Posted by: kurtsh | May 10, 2006

EVENT: “E3″… a few comments from the peanut gallery.

In the wake of Day 1 of E3: The Electronic Entertainment Expo, I have some comments about the Game Console business in general:
 
1) CONSUMERS ARE GOING TO HAVE TO CHOOSE
The whole prospect of "owning both consoles" is even less of a reality for most consumers.
 
The Xbox360 is $300-$400.  The Sony Playstation 3 is at least $500-$600.  Each consoles games are going for $60 each.  The accessories are pricey and piecemeal.  For example, a single controller is $50 for the XBox360 however the rechargable battery & USB charger for it is another $30.  A XBox Live headset for the controller is $30.  The charging cradle is another $30.  The bottom line is that after all is said and done, a single controller config can be around $110+.
 
The fact is that with consoles eclipsing the $400 barrier and the accessories and games costing as much as they do, it’s relatively hard to believe that all but the most ridiculous or weathy gamers would choose two consoles to make gaming investments in.  Instead, it’s more likely that people will will choose one over the other and stick with it.
 
2) HI-DEFINITION DVD IS NOT A DIFFERENTIATOR
High definition motion picture playback is not something that people are going to rationally choose as a reason to buy a console.  It’s going to be about the games and it’s going to be about what the gaming experience is – everything else is secondary and everything else had better not increase the price any more.  Today’s next-gen systems are expensive as they are.
 
Case & Point #1:  Take a look at the PlayStation Portable.  It’s a gaming device with movie playback, and the UMD disc format that stores the movies in the PSP format is all but dead.  People just aren’t buying movies for the PSP. In fact, the UMD discs seem to be selling awfully cheap in some electronics stores, almost at firesale prices, and most studios have completely discontinued manufacturing them.
 
Case & Point #2
How many people have seen an high definition capacity DVD?  Oops.  There are none.  Never mind – let’s try again. 
How many people own HD-compatible TV sets in the world.  Oops… that’s a pretty small number.  Alright – let’s try: 
How many people that buy DVDs are going to be willing to repurchase part of their collection, just to get the "HD versions" at a higher price.  Eek. 
How many people actually get HD signals on their cable or satellite systems? (Considering that this is usually a pay-for service, it’s not much at all)
 
…Yes – HD-quality DVDs are coming, but are people going to be willing to put out the extra cash "just to get a feature they’re not going to use for frankly a very long time"?
 
3) THE X-FACTOR IS COMMUNITY & ECOSYSTEM – NOT TECHNOLOGY.
People can argue until they turn blue about which CPU or which graphics processing unit is superior in whatever console they’ve chosen, but when the chips are down, what will make a gaming console successful is not the "uses" they’ll have for the console (It’s a dessert topping!  It’s a floor cleaner!) but rather the experience they have with the community and the ecosystem that’s been built around it.
 
What’s an ecosystem?  It’s tough to define all the elements but take a look at a few of these:
 
– Players. 
People want to play others and if it’s easier and more fun to play with those "others", regardless if their perfect strangers or friends or young family members, the game console will be more successful.
 
– Developers.
The developers make the games, and the games make the console.  Period.  If the developers embrace the development environment and believe they are most powerful and most capable in those environments, they’ll develop better games and open their imaginations more readily.  And creativity, ingenuity, and playability is what makes games great.
 
– 3rd parties.
If I can integrate my Desktop PC with my console through a 3rd party, that gets me more involved and more immersed in my console.  If people can add-on to their console with 3rd party tools & accessories that they feel are valuable, then the console becomes more personal and more a part of their psyche.
 
– Services.
Can I see my online stats for a game?  Can I compare myself with my friends?  Can I talk to others online?  Can I buy things to add to my game?  Can I buy games online?  Can I sell things to other players?  Can I bet currency during Texas Hold’em games?
 
– Games.
This is a no brainer but it’s worth repeating one more time.  Consoles are not about entertainment.  People don’t buy game consoles in the same way that they buy DVD players.  Consoles are about immersive challenges and this is a very different specific vein of entertainment that people value.  The more the games challenge players with immersive entertainment, the more valuable the console is.

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