Market Insight

Nvidia Shield: Gloves are off as X1-powered Android TV device is unveiled

March 06, 2015  | Subscribers Only

Piers Harding-Rolls Piers Harding-Rolls Director – Research and Analysis Director, Games, IHS Markit

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At a company event on Tuesday designed to coincide with GDC, Nvidia publicly revealed the next device instalment in its Shield ecosystem strategy. The Android TV-based entertainment set top box is the company’s first Tegra X1 device and is aimed at the existing streaming player market while also offering a games capability unmatched by existing Android consoles.

Our analysis:

Shield’s broader entertainment media product positioning:

Nvidia believes it has a good chance to make an impact on the video streaming player market with the promise of 4K compatibility combined with a strong gaming capability. The company hopes to court PC gamers that are in the market for a streaming player.

However, while 4K TVs have come down in price significantly meaning the addressable market for 4K content is growing, the biggest brand TVs already have on-board apps providing support for the leading 4K video services (e.g. Netflix and Amazon Prime). Additionally, there remains a paucity of high quality 4K content for consumers to take advantage off. As such, we believe that to lead with a broader entertainment positioning message at launch would potentially dilute the standout strengths of the new platform.

We believe Nvidia has a stronger proposition to the gamer with the Shield. Tegra X1 means that Shield will be able to significantly outperform existing Android consoles and older generation consoles such as the PS3 and Xbox 360 both on graphics and interface speed. Shield will also provide access to Nvidia’s GRID games streaming service, which will be available at a new standard of 1080p and 60 frames per second, a significant improvement on existing streaming services.

Shield’s pricing:

At $200 for the launch version, the device is priced well above other streaming players, but has the advantage of being future-proofed for 4K streaming services and is also a very capable games machine which includes a game controller. The price point is attractive compared to both Microsoft’s Xbox 360 and Sony’s PS3 although with a much more limited catalogue of games. We believe the company should push the gaming message as much as possible to underline its price-point value.

Shield’s games offering:

Games ported and optimised for the Nvidia Shield compare favourably in terms of graphics with the Xbox 360 and PS3. The weakness compared to these platforms is in the size of the content portfolio with around 50 optimised client games available for the Shield at launch.

Significantly, Nvidia is not pursuing major games exclusives for Shield, which, although reducing financial risk, is likely to undermine consumer interest and demand based on the games content available. Nvidia believes that the value-added aspects of the offer - instant access to content, better graphical performance and 4K video streaming will be enough for the consumer to part with their cash.

The most compelling element of Nvidia’s offer to the gamer is its game streaming service. While the service has been available on the Shield Tablet since launch, the availability of it on a connected TV device immediately increases its desirability in the eyes of the consumer. On paper, the new premium tier offer of 1080p, 60 fps streaming from an Amazon EC2 G2 server back-end based on Nvidia's best performing GPU technology outperforms the graphics of current generation consoles.

The increased usability of not having to wait to download or update a game before you play is a major plus to current console players, while some PC gamers may consider the trade-off of having less content available but not having to pay for PC upgrades as worthwhile.

However, it is clear the success of the service will depend largely on content availability, pricing and accessibility to higher broadband speeds, especially for the premium 1080p streaming tier. In terms of content it remains a work in progress, but with the promise of day-and-date availability of an increasing amount of AAA games releases for outright purchase the situation will improve over time.

Pricing for games streaming services is a difficult balancing act between commercial success, paying content partners and making it attractive to consumers. Availability of an outright purchase option for games makes the subscription pricing for the streaming offer a more complex proposition to execute in a successful way.

Overall this is Nvidia's strongest play so far across its Shield ecosystem strategy although the company's stated aim of targeting PC gamers that are familiar with the company's brand looking for a streaming player is, we believe, an odd way to position the product in the market. We understand the strategy of distancing the product from other devices in the market, but we believe this approach fails to underline the strengths of the platform. There is potential there, but a number of complex commercial hurdles need to be overcome to deliver a compelling offering: implementing the correct service monetisation, developing a product positioning strategy that plays to the device's strengths and building a compelling content portfolio with exclusivity beyond graphical fidelity.  

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