Microsoft gives warning to new console makers

We've talked a lot recently about all of the companies that are looking to get into the console market with small form factor, low cost gaming machines. Whether it's the Ouya, the Game Stick, Nvidia's Shield, Valve's Steam Box, there's plenty of new players in this game. Microsoft though has issued a warning, suggesting it's not as easy to be a console success as it might appear.

This comes from Phil Harrison, current Microsoft Studios Executive and veteran of the console wars, who said (via Eurogamer): “Entering the hardware business is a really tough business. You have to have great fortitude to be in the hardware business and you have to have deep pockets and a very strong balance sheet. It's not possible for every new hardware entrant to get to scale.”

Well we know if you're Microsoft or Sony you certainly need a lot of cash, since both companies sold their current generation of hardware at a huge loss.

“They can be successful at small scale. But it's very rare for a new hardware entrant to get to scale, and I mean tens or hundreds of millions of units. There are a very small number of companies that can make that happen.”

“And it's not just having a great brand or a great software experience. It's about having a supply chain and a distribution model and a manufacturing capacity and all the things that go with it. It's a non-trivial problem to solve and it takes thousands of people to make reality.”

Valve of course has quite a lot of the resources that Harrison is talking about here. Certainly a lot more than those of Kickstarter funded campaigns like Ouya and Game Stick. Nvidia however, also has big cash reserves and a steady revenue stream outside of gaming.

KitGuru Says: Microsoft can talk a lot of smack, since it is certainly one of the biggest players in this generation of consoles, as opposed to last where Sony dominated. However, Nintendo walked all over this gen. for the first few years of release and Microsoft still didn't make any money from the Xbox franchise, so high market saturation or not it's hardly a major success story.

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