New console makers are taking on the titans of the video game industry, betting that their cheaper, more mobile-like products will give them an edge over their bigger competitors.
For the next Christmas season, Sony will release the PlayStation 4-a video game system that's widely expected to push the boundaries of the industry. Microsoft, while it hasn't announced anything formally, is expected to release the successor to the Xbox 360 in the same time frame.
Along with Nintendo, which began selling the Wii U last year, the two new consoles will officially launch the eighth console generation among record keepers-but they won't be alone.
The video game industry has fragmented during the last few years, with scores of users losing interest in the systems of Sony, Microsoft and Nintendo and turning their attentions to mobile platforms from Apple and Google's Android.
That has opened the window for new home systems to join the fight. Perhaps the best known is Ouya, which raised $8.6 million on Kickstarter last August and will be on retail shelves in June.
The Android-based system, whose hardware will sell for just $100, will have a notable price advantage over the big three-and rather than competing directly with the AAA games of major systems, Ouya plans to focus on smaller, cheaper titles-the kind that have been successful in mobile app stores.
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"We need to rethink television gaming," said Ouya founder Julie Uhrman. "We need to do for games what cable did to traditional television.. .. Who says it has to be a 60-hour game? It can be six hours. We just get it to gamers and see if they like it, then build the next six hours."
Analysts are cautiously optimistic on the potential of the system.
"It's been a long time since a new console was introduced, and it is likely that pricing for consoles will go up," said Michael Pachter, an analyst for Wedbush Securities, when the Ouya was unveiled. "By coming in at a lower price point and challenging the existing pricing model for TV-based games, Ouya could hit a sweet spot with gamers."
"I think it could be that indie device of choice for games that don't cost $60," added Eric Handler of MKM Partners' . "It depends on how well it can be marketed. ... The question is: How can you make the casual stuff compelling by adding a joystick to it?"
Ouya's hardly alone, though. GameStick, an indie-game focused system, is scheduled to go on sale in April. And peripheral device developer Razer is jumping into the hardware market with a high-end handheld gaming device called the Edge.
Even graphics chip manufacturer Nvidia is staking a claim, introducing a mobile gaming device dubbed 'Shield' at this year's International Consumer Electronics Show.
The biggest hurdle for most of these systems could be their price. Razer's and Nvidia's shield will boast high-end components, which could drive the cost to $1,000 or more.
And with this generation, cost is an important factor in the success or failure of a system.
"The price point will be critical, in our view," said Edward Williams of BMO Capital Markets. "We believe the consoles can be successful at $399 and below in the US-with a much greater degree of success the further down the pricing curve."
Perhaps because of price or because of the exponentially higher marketing budgets of Microsoft, Sony and Nintendo, no analysts expect these new systems to post sales numbers on the same level as an Xbox, PlayStation or Wii. However, they note, each could eat away at the declining market share of traditional consoles
"All these other systems coming out create a lot of noise and confusion, but I don't think it impacts things much," said Billy Pidgeon, an analyst for Inside Network .
"High end hardware? To me, that's not going to have a disruptive effect. ... [However,] there's going to be impact on [traditional] consoles. Expectations for penetration and sales velocity [of those systems] are going to be overly high. They're not going to sell like they have in the past," Pidgeon said. "People are buying fewer packaged goods, and you're dealing with smaller user bases today."
image: © Josh Hallett