places Microtransactions and Triple A games as distinct and seperate markets.

Bryson Whiteman
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From what I understand, Vita TV is only confirmed for Asia? But if it makes it here, I think it's more about Sony filling the position for a $100 PlayStation product than a direct reaction to these microconsoles. Considering that they were selling PS2 for $100 up until this year.

It feels to me like there are more articles about microconsoles being the second coming than articles proving why they're so great. If you write about something enough, maybe it'll come true? ;)

I do think there's a gap to be filled -- but that gap is still there. While there are some gems, the game lineups for these microconsoles still don't compete with anything from the likes of Microsoft, Sony, or Nintendo at this point. And honestly, who knows if any of them will even be relevant a year from now. (That's me being doom and gloom, I'd love to be wrong)

It seems to be looked over more often than not that it's really about the games. At least that how I feel, maybe I'm alone here... Oh yeah, good games that can match up with the correct AUDIENCE! The audience that will actually pay for the games.

Wii U is selling terribly but it's lineup is anemic. From what I understand, Vita should be selling a lot better and it has great games but the hardware's a very expensive commitment for a portable system. 3DS had these same issues until they were corrected.

I feel like Vita TV could fill that niche by providing those great Vita games for a lower price in console form. Let's see if Sony somehow finds a way to fudge the opportunity up!

Regardless of what happens, I think all of this 'disruption' will definitely result in better games for all of us.

Michael Joseph
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"It seems to be looked over more often than not that it's really about the games. "

Not alone. I was about to say something similar. It feels like in all of the rush to deliver hardware, they all forgot what the hardware was for. Compelling games sells hardware. Ouya is aware of this but rather than put effort into creating their own killer exclusive titles, they trying to devise schemes to get other people to take the risk for them.

Nicholas Lovell
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I think you both have missed Kris's point. You talk about these platforms as if they should be compared to the existing platforms.

Microconsoles offer new business models, new entry points, new routes to market and so on. They have the potential (not specifically OUYA, Gamestick etc) to improve in price, quality and game availability*much* faster than MS/Sony have the ability to come down. And if Christiansen is right, one day they will have equivalent functionality for a much lower price.

But to address your core point: iOS is one of the leading games platforms in the world right now. How many games does Apple make?

James Coote
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Think of the console like a football (soccer) club, where the games are the players. Richer clubs can go out and buy a superstar squad, but smaller clubs, the manager often has to get the best out of whatever they happen to have.

I think OUYA has a good enough lineup of games, certainly to compete with others in its league and carve out some minor victories, enough to grow from there. But it's very much a case of looking at what they've got and playing to their strengths.

IMO, OUYA has a great selection of Local multiplayer games, and there are multiple ways that could be used. But there is no unified strategy for marketing games on the console, and no communication with developers (at least that I've heard) about coordinating the individual dev's campaigns with larger console-wide, OUYA initiated campaigns

Michael Joseph
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@Nicholas Lovell

iOS is more comparable to a general PC than it is a gaming console.

People buy consoles specifically to play games and so the selection and quality of games matters.

Harry Fields
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I bought the 360 for games only... but then it did morph into more a media center (especially in the summer draught)/games machine. I love getting early access to buy digital movies before they're out on BluRay and my Netflix, Hulu and ESPN3. Consoles have very much so transitioned from being about *just* games. They're not productivity machines (thank God), but they are more than just gaming machines now. And the next gen only seeks to further that trend, which is not a bad thing.

Bob Johnson
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@Bryson

"It feels to me like there are more articles about microconsoles being the second coming than articles proving why they're so great."

Exactly. This is what really bugs me about microconsoles.

Jennis Kartens
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"but then it did morph into more a media center"

Unlikely outside of the US where change for better digital media is not happening.

Thanks to the GREED of other media (mainly film/TV) I wouldn't even consider any console as a home media system in the next 5 years. That remains a PC with the capabilities of getting the latest movies at original release date for reasonable prices since netflix and others are still held back to be of international value.


