Why is NVIDIA Building a Portable Game Machine?
NVIDIA (NASDAQ: NVDA) surprised the world this morning when it announced that it is developing a portable game system that can play Android and PC games.
Tentatively being referred to as "Project SHIELD," the device is reminiscent of the MOGA smartphone controller from PowerA. Shield features a familiar gamepad with four face buttons (A, B, X and Y), two analog sticks and one D-pad. There are also a few buttons (volume, home screen, start and return) for navigating the Android operating system.
Given the unorthodox shape of the device, as well as its considerable size compared to other handheld devices, it might not seem like much of a "portable" machine. Consumers won't be able to fold this up and stick it in their pockets with relative ease. It could require a carrying case of some kind -- a man's bag, if you will -- which might reduce its portability.
In its press release, NVIDIA co-founder and chief executive Jen-Hsun Huang said that the device was created by engineers who "love to game and imagined a new way to play."
"We were inspired by a vision that the rise of mobile and cloud technologies will free us from our boxes, letting us game anywhere, on any screen," he said. "We imagined a device that would do for games what the iPod and Kindle have done for music and books, letting us play in a cool new way. We hope other gamers love SHIELD as much as we do."
Huang assumes that games are simply a ubiquitous commodity with no value in exclusivity, just like books and music. Sales figures suggest otherwise.
With the sole exception of Angry Birds and a few other hits, the biggest games are typically developed for a limited number of platforms.
The full, lifelike and multiplayer version of Call of Duty: Black Ops II cannot be played on a hundred smartphones -- it can only be found on Xbox 360, PlayStation 3, Wii U and PC. Halo 4 is not playable on a dozen iDevices -- it was developed exclusively for Xbox 360. New Super Mario Bros. (which sold 29 million units) was released exclusively for the Nintendo DS, while New Super Mario Bros. Wii (which sold 26.5 million units) was developed exclusively for the original Wii.
These are just a few of the many examples of games that sell more and make more because they were built specifically for one console or portable device.
Exclusive games are also extremely beneficial to the platform that receives them, as it gives consumers a reason to buy the device.
As an Android gaming system, Shield is unlikely to receive any exclusive software. Instead, NVIDIA will try to sell the device as a portable machine that can play hundreds of thousands of existing apps. That selling point would be very appealing if people did not already own multiple devices that could play them.
In addition to the deluge of Android smartphones, Shield will also compete against a growing number of Android-based gaming devices that are being released this year.
If NVIDIA charges a fair price (far less than $200) and plans to sell no more than one million units per year, it might be able to fulfill expectations. Even then the company will face the enormous challenge of convincing consumers -- a small number of consumers -- that they should purchase Shield over the alternatives.
NVIDIA might have one advantage in the area of PC gaming. While consumers will not be able to download and play PC games on Shield, they can stream them from a nearby PC that is equipped with a GeForce GTX GPU (650 or higher).
NVIDIA might think that its biggest competitors are traditional handheld game machines like Nintendo 3DS and PS Vita, but its biggest threat could be the rumored Xbox tablet from Microsoft (NASDAQ: MSFT). The Windows maker is expected to introduce the tablet at E3 this June -- around the same time that Shield might be released.
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