Kinect\u2019s Japan Sales Detailed | Edge Magazine

This should shouldn't be a surprise: Japanese play spaces are very small.  In Japan, the sales kiosks include a tape measure for play space requirements.  Even Americans are having trouble finding the space for Kinect.  However, it's undeniable that Kinect is awesome.  Hopefully, my cronies over at Xbox will find a way to make smaller play spaces viable for certain types of games...


How Apple TV Could Disrupt Game Consoles

In a previous post, I talked about how I think Apple TV should have been made.  One of the features I like the most is the idea of an expansion port that iOS applications could access.  I wanted to take the time to elaborate on that idea as I think it has the ability to be a disruption, especially for game console platform holders.

What value do console platform holders give to their customers?  For that matter, who are their customers?  They actually have four classes of them: consumers, publishers, developers and retail distributors.  The platform holders provide different value to each of them.  Also, let's distinguish a publisher as the entity that wants to make money selling games, while the developer is an altruistic entity that just wants to make a great game.

To the retail distributor, they provide an ecosystem of products to sell at a profit.  Note the word ecosystem: video game consoles are sold at a loss and distributors make money by selling software.  In return for this ecosystem, the distributor provides the platform holder with physical reach for consoles: even if all the games in the world were digitally distributed, console makers still need physical retailers to put the console into your home.  Apple excels here, of course, as they have a bunch of Apple Stores.

To the publisher, a console provides an install base of users to reach and the distribution channels to reach them.  Previously, there was only one distribution channel: the game image (on a disc or in a cartridge).  Now, there are a few given the various channels of downloadable content available.

To the developer and the consumer, consoles provide special value: they solve the interaction problem at scale.  For developers, a scalable solution is one that lots of users are able to use - all the more whom developers may be able to influence through their games.  To consumers, a scalable solution allows them to interact with and control as many experiences as possible, thus maximizing an initial investment in a video game console.

So in review, the only unique problem being solved by a game console platform holder is the interaction problem.  The others are a question of sales and distribution, and they are usually the most expensive problems to solve as they become chicken-and-egg scenarios.  Without potential for profitability, distributors have no incentive to let a platform holder leverage their reach.  And without reach, the platform holder can't offer the potential for profitability.

Through its Apple Stores, Apple has attained as much reach as one could need, and through the App Store, provides a marketplace that removes the middle man distributor.  That leaves the interaction problem.  Apple would love to solve the interaction problem for the purpose of users accessing their movies, music, etc.  They've tried to do this with the five button remote.  However, Apple hasn't gone beyond that and I don't think they want to do so.

An expansion port on an Apple TV device would make it much cheaper to become a video game platform holder by allowing them to leverage Apple's distribution of Apple TVs.  The platform holder would no longer need to provide an ecosystem of profitability to distributors as the hardware would no longer serve as a loss-leader: it could be sold anywhere.  Games are net-neutral as they have the same incentives to use platform hardware as they always did.  Consumers are happier since they get to choose the kind of interaction they want without investing in multiple, expensive consoles.  Ultimately, this allow platform holders to focus more of their attention on why they truly entered the business in the first place: building great human-computer interaction.


How Apple TV could have been awesome

Okay, so my predictions surrounding Apple TV weren't right.  I'm really disappointed in what Apple TV turned out to be - there is so much more potential for TV.  There are two things about TV that make the screen very special: it is typically the biggest screen people interact with and people usually interact with it together.  Dare I say the buzz word social?  With cell phones, laptops and desktops, the interaction is usually solo, or at best awkwardly social with people crowding around.  On top of that, the screen is usually attached to the best audio experience you interact with day to day as well.

While other screens have had a lot of attention when it comes to software, the TV has largely been relegated to bad cable box implementations.  This is one of the reasons I joined Xbox almost a decade ago: I knew Xbox was going to change video game consoles forever if only for the reason that Microsoft is a software company (whereas Nintendo is a toy company and Sony is an electronics company).

Video games have been a great vehicle for investment in television technology.  Everything from core display technologies like 3D to security technologies like those used in Xbox 360.  There are even some areas of technology where video games are the only recourse for large scale technology investments.  For instance, video games accelerate the arrival of interaction technology like Kinect or graphics technologies like programmable shaders.  The other driver of investment around television has been video distribution.  This means everything from VHS and DVD to HD capture & broadcast technology.

Over the past several years, these two verticals have begun to overlap.  This is because video game platforms are the only software-capable television devices with distribution at scale.  These investments are only the beginning as to what is possible with software on TV.  While there are other investments in bringing software to TV from manufacturers like LG, Sony, TiVo and Roku, they do not have the scale that others do.  Even TiVo continues to linger with only 3 million subscribers (compared to 25 million for Xbox LIVE), and smart TVs will take a long time to catch up to an Xbox.

Thus, I think Apple TV has thrown away a great opportunity.  If Apple TV had the following features in addition to pursuing my previously discussed distribution strategy, it would be a hands-down winner.

A DVR with CableCard

To successfully leverage distribution of cable companies, Apple would have needed to make the world's best DVR.  Yes, TiVo has done a good job, but no one wants to pay another subscription on top of cable and people don't want to pay $300 for the box alone when the cable company box is free.  If Apple can create a phone with HD video decoding, Apple could have created a 1080p decode chip.  At about $100, an Apple DVR would be a steal compared to TiVo.  And, compared to your cable box, it would have been usable.

Storage is what makes TiVo expensive: built into that cost is the expected failure rate and the cost of servicing that failure rate.  If Apple pursued the distribution strategy I mentioned before, this cost could have been subsidized by the cable company and passed on to the customer as it is today.  Even without subsidy, I think this feature could be added for $100 with no gross margin.

iOS Apps

Having downloadable software would have opened up yet another place for ISV innovation to happen.  Sure, the first thing you might see are utility dashboards and reformatted Netflix queue managers, but down the road you might see a truly crowd sourced television news channel, for instance.

Expansion Ports

No, I don't mean expanded storage.  While Apple TV does have USB, a 30-pin dock connector would add so much more if the device had iOS app support.  Because iOS apps have the ability to interact with the dock connector, a new ecosystem would arise.  Imagine that the Wiimote was an extension to an Apple TV.  Why would Nintendo do this?  It saves them a lot of effort in marketing, R&D, and distribution: they'd be leveraging Apple's investments in those areas and living closer to their reason for being: providing users with enjoyment (while making tons of money).

DVD Playback

Yeah, yeah, I know DVDs don't fit with Steve Jobs's sensibilities, but people would love to get rid of boxes underneath the TV, and for most people, the DVD player is the only other box of which to be ridden.
  Heck, Apple could have even hidden it behind an iOS app that requires a dock connector-based DVD player and had me fork over an extra $50 for it.

What would the Apple TV cost with these features?  I would argue not much more.  The DVR portions would be subsidized or perhaps cost $100 extra.  The expansion port might be a bit.  Apple TV is already made with the same core components as other iOS devices.  While Apple may have had to do some think-work around standard controls and UI paradigms, it has done that very well with its other devices and I have confidence it would be able to do the same with a television screen.

I'd buy this box.  Heck, it might even get me to subscribe to cable rather than futzing with all the various web sites I go to for TV shows these days.

You might argue that the functionality above is close to a Mac Mini, and those cost $700.  You'd be right, but the innards are different: it's costlier for Apple to integrate outside technology such as Intel processors.  Remember that an iPhone also cost $700, at launch.  Disk drives add a lot of cost fast, but if Apple can sell Apple TV at a profit at a price point of $100, I would argue my estimates hold water.