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Without a doubt, 2012 was a major year for both independent game developers and gaming Kickstarter campaigns. The same year that named industry titan Electronic Arts (NASDAQ:EA) the worst company in America, ended with indie developer Telltale Games taking home top honors at Spike's Video Game Awards for its title The Walking Dead. With more people playing games on an expanding list of devices, it's become clearer that the industry's landscape is changing, and for the first time in years small-time hardware developers are rising to challenge the big three console makers, Nintendo (PINK:NTDOY), Microsoft (NASDAQ:MSFT), and Sony (NYSE:SNE).
Chief among the new challengers is Ouya, which runs on an Android (NASDAQ:GOOG) operating system. The first Ouya units were shipped to developers last week; retail units will be available in April. The company behind Ouya was founded on Kickstarter in August of last year, and instantly blew past its goal of $950,000 for development in mere hours, receiving more than $8 million before pledging ended. The money seems well invested too; the project was managed by IGN and Vivendi Games veteran Julie Uhrman, who brought on famed designer Yves Béhar, the founder of Fuseproject and developer of the XO laptop, to construct the hardware. The system is reportedly the size of a Rubik's cube and is priced at $99, but features high-end specs such as a Nvidia Tegra 3 quad core processor, though the design allows for users to easily open up the system for modding or hardware add-ons.
What truly makes the Ouya unique is the fact that all systems can be used as development kits, encouraging all owners to become developers for the system without the need for licensing fees. In addition, all games are required to have some sort of free-to-play aspect, though there is some flexibility in how that can be implemented. Surprisingly, several major game studios have already announced their plans to support the system despite its reliance on indie developers.
Japanese companies like Square Enix (TYO:9684) and Namco Bandai (TYO:7832) have already stated plans to release games for the system, and Infinity Ward's former creative strategist Robert Bowling has committed his new studio Robotoki to working on an exclusive-to-Ouya prequel to his anticipated Human Element game. There are currently 19 confirmed games that are reported to come out with the Ouya, though the system will also have access to the approximately 300 games provided through its partnership with OnLive.
Although speculation about the platform's future is mixed, the success of the Ouya could have sweeping effects across the video game industry. For starters, its dedicated support for indie game developers is likely to increase the number of noteworthy titles a year. This could lead to an increase in video game sales, though a more definite benefit to the industry would be introduction of new and more vibrant talent who are more willing to take chances. In addition, Ouya's support of the free-to-play business model could aide greater acceptance of its use, though that may have mixed reactions with consumers.
However, the Ouya's greatest influence may be in how it has seemingly inspired the development of similar projects. As previously reported, Gabe Newell of Valve, one of the industry's most highly esteemed studios, recently announced plans to develop a home console to bring the company's online gaming service Steam to living rooms. Details are still scarce on Newell's project, but Steam -- popular for its title offerings and discounts -- played a big role in the indie game surge this year, so its impact in the console market could be huge.
Another major contender is a newly announced Kickstarter project called the GameStick, which is trying to stake its claim as the most portable TV games console ever. This product's entire console fits in a thumb-drive so small it can be stored inside its own controller, allowing users to take the system anywhere they like. GameStick, which is scheduled to launch in April, has already surpassed its pledge goal, though only $100,000 was requested. According to IGN, the system utilizes a small HDMI adapter, including a 1.5GHz dual-core Amlogic 8726-MX processor, 1GB of RAM, 8GB of flash storage, as well as integrated Bluetooth and Wi-Fi chips. All this comes with just a $79 price tag, making it the lowest priced console of this generation, so far.
While this hardware is less advanced to that of the Ouya's, it seems that the GameStick will be more focused on running Android's mobile games in HD, which could appeal to mobile gamers that are often irked by touchscreen interfaces. To appeal to independent developers, the GameStick will be completely open source, though its creators claim that they are talking with 250 studios, including the likes of Disney (NYSE:DIS) in releasing content.
It's worth noting the industry's history is filled with examples of failed systems that sprung up to take advantage of market trends. Although Japanese developer Neo Geo was the king of arcade cabinets, when it attempted to launch a home system with similar technology it crashed and burned. Also, both Nokia's (NYSE:NOK) N-Gage and the Gizmondo tried to prematurely merge gaming with cell phone technology. If it turns out that the impact of indie gaming has been misjudged, these new platforms may meet a similar fate. But if indie gaming proves to be more than a passing fad, the entire industry could look very different in a matter of years.
This article by Anthony Shields published on Minyanville.
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Disclaimer: The views represented on this blog are those of the individual authors only, and do not necessarily represent the views of Schaeffer's Investment Research.