Quite honestly, as long as we're not over that entire copyright problem I'll won't have any closed console in consideration as a media/entertainment system. Too many flaws and companies stuck on greed-gum from the 80s (region restriction, censorship, delayed releases, pricing...)

Nicholas Lovell
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Apple has a wider selection of games. It has many high quality games, ranging from Clash of Clans to Candy Crush, Infinity Blade to Xcom, Frozen Synapse to Deus Ex.

The selection and quality of games do matter to Apple. it's just that Apple doesn't invest in any of them.

Nicholas Lovell
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@bobjohnson
That is because you don't appear to be thinking about the Innovator's Dilemma.

Every incumbent is disrupted by a technology or competitor that was derided. It was derided for being too low quality. For not serving existing customers well enough. For being, frankly, a bit rubbish.

Incumbents generally react by either trying to serve their existing customers better (because they know how to do that) or by going upmarket (because they are generally incapable, at an organisational level, of going downmarket).

The new entrants learn how to make things cheaply, or with new business models, or with new ways of addressing customers at lower price points. Then, over time, they get better. The tech gets better, the customer service get better, the services around them get better (in case, the games get better).

I am not yet a believer in microconsoles. I am not convinced that this tranche of microconsoles will work. That doesn't matter.

They have shown a whole bunch of entrepreneurs, designers and investors a different way of doing things. That is the disruption. Importantly, if OUYA and GameStick and everything else fails, that doesn't mean that microconsoles aren't disruptive, or that the incumbents aren't in trouble.

It takes experiments, failure and learning for disruption to happen. You don't sound like you are an early adopter, which is fair enough. Keep enjoying the great stuff created by incumbents for you.

But these articles are about understanding the nature of the threat that the microconsoles offer to the existing players. And it is nothing to do with side-by-side comparisons of the two products.

Bob Johnson
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@Nicholas

You're doing what I'm complaining about. You're talking a lot about how these things are the second coming but not saying why or how. There just is this big assumption "out there" that these things are any sort of threat.

It reminds me of 3d. And GoogleGlass too. Products that are talked about way too much as if they are already accepted by consumers.

I guess various websites just don't have anything better to do and many people subscribe to the "you never know" theory. Talk about sht until it succeeds or completely disappears. And then wonder what the feck we were talking about. ;)

Anyway......Innovator's Dilemma? It is misused. IT doesn't mean new products automatically succeed or are wanted or are the 2nd coming. It doesn't mean oh just change business models, learn the market for 10 years and viola, you take the market over and disrupt it.


Harry Fields
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Yet they get 30% off the top. What a racket!

Nicholas Lovell
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@Bob,

No one is arguing that microconsoles offer more than current consoles. If you don't want to invest effort in imagining how they could change the market, that's your look out.

But people like you are why incumbents get disrupted. Of course, people like me are why some products that crash and burn get traction and investment. Some succeed. Others don't.

But Kris's argument above sets out all the reasons why microconsoles show what disruption consoles face. And your response is "huh, but the products suck".

Which completely misses the point.

warren blyth
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I think you guys (nicholas and bob) are both skirting the core problem:
Where's the innovation?

Nicholas wrote: "The new entrants learn how to make things cheaply, or with new business models, or with new ways of addressing customers at lower price points. "

I thought the innovation had to be visible to the customer, not something hidden behind the scenes for the manufacturer. ie, they'll buy the product when it lets them play games like never before - not when the console is just cheaper to produce.

Ie, it wasn't nintendo's cheap hardware, business model, or lower game prices that made the Wii a success - it was the innovation in motion controls that captured the customer imagination. it was magic.

To me, microconsoles send a message that graphics were all that mattered in video games, so why pay more? Which misses the point that video games are a technology - and technology customers always want tangible new innovations.

* I think it'll be interesting to see if forcing the Kinect on everyone makes the XboxOne seem more magical/innovative than the PS4 (which is basically just a PC). They just need a killer app for the Kinect to remind people that it's magic.

