Gaming Economics

An article on Xbox economics from Red Mercury: “The economics of the XBox don’t add up now, and they get worse with time. Sony and Nintendo can kill the XBox on cost alone. The software subsidies that Microsoft expected are a myth. Game console prices will continue to drop, from $199 to $149, then on down to $99. Will Microsoft ever make it to the $99 level of this game? We’ll see. According to XBox economics, it all depends on how much money they are willing to lose.”

The article makes the point that Sony and Nintendo are unlikely to be losing money on their consoles, while Microsoft most certainly is. This, even after Nintendo dropped its price to USD 150 from USD 199.

Microsoft, says the article, is looking to make up via software sales. It would need users buying 15-20 titles for Microsoft to break even.

I think Microsoft is looking at an additional source of revenue coming in from their online service – Xbox Live, which is likely to cost USD 49 per annum. That is likely to be the base entry pice, with additional charges for premium areas — much like how CompuServe used to be in the early 1990s.

For Microsoft, its a great (and cheap) way to learn to (a) how to get into the living room (b) build and sell hardware (c) offer a Net-based subscription service which could later be extended to enterprises and Office.Net.

Microsoft already has the infrastructure in place via MSN for the online service. Now, if only people would buy the Xboxes….

Emergic Thinking Update

This Sunday, I was going through my notes on Emergic of a year ago — then, I used to refer to it as “SME Tech Utility”. It is always an interesting exercise reviewing older thoughts and then just thinking reviewing the progress one has made. As I read, I realised that one space I had not allocated enough resources to was on the Enterprise Software side. Even the way we are doing things currently is too conventional (wanting to develop an accouting+sales package for SMEs which will run off the Thick Server on the LAN and be web-enabled), and needs to change.

What become clear to me is that Emergic needs to have 3 pillars:

1. Thin Client and Thick Server: includes the Digital Dashboard which will over time become the de facto Desktop, Messaging, Collaboration, System (files and preferences) and Publishing (website, ecommerce) applications. This is the “SME OS” — like MS Windows. We need to think of us as a “platform” for us and others to build upon.

2. Enterprise Software: This is the enterprise equivalent of MS Office — an integrated suite of eBusiness applications that an enterprise needs. Needs to be crafted like Lego blocks, which can fit in together.

3. Content and Community: This covers this weblog, BlogStreet.com (the blog directory and search engine), and other sites to build out the SME Clusters and Marketplace. Like a cross between Yahoo and eBay for SMEs.

Plenty of thinking still to happen:
– who will be our early adopters, and how do we roll out
– sequence of activities and milestones for next 6/12/18 months
– the business model: how will we make money
– marketing and distribution: how do we reach out to SMEs
– need to figure out the second hand PC value chain
– do we worry about the home market
– missing: communications (WiFi) and service (eg. microFinance, Outsourcing)

I am confident we’ll get answers as we go along. Have to jump in the water to learn swimming. We’ve started climbing the rocks. We’ll stumble a little, need to go back at times, but we’ll climb the mountain.

SMR articles on Disruptive Innovation and Platforms

The Sprint 2002 issue of Sloan Management Review has 2 articles I found interesting. The first is on “Disruptive Innovation” by Christensen and others, and talks of how to build disruptive businesses. The second is by Michael Cusumano and Annabelle Gower on “The Elements of Platform Leadership”, which discusses how companies like Intel, Microsoft and Cisco build “platforms” for industry domination.

Christensen’s article builds on his other articles (including one in the Harvard Business Review last year which won the joint 2nd prize for the best article of 2001) and book “The Innovator’s Dilemma”. It highlights two tests which a disruptive innovation must pass: one on creating a new market as a base of disruption, and the second on disrupting the business model from the low-end.

I have very much liked Christensen’s thinking, and this article is no exception. As I was reading it, I applied it to our ideas on Emergic — how we want to (a) use second-hand PCs and low-cost software to open up new markets in enterprises — people who haven’t been using computers before, and (b) create a new business model of software as a subscription service. Our targets are the world’s poorer and underserved markets — the low-income, developing countries. Our Thin Clien-Thick Server will be simple and affordable, and give computing access to current non-consumers at no more than USD 10 per month.

The second article on Platforms is relevant from the context of what we want to do in creating an Integrated eBusiness software for SMEs. There is no way we can go and create every module businesses need. So, we need to think of an architecture wherein we create the platform and others can build upon it.

