Zeebo won't shake up games market

Low-cost games console, Zeebo, will complement rather than compete against existing consoles such as Xbox or PS3, when it launches in Asia next year.
Written by Victoria Ho, Contributor

When low-cost games console Zeebo arrives in Asia next year, it will likely appeal to emerging markets in the region, but is not expected to pose much competition to Microsoft's Xbox and Sony's PlayStation audience, say analysts.

Games start-up, Zeebo, recently launched its console in Brazil, and intends to ship internationally next year, according to reports. The console is priced at US$199 for the Brazilian market, a contrast to more expensive, higher-end devices such as the Nintendo Wii and Sony PS3.

But analysts think Zeebo will not pose a threat to existing consoles, instead creating a complementary market.

Shailendra Pandey, senior research analyst, mobile content and applications at Informa Telecoms & Media, said the device's target markets are greenfields for games, as their consumers would have had limited experience with games on PCs or competing consoles.

Pandey said Zeebo's basic platform "may do well" in attracting first-time gamers. "Zeebo can help create a large base of basic games users in emerging markets, many of whom will later migrate to more advanced platforms such as the Xbox or PlayStation," he added.

Steven Bailey, games analyst at Screen Digest, said Zeebo faces other challenges in China. It does not compete with the "long-established culture of PC games" or of the social aspect of PC games cafes, he said.

India, which is more familiar with console games, thanks to Sony's "targeting the region with PlayStation", may be more receptive to Zeebo, Bailey added.

Part of Zeebo's sales pitch is its games download delivery model, which will distribute games to users by way of wireless downloads. Bailey thinks this may give Zeebo an edge over older, more basic consoles such as the PS2, because Zeebo can offer more "proportionate" prices for older games with this delivery model.

Games publishers such as Electronic Arts and Capcom have plans to port various games to the Zeebo platform, said reports.

"It is about perceived value, more than what's cutting edge" for Zeebo's target audience, said Bailey.

Kinks in delivery will have to be worked out
Zeebo's games download distribution model is hoped to combat disc-based piracy in emerging markets. The company, partially held by Qualcomm, uses a Qualcomm 3G chip in the console to allow wireless downloads.

Bailey thinks this may be an effective move against piracy. "There is no doubting that the Asian market is a hotbed of entertainment media piracy and that this, along with a lack of retail distribution, has hampered the development of a local packaged games market," he said.

With no major packaged retail market or console hardware in some emerging markets, "digital distribution is perhaps the only effective solution to get content to consumers", he said.

But it is unlikely to eliminate piracy completely, Bailey said. Piracy may still be possible once games are downloaded on an offline device, as compared to online games, which need to be downloaded each time they are played.

Pandey thinks consumers may not take the downloads model very well. "Most consumers usually don't like the basic pay-per-download model and [Zeebo] will have to introduce attractive price plans."

The lack of credit or debit card and online banking penetration in emerging markets may also pose an issue with payment for the download model, so Zeebo will have to use an alternate payment mechanism such as vouchers, Pandey said. This alternate ecosystem will, however, require, "good investment" from companies or franchisees in the retail ecosystem for this to work reliably, he noted.

There is the further challenge of ensuring the wireless infrastructure is reliable for Zeebo's delivery model, in some parts of Asia. Bailey said Zeebo's reliance on a 3G network may pose a barrier for countries such as China, which does not have a commercial 3G network as yet.

Erik Ford, regional marketing manager, Microsoft Xbox, Southeast Asia, said the downloads model has been profitable for the software giant. Since 2005, about US$1 billion revenue has been generated from Xbox downloads, he said.

"As broadband penetration and console ownership increase, more people are discovering the ease of purchasing games content without the need for physical media," Ford said.

But consumers still need convincing that downloading games is "no different" from buying off-the-shelf packaged versions. "Many consumers today still feel the need to purchase...something they can touch and feel," he said.

To that end, Microsoft still invests in its retail channels, he said. "Retailers provide personalized assistance and customer engagement that digital downloads cannot. Both retail and online distribution are complementary to each other in the gaming ecosystem."

Zeebo could not be reached by press time.

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