Nicholas Lovell
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That's a really interesting point.

So here is the question: are console buyers technology customers or entertainment customers? Or is the issue that traditional consoles are going after tech customers and microconsoles the entertainment ones.

Either way, that distinction is an interesting one to muse upon.

Bob Johnson
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@warren

You're right about the core problem, but I haven't been skirting around the issue. ;)

As I quoted above from Bryson

"It feels to me like there are more articles about microconsoles being the second coming than articles proving WHY they're so great."
"

On the other hand I think Nicholas really just wants an open platform. That is really what he is arguing for and many others are arguing the same thing. That's what this discussion is about.

yes your console can do all a micro console can do but I can't make a game for it.

I guess I hope MS and Sony find a way to have a more open type of store or place in their store for the guys in a garage etc who want to make a game for a console. It sounds like their consoles are heading more towards that direction than not.

Bob Johnson
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@Nicholas

The article doesn't present any reason why microconsoles will succeed.


All it does is say other products have disrupted markets. And that there is a theory that helps explain why this has happened before. And that gaming has been disrupted before.

All true in and of themselves. But where is connection to micro consoles? There is none. Just being a semi-new product isn't enough. Just being in an industry that was disrupted before isn't enough. Just stating a theory that explains why other products have disrupted industries isn't enough.

So the people that think microconsoles are disruptive need to show what they exactly are doing that is so disruptive. How are they taking over?

I'm not seeing it. I'm seeing everyone interested in the PS4 and Xbox One.




Jess Groennebech
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@Bob Johnson

Well obviously the disruption is the pricepoint, when did you last buy a somewhat competitive console for 100$? The answer is obviously "never". The pricepoint means that at some point in near future, every home will have one in some variation (maybe integrated with a regular tvbox or it is the tvbox itself).

Leon T
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It's not price actually. There have always been cheaper gaming boxes with just digital games to play. The difference now is that you can download new games for it from the Internet. Also people forget that a Roku also has games you can download and play and it is less than $100.

Micro consoles are not offering anything innovative in price, size, convenience, or even tech really. The difference is its an open platform which is more exciting to developers than consumers. This would have had a bigger impact before Nintendo and Sony started rolling out the red carpet to indies and made apps that let you port iOS/android apps with ease. At least then they could have kept any of their hit software off consoles longer.

David Navarro
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"than it is for a company like Sony to move down-market (i.e. decrease product cost and performance for a simpler experience to serve a smaller, emerging audience)."

Whether easy or difficult, it appears Sony have done an excellent job of it. If my gaming machine budget were $100, I know where it would go, and it most definitely isn't the Ouya.

Leon T
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The problem for both Ouya and Vita TV is that the games they offer are mainly for mobile devices. Well Ouya has the advantage because their are games that are built for it and are not mobile ports. All Vita TV has is some old Playstation games and Vita games.

I think my $100 is better spent on an old Wii/PS3/360 if I want a cheap game setup.

Eric Salmon
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To be honest, though, the Playstation lineup thrashes Ouya's at present.

Harry Fields
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If I had a 100$ budget for a machine, I'd pick up an SNES and a handful of classics. But I'm biased =).

I truly believe rumors of the core console market's impending death are premature to say the least. I know a lot of folks on this site's bread and butter is mobile and casual and therefore get excited at the prospect of pushing their wares into a new market (hint, get good at localization!), but they are very distinct and separate markets. Watch the sales graphs for each over the next two years. You will not see either eating into sales of the other. Console gamers are not going to stop buying consoles in favor of cheap little cell-phone-on-a-TV-devices. Conversely, the opposite applies... true casual gamers, with the exception of the Wii to some extent, have historically skipped consoles, with the exception of buying one for a spouse or child. Seriously, we are at a point of fatigue with the current gen, but this is the new cycle (8 years). We will effectively see a groundswell surge of sales over the first couple years for XB One and PS4. Demand for a next-gen console has been pent up for the past 4 years.

