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Will microconsoles make it big?

by Brian Weberman , 23.10.2013

With E3 (or the “Electronic Entertainment Expo,” to the uninitiated) now firmly in the rearview mirror, those following the video game industry are turning their attention to the coming holiday season. In late November, Microsoft’s Xbox One and Sony’s PlayStation 4 will join Nintendo’s Wii U to round out the so-called “8th generation” of video game consoles. However, with these industry stalwarts dominating the headlines, it’s easy to overlook an entirely new class of video game consoles: microconsoles.

Unlike their more popular, well-financed competition, microconsole makers are using more unconventional marketing tactics, in an effort to find new market opportunities and to win consumers away from those well-known household brands. With Generation 7 consoles (Xbox 360, PlayStation 3, Wii) having shipped over 258 million units worldwide to date, even a small share of the video game pie can be a very profitable one.

What’s Different About Microconsoles?

While each case is different, microconsoles are generally characterized as low(er)-cost alternatives to the three traditional console brands; as such, they are priced to be more accessible to a broader casual gamer crowd. Rather than paying US$400 or more for a video game console, microconsoles are priced as cheap as US$79. And unlike the typical game released on traditional consoles (with a starting price point of US$60), titles on a microconsole are more likely to resemble a pricing structure you would find on your smartphone’s app store of choice: a few dollars or free-to-play. (In fact, games usually only can be purchased from an app store or some kind of online digital platform, as physical discs are eschewed altogether.) In sum, the concept promises a fun gaming experience at a fraction of the cost.

The tradeoff, however, for some of the microconsole offerings is a lack of hardware firepower relative to the traditional consoles, meaning marquee titles like Call of Duty: Ghosts won’t be available to play. What also may be missing are the broader entertainment options and higher-end functionality (read: Blu-ray drive, cloud computing, voice/motion sensors, et al.) boasted by the pricier console options, which are designed to do more than just casual gaming.

In an effort to court game developers, microconsoles tout a more open-ended business model that cuts down on many of the expenses and red tape – licensing fees, retail fees, publisher fees, the need for a pricey software development kit (SDK) – that are commonplace with more traditional game development through major publishers for major consoles. Moreover, reliance on the commercially ubiquitous Android operating system facilitates the development process; and if the game developer is simultaneously working on a game for an Android-based tablet, for example, there are economies of scale to be able to work on a microconsole version at the same time. All this serves to create a friendlier environment for game developers and creates opportunities in the market that might not be financially possible for them otherwise. For consumers, this translates to a wide, relatively inexpensive selection of games from which to choose.

Ouya Helps Kickstart the Microconsole Generation

Arguably the most popular of the microconsoles, thanks in part to being one of the first of its kind to market, is the Ouya (pronounced “oo-yah”). Lacking the financial might of global powerhouses like Microsoft and Sony, the story of Ouya begins with a far more grassroots campaign. (Their display area at E3 2013, for example, was located not in the main convention area, but in an outside parking lot completely apart from it, much to the chagrin of event organizers.)

In 2012, seeking to create a console that was more accessible to developers and gamers alike, founder Julie Uhrman assembled a team of other savvy gaming-industry veterans. The goal was to create a console that was open enough for anyone to become a developer, with all games based on the freemium model.

Uhrman and co.  then looked to crowdfunding pioneer Kickstarter to secure the necessary startup capital, which they quickly received. And then some. On 10 July 2012, Ouya shattered its target fundraising goal of US$950,000, reaching the target within just 8 hours of its 8:44am fundraising launch and went on to raise another US$1.7million, bringing their 1-day haul to a total of US$2.6million - a current Kickstarter record for pledges received for a project in a single day. All told, Ouya set a number of Kickstarter records and raised a grand total of US$8.6million from more than 63,000 backers in only 29 days of funding.

How is the Ouya Doing So Far?

The early results seem mixed. Critical reviews of the Ouya have been collectively lukewarm, and in July Uhrman responded to reports of slow sales figures, contending that they were, from their vantage point, “better than we expected.” In the month since its 25 June 2013, retail launch, 27% of Ouya users paid for a game, a figure she calls significant for a free-to-play console. This means of course that 73% of Ouya users haven’t paid for anything other than the cost of the console thus far, so an assessment of performance early on appears to be a matter of perspective. The numbers seem great for developers of social and mobile apps but represent weaker attach rates compared to traditional consoles.

Ouya has also experienced some stumbling blocks out of the gate. Kickstarter campaign backers who were promised earlier console deliveries were instead met with shipping delays, as many received them after Ouya hit retail stores. Additionally, their “Free the Games” initiative, whereby Ouya matches funds raised for crowdfunded games in exchange for short-term exclusivity, has seen its fair share of foul play. A handful of campaigns are being accused of using bogus accounts and other irregularities to help hit their funding targets and gain access to Ouya’s matching cash bonus. This prompted Uhrman and co. to change the way the program works going forward.

Microconsoles: The New Challengers

In spite of Ouya’s early woes, it may be too early to write off the budding subgenre of video game consoles entirely. With traditional consoles, handheld gaming devices, PCs, smartphones, and tablets already vying for consumers’ gaming dollars, is there enough room in the market for microconsoles to play? As there is still a long holiday season right around the corner, and with such a diversified and varied field of consoles still to come, time will tell whether any entrant is able to successfully challenge the big name brands and carve out a portion of the market for themselves.

See also:

What Can We Learn From Crowdfunding?

Microfinance and the Power of the Crowd

The future of console gaming – lessons from E3

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