Wednesday, January 18, 2006

Handheld Bonanza

The Nintendo DS. Where do I even begin with a product like this? First let me state that I think this may be Nintendo's MOST innovative product to date, followed by the Virtual Boy (true stereoscopic vision which was so far ahead of its time that the technology could not support it) and the Nintendo 64 (the innovation in the 64 was myriad being the first console system to even suggest upgradable memory. The graphics and sound cards laid the foundation for the Gamecube and Revolutions own chipsets using advanced firmware in both which has allowed the Gamecube to look and sound incredible while keeping game software more compact. The real innovation here though lies in its controller. Before the 64, shoulder buttons werent aligned in the now standard trigger angle, the z button changed that. A standardanalog stick was an addition that changed console gaming with such resolution that Nintendos competition think the analog stick cannot be replaced or enhanced. We will see. On top of these the c-button configuration could be said to be the precursor to the dual analog and was utilized in FPS games in exactly the same way.) Nintendo has always had the market strategy to sidestep direct competition with innovation.
Let me give you a great example of this concept. There is a game on the market called Guitar Hero. This game sells with a 3/4 size, plastic guitar. The guitar has buttons on it that let you sort of mimic chords and some buttons that let you sort of mimic plucking. The developer and publisher both made a substantial gamble in terms of time and money for this game. The game runs $70. $110 if you want 2 controllers. Unless a sequel is made the controller will never be used for anything else. The manufacturing cost for a brand-new controller form will need to be recouped AS WELL as the development costs for the software. Most designers and publishers are not willing to take this kind of risk. Now take a look at the payoff. Anyone who thinks playing a guitar game would be something they should do has only one game to choose from. This would probably include people who play the guitar as well as people who dont. On top of this even though the costs for the controller were very high, the cost for software development on a game of this kind are very low and with existing game mechanics a sequel could be brought together in a matter of 6 months which could be a decision regardless of if the first game sells well. If it flys off the shelves a sequel will increase profit margin and genre proliferation. In contrast if the first game doesn't sell well a sequel can be made for a fraction of the already cheap development cost of the original and sold without a controller earning profit through marketing mainly to consumers who bought the first game. The same example can be made for the Nintendo bongo controller, with two main differences. #1 Nintendo can produce a new, high-quality controller form-factor for much cheaper and #2 because this product was released by Nintendo proliferation can be expected to be much higher so we see 3rd party developers creating games that make use of the controller such as Odama which is a quirky pinball type game. Where the guitar controller will never be used for any other type of game the bongos have been used for music games (2 I think), a platformer (which is awesome and very shattering to the game development world to have created such a solid platforming title with no d-pad, no analog and only 2 buttons. The title is actually operated with only 5 commands, tapping right and left to have your character run that way, slapping both to have him jump, alternating back and forth to have him hit things and clapping to interact with other characters and objects.) and the pinball game coming out in the spring (I think).
In contrast to both of these games and their unique software titles it needs to be noted that creating an entirely new handheld or console can increase profit margin dramatically as in the case of the DS. The reason why is simple, while a developer making a game that uses the bongos is mainly marketing to consumers who already have the special controller and developer for the DS has a market where EVERYONE has a touch screen, microphone, and wireless funtionability. We would say that market saturation for these new control forms is 100%. Therefore creating an innovative title to take advantage of these new control abilities is MUCH less risky and is not attached to high manufacturing costs of creating new controller forms.
Now on to specific market arrangement. Nintendo created to DS to do two things. First to provide new tools to developers in order to create new genres and continue the gaming lifecycle which I will blog about later. Secondly they hope to create a new market. They said several times that the DS represented a third Nintendo product and was NOT a succesor to the Gameboy Advance. If we take a closer look at the Sony PSP we can easily see why Sony could stand to lose quite a bit of money on it. First though, I want to talk about some of the things that are really working in the favor of the PSP. The best marketing move on Sony's part here is definately the choice to go with UMDs. While I think that UMDs are a detriment to the handheld on the consumer side they are a real strength from Sony's perspective because they are cheaper to manufacture than cartridges and because the storage capacity allows Sony to market movies from Sony pictures providing yet another market for their movie lineup. Reasons why UMDs are bad for consumers would be the frailty of any optical disk in comparison to a cartridge and the marked battery difference giving less than 3 hours playtime if the disk is constantly spinning (as in watching a movie) which will drop to about an hour after a couple hundred recharges which could easily represent a year in the case of some hardcore gamers. Another huge benefit in favor of the PSP is the power of the unit. I would say to anybody that gameplay should always have more consideration than graphical power but at the same time there is no denying that if you could get the same game with better graphics you arent going to choose the worse looking version. Of course the consumer will pay a different price for a better looking product even though functionally it might be identical. The pricepoint for most PSP game is $40 while the price point for most DS games is $30. This is purely the difference in development costs because as has already been stated UMDs are much cheaper to manufacture than cartridges. As I said in my last blog, this price difference in games will be a major advantage of the Revolution over the PS3 and 360 where I think the price difference could be $20 or more. How hardcore are you REALLY?
Now on to why the PSP could face some major trouble. Firstly we need to take a look at the competition. Nintendo is the obvious competition and though I am not privvy to profit margins I would be willing to bet that Nintendo has a wider profit margin on a cheaper system than Sony does because that is how their prevailing history. This is a viable concern as it means that Sony may or may not make any money on its PSP lineup whilst competing against a corporation that is definately making money on its products. Not so obvious are the other huge competitors to Sony's device. When Sony decided to incorporate movies and music capability they put themselves in direct competition with quality MP3 players like the I-pod. In an earlier blog I talked about why videogame consoles don't drop in price as much as other electronics and here is another wonderful advantage. Apple can release a newer version of their I-pod and start selling their older versions as a lower price, eventually creating a media product that does what the PSP does for half the cost to the consumer. In contrast the PSP will almost definately never sell below $150 and it will be a couple more years before that price point can even be reached. Another big issue for Sony is the multi-fuctionality of the PSP. Multi-functionality does not typically drive sales up and in the case of the PSP this is definately true. In order for the PSP to remain competitive they have to have a lineup that incorporates games AND movies now, whereas Nintendo only needs to worry about games. Looking at this past year you can see a steady decline in games released for the PSP and this is part of the reason why. Now you have gamers disappointed with a product. If there were less movies available then you would have media buffs upset. Sony has put themselves in a position that is dificult to maintain competitively.
The comparison between the PSP and the DS is so important to Nintendo's strategy that I had to talk about it. Now on to some of the specifics of the DS and perhaps more importantly with the Revolution looming on the horizon, some idiosyncracies with the announcement and release of the DS. But first, have a Merry Christmas.


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February 12, 2007 5:51 AM  

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