Now if we talk emerging markets where consoles have historically failed to push significant units, that is where the micros can really take off, but as I mentioned, it won't be a lost sale for MS or Sony. Is it disruptive or is it simply market expansion and pickup of a consumer where there otherwise would not be? Disruptive implies they are going to come in, grow the market and shake lose the very underpinnings of the core console market. I'm sorry, but with hundred of millions in marketing (if not billions), Sales for this gen will be brisk. Sales of Micros may pick up as well. But I don't see one truly interfering with the other... it's simply a nascent market at this point.

Not to make another Hollywood parallel, but it's kinda' like the big summer blockbusters versus the straight-to-DVD low budget Sharknado market. Would you argue Sharknado, SuperShark, OctoShark and all those trendy new B movies are eating into ticket sales for the blockbusters? I would have to say no as it's been a banner year for box office sales. Consoles/PC=Theater, Micros=Sharknado.

On a side note, one should probably not try to write while hopped up on codeine cough medicine 0_0.

Eric Salmon
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Ouya has a SNES9X emulator on their site, I noticed.

Harry Fields
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Yeah, but some of us have a stance that emulation, in most cases, = piracy. I would be in that group, so that's a non-starter for me (unless I already owned the games and could no longer find an SNES to play them on). For some people, that may be a selling point, I suppose.

Eric Salmon
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In that case, it might be better to recommend buying a Wii and buying the available games on through the Virtual Console service.

Leon T
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Micro console or not the console sells on games. The mobile chips, open app stores, OS, and smaller dev teams don't do anything to current console market, but are tools that someone can use to disrupt it. Right now no one is using those tools in a way that makes that possible. What's going on right now is a tech disruption. Smartphone and tablets are a hard disruption to the PC and laptop market. Micro consoles at this point are only a problem for Roku and Apple TV type devices. I see Roku and Apple TV winning that battle.


The problem right now with micro consoles is that there is no market for them. The Wii had Wii Sports and motion controls and Nintendo software to help create a market for it. Vita TV has Vita games that can't even sell the Vita. It's a cool device but only if you have a Vita and/or PS4. Other micro consoles are trying to sell off of mobile or PC games that people want to play on mobile or PC.

There is nothing stopping one of the current console makers from using mobile tech for their next console either.

Also like to add that IMHO Vita TV is not actually going after the micro console market. There is barely a console market in Japan at all. In Japan dedicated handhelds have disrupted the home console market. Vita TV is Sony trying to give Vita a hook since its getting killed in that market.

Bob Johnson
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Exactly.

Give me a reason to buy a microconsole. There just aren't any right now.

Nicholas Lovell
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And for the purposes of Kris's analysis, this doesn't matter. The microconsoles are experiments, and the secret of evolution is survive, learn, adapt.

It's possible that the microconsoles are evolutionary dead-ends, but the lessons and threats to the industry are still very real.

Leon T
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It does matter because many attempts to disturp a market fail so talking about why they may fail matters.

Otto Ruefrak
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I have to disagree with your interpretation of the Innovator's Dilemma. Sony with the VitaTV is avoiding the dilemma, and doing so rather brilliantly. Like a lot of the examples in the book, Sony is releasing a product that is less powerful, with fewer features, and seemingly more niche than what it currently offers. It's also a lot cheaper. It's also a product that they would never release if they were to fall victim to the "innovator's dilemma" because it creates competition for their main product line.
Micro consoles are disruptive but what they lack right now is content. A gaming console that can play Android games isn't very useful since most mobile games are designed around touch. The same goes for iOS games. Apple can't flip a switch and make all those games in the App Store work with a handheld controller. They could make a touch-based controller but then the costs associated with it would negate the disruption (see Nintendo Wii U).
Sony in this case is in a unique place because they do have a library of content that they can put on a micro console that can provide the foundation for a market. Then as time goes on, more content can be generated focusing on the new platform. As time goes by, services like Gaikai come into play and as that service improves, you'll suddenly be playing high end, AAA games on this tiny $99 console.
A lot of people say that the PS4 and the Xbox One are the last consoles we are going to see. They're not. It's just that the next generation of consoles are going to be like the VitaTV, smaller, compact, and heavily reliant on the cloud for HD gaming.
What Sony is doing that is really smart is they are getting onboard with this early to avoid the Innovator's Dilemma. In fact, if anyone is falling victim to the dilemma, it's Nintendo. They are the only other company with a catalog of content that could work on a micro console (imagine a micro console that played all the Virtual Console content) but they won't because it will take away one of the advantages of the Wii U.
So no, the VitaTV isn't just another console. It's the solution to the dilemma.