Reading the management magazines like SMR and HBR are interesting when one has some ideas in mind because there’s always something to learn if one can (a) choose the right articles to read (b) apply these ideas to the challenges / thinking on hand. They can either contradict or reinforce what one is thinking. The magazines may be expensive to subscribe, but for any entrepreneur, I would strongly recommend investing both the time and money. As entrepreneurs, this is, in fact, a very inexpensive mechanism for exposing ourselves to new, innovative thinking from some of the best experts in the business. The key is to read the articles and think from our context, and not necessarily, the BigCo context that is embedded in the writings.

Re-thinking this Weblog

I have now been blogging for just over 10 days. Spend about 30-45 minute daily on the weblog. But I am not happy with it. It is not innovative, conversational or different. Have been thinking of ways by which Emergic.org can be a standout.

Currently, this blog is a mix of:

  • My daily Tech Talk column. Each week I take a theme, and write about 500 words a day, Mon-Fri. Sometimes, the theme extends into multiple weeks.
  • Link-Quote-Comment: This is the “Information Filter” part of the blog. I link to a few articles a day around the web which I have found interesting, excerpt out a little bit from the article, and provide some commentary.
  • Original Thinking: Like this piece, wherein I write about my ideas/thoughts, and some of the work we are doing in Emergic.

    The above is still too conventional. It is too “bloggy”. What fresh thinking can I bring in?

    1. NewsLinks: adding a collection of news links from 15-20 websites. These websites would be a mix of technology, business and emerging market sites. In fact, I want to take 1 website each from the 5 top emerging markets — India, China, Brazil, Mexico and Brazil. Taken together, this collection of 100-odd links provides a context to what’s happening in the world around us. It also records the day in posterity (the archives, in our language).

    2. BlogDaily: a mix of some daily features, which are not time-sensitive. Example section: Think It Over (a quote/extract), Quiz Question, Number/Statsitics, Cool Site of the Day, Discussion Topic for today (among readers), The Latest (coverage from magazines), Book Blog (thoughts as I read a book).

    3. Categories and Outlines: The posts on the site are organised chronologically, by date. I was thinking of adding categories, but that would also end up being organised by time. What I want to do is to use the category pages to give a Big Picture view of the content in that section, like a Table of Contents, an Outline.

    The objective is to make Emergic.org a daily “must-visit”: it must add value to your life, so you will want to spend 5 minutes everyday. I want Emergic.org to be like a conversation we have every morning. In fact, I’d like this site to be the first site you visit everyday. Let’s see if I am able to accomplish this!

  • TECH TALK: Why is it so?

    (This is Part 2 of a 5-part series on India’s Anguish. Part 1 was published yesterday.)

    The previous Tech Talk series was on Indias Next Decade how to imagine and build a brighter, richer, progressive, more powerful, and technologically advanced India. And yet, theres nothing which takes away Indias Anguish even as Indians want to reach out to the stars and a better future, as a nation we seem to only be falling further behind the world. Why is it so?

    It is easy to lay the blame on a few disgruntled elements be it within Pakistan, some of our extreme politicians or some scheming brains. The problem is that we let it happen, we let ourselves be driven, we are happier being led rather than lead. We have gotten so used to being also-rans that we have lost the desire to win. We expect ourselves not to win whether we are playing cricket or hockey, or cheering for Lagaan at the Oscars. We are not used to taking the initiative or setting an agenda. We just let our lives come. This is the mass attitude which defines India today. Chalta Hai. Let things be.

    The result is that there is no vision for India. Our political parties and politicians crave for votes based on religious and caste divides. That is where the rot starts. Our horizons have become so narrow, that we do not expect anything better. We have become immune to our government. We have come to accept giving bribes at various levels to get things done because that, seemingly, is the only way. We have become insensitised to scams. A scam as big as HomeTrade managed to seemed so easy to pull off, and it no longer makes the headline news. Why? Because Pakistan, our Enemy No. 1, now dominates the news.

    We worry about all these things because we dont have more serious issues to worry about. No ones talking about making India great we have accepted that we cannot do it. No ones talking about excellence and innovations we have resigned always to becoming copycats rather than copyrighters. No ones talking about technological leadership we just dont believe it is possible. In fact, when something good happens, it surprises us. We have reset the standards of our lives — we have come to accept the mediocre as good. The Indian bar has, over the years, kept moving lower. Our wishlist has gotten smaller and smaller. And we, as a nation, have forgotten to dream. Or still worse, put our aspirations away in cold storage.

    Tomorrow: The Emerging Markets Paradox