Microconsoles: Growing pains or death throes?

Microconsoles: Growing pains or death throes?
Nick Gibson

By Nick Gibson

May 7th 2014 at 2:54PM

Nick Gibson on the struggles this emerging market faces, and whether it can overcome them

You might be surprised to learn that there were actually three new games consoles launched in 2013. PlayJam’s GameStick was thoroughly obscured by the din from Sony and Microsoft’s competitive chest thumping.

With microconsole pioneer Ouya also struggling earlier in the year, what was forecast to be “the year of the microconsole” passed with its two leaders proving to be damp and squib-like. Are these just growing pains for a fledgling but high potential market, or the death throes of an ill-conceived and unviable concept?

Ouya’s $8.6m Kickstarter performance and $15m VC fundraising had promised so much. But negative reviews, dismal software sales, complaints from developers and staff departures have soured initial enthusiasm. If Ouya, with its relatively laden coffers and strong initial momentum, couldn’t crack the market, what hope do GameStick and other “indie” microconsoles have?

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Microconsoles face the same problem all games formats have: to grow an installed base, you need compelling software. But to gain the former you need the latter. Once you have an audience you can start to grow your library, which then stimulates the audience and so on. Nintendo, Sony and Microsoft overcome this by throwing money and resource at strong first and second-party development while securing third-party exclusives. Long-term momentum is always driven by content.

There is a future for microconsoles but it is closer to the traditional console model than firms are able to admit or achieve.

These microconsoles are sold on the value of their open publishing platforms, suitable for re-versioning titles from other devices, but they need more than ports to be commercially compelling. Unwilling or unable to throw money at exclusive content, the microconsoles have therefore had to use price and functionality as their USPs.

History has shown that cheap consoles can sell, but these have always been full consoles at the end of their sales cycles, with content portfolios and brand strength built over many years. As long as price not content is their USP, microconsoles will struggle.

To break out of this rut, Ouya has become hardware agnostic, allowing its platform to work on third-party devices. Rather than gain exclusive content, it is trying to secure the installed base first, piggybacking on others. It’s an interesting strategy that initially hinges on the quality of its hardware partners.

But, as OnLive proved, even with major partners it would still need a continual flow of high-quality and exclusive content to drive long-term growth; there is little evidence that any current microconsole can achieve this.

So is there any future for microconsoles at all? I believe there is, but it is limited in size and closer to the traditional console model than the existing players are capable of either admitting or achieving. The opportunity is to create a low-priced but powerful, accessible and portable console with high-quality content for TV. It would be aimed at the sort of gamer that picks up a PS3 in its later years as well as less affluent territories where price sensitivity is high. Sony certainly believes it’s a viable market. Despite its potential to cannibalise existing console sales, Sony’s comparatively well-received Vita TV microconsole is expected to launch in Japan this year, with a library of some 1,300 games.

In fact, the microconsole opportunity may only be realised by companies such as Sony, with sufficient financial and development resources to jump-start consumer interest. Amazon is another viable entrant in this market with a successful Android app store, a robust reputation for high quality, low-cost consumer devices and, most tellingly, the recent acquisition of 75-man console game developer Double Helix.

Those first to market face a long, slow and difficult journey in a currently microscopic market, but don’t give up on the microconsole concept. Wait until the heavyweights get the market started properly.