Zach Grant
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I seriously don't understand who would buy a microconsole. If I want to play small mobile games, I've already got my phone. If I want to play polished indie games, my 3 year old PC plays them just fine. If I want to play AAA games I've got my 360. If I want to play AA mobile games I have my DS.

These consoles just reek of trying to fill a niche that just isn't there. Or perhaps I'm just not the target market.

Dane MacMahon
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Yeah, I don't think the market is there currently without exclusive games to force people to get one. Ouya has even acknowledged this, and Amazon is reportedly focusing on making exclusive games for their future release.

This will change though, IMO.

James Coote
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You're not the target market. There is a huge market for the microconsole that gets it right. People who wouldn't consider a $400 + $60/game console may be willing to stretch to ~$100 for something that offers something a bit different. And there are lots of ways you could offer that "something different"

Dane MacMahon
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@ James

Of course, but right now there is no reason to go to Ouya for this instead of playing a laptop, tablet or phone game. It is not a unique experience yet.

It will be though.

James Coote
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Actually, there are unique things the OUYA has. Try getting 4 mates round a single PC to play a local multiplayer game. Do you prefer playing an emulator on your tiny little phone screen, or on a big TV with a controller as it was originally intended?

In OUYA's case, the product and games are not the best, but it's good enough. History is full of examples, like betaMax vs VHS, where arguably the technically inferior product won out due to superior marketing

OUYA is only struggling because they have terrible marketing

Dane MacMahon
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Your emulator example is nowhere near an Ouya unique experience. Nor is local multiplayer really, compared to consoles, though admittedly there is a higher cost barrier even for a Wii, but not much.

Ouya is struggling not only because of marketing, but because nothing is making a lot of people want it over common sense alternatives. Ignore that if you wish.

James Coote
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It's very easy to take each thing in isolation and say "but it's not unique because X can do that". Why would I need a smartphone when I have a feature phone and a laptop? Combined, they do everything the smartphone does, and more. But the smartphone sells because of the unique combination of things it does in a single product, all wrapped in a sexy UI and with a heavy dose of marketing

Plus you personally have in depth knowledge of the full range of alternatives from working in the industry. Most consumers don't

Dane MacMahon
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Yes but no console, PC gaming GPU or even smartphone sells without consumers wanting a game or app available for it that they can't get already. I don't think Ouya has any of those. Hopefully it does someday. If it doesn't then another microconsole will.

Either way I think it is a big part of the future, but today, right now, the Ouya has a problem selling itself as a place to get something unique and well made.

James Coote
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The idea of a killer app is a bit of a myth. It's lazy and convenient form of analysis, pointing back in hindsght to a single thing that you can hold up as the key to success

What apps did the iPhone launch with? Were any of them "killer"?

Edit: The idea of platform exclusives pushing sales is similarly bunk. It's good marketing that weaves exclusives into a wider story about a platform's ecosystem. No one really buys a platform for a single exclusive game. They buy on the expectation that the exclusive is representative of the wider game selection.

Dane MacMahon
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@ James

I'm not really talking about one hit game exclusive, though that would certainly help. I am talking about a general air of "need an Ouya to do this." I don't need it to do anything, I bet most other people don't either. Your examples are all things you can do with a laptop and a Wii, things most people already have or had. It's just not compelling.

Microconsoles are going to have a larger market when they replace other devices or do things unique among devices. The Ouya cannot do either right now.

