The Tricky Math Of A $99 Game Console

Ouya sprung onto people's radar recently with an incredibly desirable, or at the least incredibly interesting pitch. The would-be console makers offer a cheap alternative for gamers to play, and even hack and mod their way through the hardware and games potentially offered on the platform.

But Ouya can't possibly be relying on hardware sales for their business model. Speaking with me on Wednesday about Borderlands 2, Randy Pitchford and I began to sidetrack and talk about current industry matters. We got on the subject of Ouya (Oh yeah? Ouija?), and he knows that the Ouya makers will have to make money somehow. This sugar-coated pitch can't be everything.

Ouya can't continue to exist off of simply Kickstarter profit, that much is obvious. And they can't rely on selling units in the future at $US99 a pop. Why not? Pitchford explains:

"They asked for a million, so they must have planned this out. They were selling them to the people that were buying them through the Kickstarter for $US99. Take a million divided by $US99. That's 10k units. Let's imagine their margin on the hardware is $US10, which I think is actually exaggerating, considering what's actually in this thing. $US10 times 10k units, that's $US100k. You can afford four guys for two months. That's not a business. Maybe this is just the thing to get what their business is off the ground, and they'll say whatever they need to say to get Kickstarter to work in their favour."

Pitchford guesses that Ouya will take the tried and true method other consoles companies have for monetization, namely taking some sort of cut off of software sales. It seems likely that this could at least be a considered business plan for the Ouya folks in moving forward.

Playing off the hype and excitement of the new console, Ouya could be luring us into their field before delving deeper than this tip of the iceberg. Kickstarter is just the first step in a longer business plan set for the future.

But is Pitchford excited about this platform, future undisclosed monetization plans or not? Absolutely. "If there's a machine that's capable, that people love using, and there's a lot of people consuming games on it, I'm going to be really excited to create content for it. What it actually is doesn't really matter to me. But it [the Kickstarter draw] is a really clever, interesting play."

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Comments

    "Our business model is simple. It's identical to the mobile game model – nothing fancy or sneaky. We'll share revenue – you get 70 percent. We’re planning to make it as easy as possible for you. And OUYA is built on Android. It will also support most of the popular engines. Already Unity is a launch partner.."

    This has been on the main page from the start.

      I was just thinking that :P The real draw is that it's not going to cost the developer money to actually get the games out there, and when they do actually get sales, they get a healthy portion of it.

        Exactly.

        So many articles trying to make out that the people behind this project are being shady and misleading, but the reality is that they are being very upfront and transparent.

          Good to see replys from the maker of such products. Even in a Australian website.

            I didn't know the Ouya was a New Zealand based project, I better go round up my sheep and start building this thing!

            Actually, I do work for a manufacturing firm here in NZ which specialises in plastic injection moulding, CNC machining and metal foundry work - making the cases for something like the Ouya and it's controller would be easy for us....but unfortunately we get projects like making light fittings and shelf brackets :( /endlifestory

    They're getting a 30% cut, it's standard faire these days eg. iOS AppStore.

    Peny Arcade copyists.

    Well of that could make $10 on each console that's more than Sony made at the PS3s launch. Plus they don't actually have millions of dollars worth of R&D costs when they're just running this off of Android and using standard type, albeit currently top of the line, mobile hardware.

    Nice job not bothering to read the Kickstarter page regarding their business model or watching the video to learn the actual pronunciation of the Ouya. Top notch journalism.

    I really hope this machine takes off, could be the kick in the arse the industry needs :D

    I'm not entirely confident with the hardware of the thing.

    But oh well.

    The really suckful thing about it is that as soon as they launch Apple will sue them...

    Have they mentioned how they will deal with the fast moving android hardware race? This thing could be outdated pretty fast. I know people will still make games exclusively for it but will it run the next big releases, which are becoming a "thing" on mobile platforms?

    I have an Xperia play. Android games have already been specifically made with controller options - even minecrafts first mobile version was made for the xperia play and it's control pad. I wonder if these games will work out of the box on Ouya.

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