How Google should approach an Android game console

If Google is going to get into the game console business, it won't look the same as Microsoft or Sony.

The Wall Street Journal set readers to pondering about an Android-based game console and a long list of other speculative Google initiatives, including a new version of the Android-powered media-streaming device called Nexus Q.

The decline in game console shipments, from 89 million in 2008 to 36 million in 2012, makes one wonder why Google would enter the market, especially since it’s dominated by Sony, Microsoft and Nintendo.

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If the Wall Street Journal’s predictions of an Android game console in the fall are true, Google won’t be soliciting the big console game studios for an Android port. Rather, Google will exploit the cross-platform, free-to-play casual game phenomenon to keep gamers and television viewers transfixed to the television attached to their game console.

The top cross-platform games have user-engagement statistics and revenues that would make any of the top-10 console game studios green with envy. The definition of cross-platform games once meant a game could port between two or more game consoles, and today it means casual games that run on the web, Facebook, iOS and Android, and let the player pick up the game on one platform where he or she left off on another platform. An Android game console would add television to the cross-platform experience that game developers will welcome because each new platform disproportionately increases user engagement.

Candy Crush, one of the more successful cross-platform games, has 110 million monthly active users and is played 600 million times per day as users employ the web, smartphones and tablets in their free time. Although Candy Crush publisher King was not available for comment, Arseny Lebedev, Founder of Signus Labs, helped estimate Candy Crush revenues.

"Candy Crush, a private company that does not release financial information, is performing near to market revenue leader Puzzle & Dragons that produces $2.5 million per day in in-app microtransactions, so it would be reasonable to estimate that Candy Crush’s similar monetization model would produce revenues between $1 million and $2.5 million per day."

Based on Lebedev’s low estimate, Candy Crush revenues exceed those of the most popular console games, such as Square Enix’s Dragon Warriors 7. The estimate pegs Candy Crush at $360 million per year, compared to Dragon and Warriors annualized first quarter retail revenue of about $300 million.

Casual games would bring a much larger cohort of gamers to an Android game console than the big studios would. Lebedev also said:

"In casual gaming the design of the UI and controller is completely different than designing for video game consoles. Using something other than the mouse or touch screen controllers familiar to casual gamers will create an obstacle to attracting them."

The Android game console may not really be anything like those built by incumbents. Giordano Contestabile, VP of Product Management and Revenue at Tilting Point, explained:

"It makes absolute sense for Google and Apple to enter and perhaps dominate the casual game console business with their strong brands and developer relationships. But the Android game console will likely not be a high-performance game console like the PS3 or XBox360. It would be much more logical for players to use smartphones and tablets to stream the game to the television using the Android game console."

Based on the insights of game industry experts, the Google game console and Apple’s rumored equivalent will have little in common with the incumbent consoles. Developers and game players will be attracted to the Android game console as a new casual gaming platform with some new capabilities, such as a unified gaming experience on a single large screen. Google, in turn, will attract the cohort of casual gamers that is larger than the incumbent console game market. Google also will share in 30% of the in-app transactions.

The speculation about an Android game console and a second version of the Nexus Q is probably about a single product because the features needed for sharing streamed content using Spotify, Netflix and Amazon accounts isn’t much different than sharing a casual game experience.

Google is counting on the casual game console business for television to strategically link smartphone and tablet users and its network of content and services in the living room to sell casual games and other types of content.

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