Harry Fields
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I'm pretty core in tastes and actually had an Ouya on pre-order. Then I was reviewing my budget and saw the pending expense and was like "why am I buying this?" The machine was a novelty and well within impulse range but I took a quick glance at the games and there was nothing offered that I couldn't find elsewhere in some form. Granted, I love my gameplay wrapped in a warm tortilla of beautiful, gorgeous graphics and sublime music and production values, but still... point remains that they had me as a customer on impulse (a good position to be in)... until I looked at the experiences offered (a bad thing). If they can get some truly killer exclusive gems (ie become the home of PixelJunk and thatgamecompany type products), they can carve out a niche. There has to be *some* level of walled garden in place though. As soon as you flood a market with hundreds of thousands of crapware titles, it muddies the waters and keeps gems from being found by the very market the machine targets. They must solve that. True open-ness will never work. They have to curate content. But then that's going with the current app-store paradigm which turns them into a less disruptive force putting it all right back at square one: Why am I buying this?

Dane MacMahon
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Imagine how cool it would be if I could purchase, download and play a game on my PC, then copy it to a small device I can plug into my TV or tablet and continue playing there. Perhaps my whole gaming life and library could be on a small device the size of a USB stick, which I plug into whatever device I want to play on. No more platform holders, just distribution networks competing with each other with sales and exclusives, but never hardware exclusives, because gaming has moved beyond device exclusivity. Each "gamestick" has manufacturing competition, like a DVD player, but universal functionality.

Man I would love that.

Anyway, just brainstorming. My core point is I think these future technologies and market changes could easily kill the dedicated console box with a mighty corporate gatekeeper, and MAN am I looking forward to that. Bring. It. On.

If I've ever really liked a company it would be Amazon. Amazing customer service, quality options and value. I look forward to what they offer in this space and the start of change.

Kris Graft
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I think some people are missing the point that as mobile-based consoles continue to move rapidly upmarket as explained in my article, they'll be delivering the kind of "AAA" experiences that you can get today on dedicated home consoles. We're already beginning to see this today. No one needs to worry about couch-friendly gaming disappearing, or AAA gaming disappearing. I'm convinced it'll always exist, but within a different framework. Everything I wrote is good news for people who make video games.

Here's some additional food for thought, straight from Christensen's book:

"When the performance of two or more competing products has improved beyond what the market demands, customers can no longer base their choice upon which is the higher performing product. The basis of product choice often evolves from functionality to reliability, then to convenience, and, ultimately, to price."

Raise your hand if you think this applies to today's video game console market...

Harry Fields
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I think it may apply in the 2021 cycle, when processors simply cannot get any smaller and power starts becoming about efficiency and utilization. The developer within loves having the constraints of the past 8 years removed. The gamer within looks forward to seeing what everyone else does with the new capabilities. Who will be the first shop to really take advantage of MS's Azure stuff and do something revolutionary? I look forward to "state-of-the-art" getting a bump, and Micros don't come close to meeting yesteryear's state. But again, the Micro Consoles of 2017, 2018.... maybe they do perform at the point where consumers don't see an advantage in the big boxes anymore. It'll be interesting to see how the market(s) shakes out. It's far too nascent to risk capital going after with AAA experiences for now. Maybe when Apple, Amazon and others get into the fray (and seriously), it will shift the gaming world on it's axis. I do not believe that time is yet. So for now, I have to keep my hand down. Maybe later down the road, I'll raise it :P

Bob Johnson
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@Kris

It doesn't apply.

The AAA console experience that you can get today on a dedicated home console is a moving target. It is just about to move again this fall. And it will take another 7-10 years before a $100 "micro-console" can catch up. And by that time the old dedicated home console will catch up to the "micro-console" in price and a new much faster console will take its place.

I'm just talking about MS/Sony. Nintendo's definition of a AAA dedicated home console experience is a completely different paradigm. One not driven by processing power much, but by gameplay/controls/input.

