The TV gaming market remains one screen category in relation to games that is dominated by dedicated games devices from the traditional games platform companies; Sony, Microsoft and Nintendo. In this sense, it is a key area of the games ecosystem that has yet to be significantly disrupted by new market entrants, new distribution models and cheaper competition. Yet, it increasingly looks like 2013 will provide some tangible disruption, even if it is at least two to three years before established games consoles are significantly upended by competing channels or devices.
Standalone full streaming services from companies such as OnLive, billed as console competitors, were given a commercial reality check in 2012 due to their lack of scalability at sustainable costs. The lack of a robust commercial model to stream high-quality console like content at the beginning of 2013 has left basic casual and games app experiences on connected TV devices as the main challenge to traditional games consoles.
Connected TV devices - internet enabled TVs, internet enabled Blu-ray players, Google TV devices, streaming (video) boxes and advanced IP and pay-TV set top boxes - have, up until now, been largely positioned as devices to consume video, with more of these devices adding capabilities to consume games content and apps. The usage of games apps on connected TV devices still have a number of hurdles to overcome before becoming a mass-market phenomenon including usability, discovery and monetisation.
But in 2012 we saw the start of a trend in positioning cheap connected TV devices as games consoles above everything else. These devices are commonly based on custom versions of Google's Android, the OS of choice for third-party smartphone and tablet CE companies, and are built to offer more advanced games, that, while not at the level of established consoles and PC games, are a more competitive offering than many existing smart TV apps.
In June 2012, significant industry interest was generated by Ouya Inc's Kickstarter listing for an Android-based games console. The Ouya console runs a forked version of Android, will utilise Ouya's own proprietary store, offers a games controller as standard, is priced at $99 and is already being shipped to developers at the beginning of 2013. It has a consumer launch date of April 2013.
Since Ouya's entry into the market, at least two other games consoles have been announced. Prior to CES, PlayJam announced a new Android-based device named GameStick and, following in the footsteps of Ouya, listed the project on Kickstarter. GameStick is a small HDMI dongle device similar to a USB storage device in dimension, which runs Android and plugs into HDMI-enabled TVs to provide gaming on the big screen. The device comes with a Bluetooth controller and retails for $79. Within 24 hours of listing on Kickstarter the device reached its (low) funding goal and while it will not generate as much funding as the Ouya project ($8m), PlayJam has a significant head start on Ouya with regards to the publishing, billing, online store and content portfolio side of the commercial strategy. PlayJam is an existing major player in the smart TV gaming market, with a number of commercial relationships with major CE vendors across TVs and streaming set top boxes.
In addition to GameStick, PC-hardware company Xi3 Corporation announced a development stage computer game system named Piston, which is optimised for Valve's Steam gameplay in its Big Picture Mode. Big Picture Mode is Valve's online platform and content strategy to disrupt big screen gaming, by enabling Steam content access and use on the TV. Under the mode, navigation is optimised for the TV and all games have controller support.
Valve itself is working on its own 'Steam Box' hardware, but this has not stopped the company partnering with third-parties to bring the Steam platform to the TV. In addition to this partnership, Xi3 has received an investment from Valve to fund commercialisation of the device. There is no confirmation of Piston's pricing but the company's X7a PC starts at $1,100. Even if it is launched at a significantly cheaper price point, the Piston will not be competing directly with the next generation of Xbox and PlayStation devices which are expected to offer robust pricing in the $300-$400 range, although the solution may be attractive to those gamers that spend significant sums on PC gaming rigs.
Nvidia also took the opportunity at CES to push forward its own games-related agenda to the CE industry. The company announced an Android-based handheld gaming device, Project Shield, which incorporates a console controller with a flip out 5-inch OLED screen and runs on the company's latest Tegra 4 processor. In essence this surprise announcement shows off Nvidia's component capabilities around gaming and with a wide number of new devices expected to hit the market in the coming months and years, this was the company reminding the CE community of its credentials. Pricing for the device has yet to be confirmed, however the component make-up and the incorporated screen of the device indicates a significantly higher price point than the other Android-based devices covered here and is probably in the $200 to $300 range.
With the high and low-end mainstream tablet market seemingly sewn up by Apple and Google and its various third-party device partners respectively, the concept of a more gamer-oriented tablet device has come into focus for those companies looking to carve out a smaller, yet potentially lucrative, market opportunity. In addition to Nvidia's handheld device announcement, US-based company Razer showed off its high-end Windows 8 gaming tablet Razer Edge, first shown at CES 2012.
The Razer Edge is priced at $999 for the basic version, rising to $1,449 for the high specced Pro version. The gamepad controller attachment, which incorporates its own battery pack for longer gameplay time, is an additional $249 on its own but is bundled in with the Pro version of the tablet for $200. The device also offers a docking solution which connects directly to the TV and supports standard controllers from the dock to play games in traditional console mode. With this pricing, it is hard to see this device being any more than a niche solution for very dedicated gamers that want a more portable and flexible PC-gaming solution.
So it is clear that we have two trends emerging for competing devices to traditional consoles. One trend is for expensive, high-end gaming solutions that bring existing PC games to the TV and tablet markets, and the other is for cheaper Android-based solutions that are looking to disrupt the established order and can see an opportunity to establish a more gaming-specific offer not yet available from the largest CE vendors offering connected TV devices.
Incumbent TV consoles clearly operate in a more competitive market than ever before but it is also true that Nintendo, Microsoft and Sony have all evolved (and sometimes re-invented) themselves and their console products over time. None of these companies have stood still. Indeed, we still believe that there remains a strong window of opportunity for incumbent platforms in the TV console sector over the next two to three years as nothing yet exists that can replicate what consoles offer. With the announcement of next generation platforms from Microsoft and Sony not that far away we will be looking for unique services that will once again extend the gap between dedicated devices and these young pretenders.