Product cycles: Ain't age nothing but a number?

Mobile phones have always had short product cycles because consumers, especially those in Europe and Asia, are so used to changing their phones every six months.

And between the new Macbook Pros released late last week, and the anticipation for the upcoming iPad 2 in March on top of all the iPhone and iPod releases later this year, it seems that Apple is updating their products more often than ever.

But wait a minute. The same can’t be said with the videogame industry, right? With Nintendo DS pushing past its sixth year in November and the PS3 currently in its fifth year, game consoles seem to be immune to the ever-shortening product cycles compared to other consumer electronics.

I don’t know how Sony does it, but despite being in its fifth year the PS3 still feels very much like a new console to me. Likewise with the XBOX 360. The only console showing its age so far is the Nintendo Wii, and much of that is because of the difference in its graphic capabilities compared to the PS3 and XBOX 360 from the very beginning.

So what makes game consoles so uniquely different from other consumer electronics? Why are their product cycles acceptable to span well over five years when laptops, mobile phones, tablets, and other tech devices require product updates every eighteen months or less?

Excluding the most hardcore of gamers, how many hours a week do you spend on your smartphone or laptop compared to your game console? From checking the time to casually browsing Facebook, you are constantly on your phone or laptop. Now how many hours a week do you sit down for a game of Call of Duty 4 or Street Fighter 4 in your living room?Even if you spend hours on end playing these games, it’s still a lot less comparing to the hours you use a computer at work or school. It’s demand and supply at the very core: the more you need something, the higher the demand and the more supply there needs to be.

Business model
Until very recently, game consoles were initially sold as a loss and had to wait for components prices to fall over time just to break even. But because of that, companies like Sony and Microsoft have no choice but to view their consoles as long-term investments. In a way, consoles are built like inkjet printers but instead of making money off of future accessories, game consoles have to rely on time, component prices, and other external factors in order to recoup the costs. It’s not an efficient business model no matter how you look at it. Now compare that to any computers sold at Best Buy where each computer unit has a set profit margin right from the beginning. Computer makers earn money from day one and are able to use that profit for research and developments, and in turn promote better products in shorter time. That’s what Nintendo is doing with the Nintendo Wii, at least with the earning money part. While Sony and Microsoft were losing money initially for each of the console sold, Nintendo has been earning money ever since day one.

Development model
Console games are created with specific platforms in mind. The games are created according to specific requirements of each console’s development kit. At the end of the day, the power does not belong to the game developer, but to the console creators who built the development kits. The console creators have sole deciding power in their consoles’ capabilities along with an arbitrary timeline. If a game is too powerful to be run on any of the gaming platforms — tough luck. Now compare to the software created for the PC. From an entry-level Dell to the top-of-the-line AlienWare, the PC can be anything. It can even be a Mac. With no specific requirements, software developers can write an application to their heart’s content. And profits aside, it’s up to the consumer’s computer and its technical prowess to render the application. The power goes to the software developer, and in turn the computer makers constantly have to play catch up in order to run popular applications in record time.

Extended accessories
This applies especially to the current generation of game consoles. Nintendo led the pack by separating the controller into two parts (ie: the wiimote and the nunchuk). Instead of charging $40 per controller they were able to charge $60 for two half-controllers. Then they began selling accessories over time with specific purposes, like the Wii Balance Board for Wii Fit or the Wii Wheel for Mario Kart Wii, in order to expand the system’s capability. Micosoft and Sony saw the potential for motion gaming and eventually joined in the accessories game like Kinect and PlayStation Move. Products like these not only extended their consoles’ lifespans, but they also expand the consoles’ functionalities that no firmware can otherwise compare.

What’s really interesting is that all these devices are converging. You can now stream Netflix movies on every game console and play hardware-intensive games on today’s most popular smartphones. These devices are all competing for your time.

So how will that affect their product cycles? I am curious to see if computers, smartphones, and tablets will eventually see slower product cycles through firmware updates or if gaming consoles will have shorter lifespans in order to compete with the smart devices.

And where do stream-only devices like Apple TV and Google TV fit in all of this? Will they eventually replace the jack-of-all-trades of today’s game consoles, or will they become something else altogether? It’s only the first quarter of 2011 but I can’t wait to see their next release.

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