The day these guys can't do much new and fun at $300-$500 is the day microconsoles take over. Even then what are old consoles at sub-$200 prices but microconsoles?

Thus there is no market for microconsoles.


E Zachary Knight
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Bob,

Do you really think that the PS5 will launch at a price comparable to a microconsole? Sony can't even get the PS3 to a comparable price. The only way they will be able to compete on price is if they give in to the technology. Ditch the cur=tom boards and go commodity.

As it stands, Microconsoles are capable of nearPS2 gen level graphics. At the rate of advancement of mobile tech, where a lot more than 3 companies have a stake, we will pass that in a couple of year. At which point, the graphical difference between the microconsole/mobile tech and the dedicated big 3 tech will be moot for most gamers.

Bob Johnson
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@E Zachary

That's not what I was tyring to say.

I tried to say by the time the PS5 comes out the PS4 will be close to the $100 price of a less powerful micro console never mind that, by then, 75 million people will already own a PS4 ((assuming sales equal to PS3.)

IN terms of processing power, what you can put into a $400 shoe box belonging to Shaq is always going to be faster than what you can put into a $100 hockey puck sized box.

Harry Fields
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'cept in emerging markets. I maintain they are perfect for that.

Nicholas Lovell
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Do you really think that the AAA console experience is moving that much? I see a lot of professionals accepting that the technology advances are costing much more to deliver for little benefit for gameplay or for selling more games, except that it increases cost.

Dane MacMahon
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Minecraft has sold more than any game that emphasized graphics. The whole idea of needing to invest more money into graphics at the cost of needing more sales is ridiculous. Even Call of Duty prioritizes framerate.

Bob Johnson
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@Nicholas

Either way microconsoles lose. I mean if I don't need a more powerful console then I'll just stick with my old one.

Jane Castle
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I don't always agree with you but this time you have a point. No one cares about a dynamic, real time global illumination eye lash tessellation engine.

Harry Fields
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@Jane

But some people may care about individual blades of grass being procedurally rendered on a football field with realistic hi res skin materials being applied. (remember the big deal at the beginning of the current-gen with sweat?-- Everyone was obsessed with sports games faithfully reproducing sweat of all things).
On the adventure and action game front, there's always room for improvement. True property-driven volumetrics on gases, Realistic, real-time physics-based fluid simulation, and dynamic solids tessellation and de-tessellation based on real-time deformation. Yeah, I'll buy that stuff all day. Prettier textures and higher res bump and normal maps are great as are improved shaders and higher poly-counts. The next gen will set itself apart when it stops being current-gen titles with higher frame rates and better models/textures.

WILLIAM TAYLOR
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I don't really see a future for these microconsoles in the way that most do. I actually believe that Sony and MS, particularly Sony, are actually the best candidates for it.

If the PS3 can drop down to $150 or less, what will be the point of these lesser devices? Especially with something like PS+ where you can sign up for $5 a month and get all of these amazing PS3/PSN games at no additional costs? Will mass consumers really be interested in spending $100 for yet another way to play angry birds on some of these janky Ouya devices when they could spend the same or a little more to play these major titles as well as the indie stuff, have access to the same or more media services AND have an extra blu-ray/dvd player if they don't happen to have one for their TV yet?

As for the Vita TV... I think that's an incredibly niche device that mostly appeals to the Sony faithful and people with PS+ but no Vita who have amassed this huge library of Vita and PSP games that they can't play. Outside of that though, I think that as the PS3 gets cheaper and cheaper the appeal of this device will lower and lower.

Elwood Blues
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I'm really eager to see what Google, Apple, or Amazon would do with a microconsole. They'll have as much work to do as any of the newcomers. They can't leverage their existing app markets because their games won't be ready for the traditional TV/gamepad setup. Will they pay devs for ports? Or just let their clout inspire devs to build for their boxes?

Dane MacMahon
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Amazon has a thriving PC digital storefront, but obviously without Windows they can't really leverage that on a TV. It will be interesting to see what they come up with.

