Our solution would be to partner up with Nintendo and create a next generation MediaSmart television that includes an integrated Nintendo gaming system (be it the Wii, it’s successor, or a generic piece of hardware endorsed by Nintendo). The integration would be simplest for HP to pull off, as the Wii’s hardware is the least advanced of any of the next generation consoles. While getting Nintendo to buy in to the idea may prove difficult, there are benefits to be had by both partners.
The benefits to HP are obvious. While direct competitors to the MediaSmart are hard to come by at the present time, copycats will soon emerge. Technology has become almost a commodity, and HP may lose out to manufacturers who are better known in the television world. Partnering with Nintendo gives them a unique edge over their competitors for various reasons. First, it ties the name of a titan in the video game world to the MediaSmart television, lending HP more credibility. Second, it enables the MediaSmart to play the full library of Nintendo’s games, something that will be impossible for other television manufacturers to replicate. Finally, social networking, which is supported by the Wii, may provide ever important network effects for HP.
The benefits to Nintendo are slightly less obvious, but no less real or important. First, consoles are loss leaders for all game console manufacturers, as they are merely a catalyst for game sales. As aforementioned, the Wii is the closest to the MediaSmart in terms of technological capability, meaning Nintendo could integrate at extremely low cost. This would free Nintendo to concentrate on its forte, gaming, and let HP handle what it is good at, hardware production. Second, it would help them penetrate further into the home. People considering purchasing a next generation television are already spending $1000-$2000. Those who may not be willing to spend $250 for a game console may be willing to spend an additional $50 for a version integrated into their television. This may prove to be the edge that Nintendo needs to win the console wars.
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Manufacturers generally lose money on each console they sell. According to David Hoyt of the Stanford Graduate School of Business:
“Console makers typically [lose] money on each box…. Two factors [are] critical to profitability in the console business: driving costs down, and game sales. Microsoft estimated that the original PlayStation cost Sony $450 when it was launched, but just $80 five years later. Sony’s initial sales price had been about $300, decreasing to $99 after five years.”
Source: Hoyt, David. "Evolution of the XBox Supply Chain." Stanford Graduate School of Business. (2006).
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