In the Hutong
Looking for a Snack
In case you missed it, one of the interesting developments coming out of the recent Game Developer's Conference in San Francisco - at least as far as China is concerned - is an interesting item about a new game console called "Zeebo."
Brought to you by Qualcomm, the people who invented third-generation wireless technology and the Eudora e-mail client (and many other useful bits of technology,) Zeebo is a game console designed for those of us who cannot afford - or cannot buy - an XboX, Wii, or Playstation. Created with the growing middle class in Brazil, Russia, India, China, and other emerging markets, Zeebo eliminates the need for game cartridges or discs by allowing you to select, buy, and download games directly to your console over a cellular telephone network - apparently even if you don't have a mobile phone account.
There is much sexiness to the Zeebo idea, not least of which is the elimination of piracy as an issue for game publishers, , the use of an already-ubiquitous network for distribution, a local partner (the wireless carrier) to run the business, and other advantages that I'll go into in another post.
From a business perspective, the device seems tailor-made for China. But Zeebo's path to success in China is fraught with challenges.
Open a Window
Wireless devices inside the modern Chinese home face nasty challenges to what engineers call "signal propagation." Most apartment buildings and free-standing homes in urban China are built of thick concrete reinforced by steel bars. These sorts of structures play hell on wireless signals.
In my home, for example, a wi-fi signal won't make it past the next room over, and if I am more than 10 feet from a window, I lose cellular signal - even though we can see our carrier's cell site form our windows.
Designed to be placed next to the TV set, Zeebo is not necessarily going to be next to a window within optimal range of a cell site. The value of the device, in other words, will depend on local signal quality. That's going to create a few issues, and could conspire to give the device an unfair reputation among consumers.
(This is not an idle concern. For a long time, and for reasons having more to do with local conditions than problems with the technology, people in China used to joke about having to "open the window and let CDMA in." That undeserved reputation has dogged the 2G and 3G versions of Qualcomm's technology, a challenge Qualcomm has overcome only after considerable effort.)
Brand Power (Or Lack Thereof)
Buying a Zeebo - or any of the console gaming systems - is a tough decision for a consumer. They are, after all, not just buying a device, they are making a bet on a gaming ecosystem, committing to software, accessories, services, and upgrades to that ecosystem for years to come.
That's a tough threshold to get consumers to cross. Just ask the XboX guys at Microsoft, or the Wii guys at Nintendo. If you want to get frugal consumers to place a bet on your new entertainment ecosystem, it helps if those consumers know you and trust you.
Zeebo, being new, has not yet cultivated this confidence, and Qualcomm has until recently placed little stock in building their brand with consumers. Why bother? The consumers, the thinking went, didn't buy Qualcomm products. That lack of foresight is going to hurt the new console's prospects in China.
A Brutal Approval Process
When it created BREW, Qualcomm established a rather involved certification process for the applications to be delivered over wireless networks. The reasoning was strong: given that these were applications that ran on the network as much as on the device, one bad line of code could not only crash the device, but potentially harm it and possibly affect the functioning of the network.
That involved process has come to the Zeebo. Apparently, first you need to become a BREW developer, then get Zeebo approval, then use the Zeebo software developer kit, then go through the approval testing firm NSTL, then reach the console.
In China, I can foresee two additional steps in that involved process. First, you would need to get approval from the carrier, who is going to want to have some say over what gets distributed over their network, and second, you are going to need to get approval from the General Administration for Press and Publications (GAPP), the government regulator with authority over games. And, if you're not a Chinese company, you'll probably need to find a Chinese distributor first.
And you thought it was tough getting your iPhone app approved.
That process will be time-consuming, costly, and for the last two bits in particular, frustrating, none of which endear Zeebo to already-overworked developers, nor will it help ensure a rush of new games to the platform. And that's important, because regardless of what they may believe at Qualcomm headquarters in La Jolla, Zeebo will need more than Quake and World of Warcraft to succeed in China.
Local Developer Support
One of Zeebo's advantages is that Qualcomm has already managed to corral the support of major game publishers and developers, including EA, PopCap, Capcom, Activision, Namco, and a host of others, giving the device 15 titles now and 30 within 90 days, with more to come.
Zeebo's succesess in China, though, will depend on cultivating the support of popular local game developers creating games that Chinese people want to play. For all of the success of companies like Activision-Blizzard with Worlds of Warcraft in China, foreign companies hold a shrinking part of the pie. The majority of games played in China are locally created, and that proportion is growing.
The good news is that Qualcomm has some experience here, having built a healthy local developer community for its BREW mobile platform. The challenge, though, is going to be convincing developers to invest in this new platform. Already developers need to spread their resources among developing online games, PC games, half a dozen mobile platforms, widgets, and games on social networking platforms.
What Qualcomm has created is an inexpensive device with an ecosystem. Even if Zeebo enjoys only modest success, we can count on local companies duplicating the effort, creating a device for even less money and with the support of local game manufacturers.
It does not take much imagination to see the Chinese government supporting the creation of a TD-SCDMA based Zeebo clone, created in China, sold through China Mobile, and packaged with sales of TD-SCDMA networks overseas. I would be shocked if Qualcomm's announcement didn't set at least half a dozen such initiatives into motion here in the Middle Kingdom.
Unless Qualcomm cuts deals with all three mobile networks in China, we could see our own version of the Console Wars playing out among China's carriers. Qualcomm would be faced with having to support an expensive marketing battle against a local champion (been there, done that, eh, Dr. Jacobs?) or bailing out entirely.
And if it chooses the latter, it opens the door for Zeebo competitors in its other markets as well.
It's the Experience, Guys
In reading through the announcements and other supporting literature, it is clear that Zeebo's primary appeal is how neatly it appears to solve several business problems in one fell swoop: piracy, affordability, and accessibility most prominent among them.
At the same time, I was amazed to see how Team Zeebo is playing down the importance of what is apparently an inferior experience. What is important, we are being told, is how inexpensive this thing is. So what if it is a little slow and the games are two generations behind the state of the art? What is important is that the games are in the homes.
If the average middle-class gamer had little exposure to what the world of games can offer, that would be one thing. But all you need to do to see an extremely cool, fast, and immersive game is walk into any Internet cafe in China.
The list of devices that have tried - and failed - in the PRC because they offered a low price but a downgraded experience should be enough to give the Zeebo folks pause. Just ask ASUS, or the One Laptop Per Child team in China. Or ask Microsoft. Anybody remember the Microsoft Venus Internet set top box?
Right. This is a place where workers save three months to buy a phone instead of one month because they want the best experience they can afford, not the cheapest.
Zeebo's biggest challenge in the PRC is going to be delivering an experience that players will find more fun, more immersive, more addictive, and more appealing than what they can already get in a Web Bar. The battle is to entice them back into the living room, and Zeebo can only do it with a kick-ass experience.
Take a hint from Debbie Fields, Zeebos. "Good enough" won't be. Not in this market.
A Step Back
None of this is to say that Zeebo won't be successful in China. But the great thinking that has gone into the product's design and the business model that will sustain it only address the most basic challenges.
But now comes the hard part: turning Zeebo into an awesome experience for gamers even as the company ensures it is a superior business for developers, mobile operators, and retailers.
Qualcomm's hurdle is that as a company it lacks experience running a consumer-oriented business generally, much less a multi-sided platform in the ever-changing emerging markets. The company has to develop a whole host of competencies very quickly, all while gaining the trust of consumer it has all but ignored for over a decade.
But I hope they succeed. And I'm going to explain why tomorrow.