I haven't owned a console since the PS2 but I like Amazon enough to take a risk if they release a decent machine with unique games on it.

James Coote
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The other option is for incumbents to buy one of the upstarts and run it as a separate entity.

For example, Apple's iPhone 5C being an obvious attempt to go downmarket that most expect to go down more like a lead balloon. Whereas they could have bought out a cheap Chinese handset manufacturer to get into the lower end of the Chinese market while not polluting the Apple/iPhone brand

Thibaud de Souza
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I have yet to see more than anecdotic evidence that Apple is trying to go down-market in China with the 5C; pending solid evidence, I will stick to the idea that "Chinese want a cheap iPhone" is fabricated by western media.
What I see around Beijing is the Apple brand stuck on cheap lighters while construction workers and vegetable retailers call their family using their iPhone.

China is world's #1 luxury goods market; if anything there may be demand for a more expensive iPhone here. Keeping in mind that the 5C will be sold at $733 in China, and getting it on a phone contract doesn't help.

Jonathan Murphy
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Production costs go up, prices stay the same(plus DLC), hardware prices go up, and consumers walk away. 2014 will be a hell of a year.

Winning.

John Gordon
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I think this article is well written and well researched. However it ignores one thing that no one has mentioned yet: Minecraft. Or really any other game like it which has low production values but is insanely popular.

One might think at first that Minecraft is the very reason why microconsoles will disrupt tradional consoles. However on closer inspection it actually proves why traditional consoles are safe. See Minecraft would be a threat if it were a OUYA exclusive game. However that is not what has happened. Instead it is being sold on the XBOX360, first digitally and now in retail. Whenever one of these small games really takes off, then the maker is going to want to put it on a "big" console.

Every successful console in the history of video games has had killer apps that were exclusive to the console. These killer apps don't even need to be of high production quality, like the original Pokémon game for the Gameboy. What is necessary though is that these killer apps be exclusives. I haven't really seen a microconsole make a committed effort to making hot exclusive games for their consoles yet. That is what I am waiting to see. Until that happens, the big 3 have nothing to fear.

Ultimately the video game industry is about video games. It is not about hardware. Gamers are going to buy the console that has the best games and the best library. Period. And right now any game that makes it really big ends up on one of the big consoles. That's why microconsoles are not a threat.

Leon T
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I fully agree. That's why dedicated handheld gaming consoles still sell by the millions along with its $50 software in the face of smartphones/tablets with their $1 software.

Bob Johnson
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Yep and Minecraft on iOS isn't the "real" Minecraft last time i checked.

Not sure the full version could run on something like OUYA or not.

Harry Fields
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It could if you reduced draw distance a good bit. It's actually pretty well suited for a part like Tegra3. It would be *almost* as good as the 360 version and entirely playable, even if framerate was at 25-30 in scenes with more lights and faces.

David Boudreau
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Good discussion- as Bob mentioned, Microsoft has had Xbox Live titles, and Indies definitely fit Nicholas' quality requirement as a potential disruptor. The big console makers are and have been aware of Innovator's Dilemma. I mostly agree with Bob's points, and I'm not so sure Innovator's Dilemma applies to the extent that an incumbent is about to be disrupted.

Nicolas Godement-Berline
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I'm late to the party but I'm still on the fence wrt micro-consoles. Do enough consumers still want a dedicated gaming device?

There's definitely performance oversupply on the part of console makers, and room for disruption with cheaper, more accessible devices. I also think there is still room for big screen gaming in today's mobile/tablet world. So from that perspective, Micro-consoles fit the description.

Right now we have PS4 and Xbox One that are dedicated gaming devices, also doing many other things (media, social...). Then we have micro-consoles that are dedicated gaming devices, not doing all the other things the consoles do. But what if what consumers want is a device that is primarily a media and social devices, and also happends to do games? Just like smarphones and tablets for portable gaming.

From that perspective I feel perhaps smart boxes and smart TV may be the real future of TV gaming.


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