Why Ouya isn’t going to work
So there has been a lot of buzz on the Internet about a Kickstarter project called OUYA. For the uninitiated who have been living under a rock for the past week, OUYA is an open-source game console based on the Android operating system. It plugs into your TV and allows you to play games on your big screen (rather than on your phone or tablet screen, which has been the recent trend). And the overall mission is for this to be an open platform, unlike Xbox and PlayStation, so anyone can develop games for it (most independent developers can’t afford the fees required to publish their games on the big consoles). And one more thing: it only costs $99 if you donate to Kickstarter right now. Unsurprisingly, Ouya was the fastest project to ever hit $1 million in funding on Kickstarter, and it crossed the $4 million threshold in just a few days. I think it’s also likely to be Kickstarter’s first huge flop. I’m skeptical that they can make the product they are promising, and this should be obvious to anyone who gives it a close look. I see a few major red flags — namely that there are too many moving parts in getting the hardware right (let’s not even address the software and marketing issues), and that the team doesn’t appear to be cut out for the mission.
Hardware manufacturing costs and complexity
Let’s be realistic, even if they use completely off-the-shelf components, the cost is just way too high for them to pull this off at the promised price point. If you look at the specs they’ve given, we’re probably about talking close to $50 just for the raw materials required for the console. From what I can determine, the Tegra3 SOC is $15-$25, but that’s only a small part of the console. A number of other pieces are required, as the SOC doesn’t include a number of important interfaces (Bluetooth and Wi-Fi). Even if they can find an off-the-shelf logic board that includes all necessary components, they still need a custom case and a power supply.
Had the team decided to focus on just the console, and designed it to work with some common USB or Bluetooth controllers, they could have shaved off a significant amount of the cost.
Had the team decided to focus on just the console, and designed it to work with some common USB or Bluetooth controllers (as have Microsoft and Sony with the Xbox and PS3), they could have shaved off a significant amount of the cost. Sure, I know that a top-notch controller is important, and the company really wants to distinguish itself from what’s out there, but there are plenty of off-the-shelf controllers that could suffice for now. As it is, they specced a custom gamepad with an integrated touchpad, which can’t be cheap to manufacture. If they can source the parts for $25 at the scale they are proposing, I would be seriously surprised. So we’re talking about at least $75 in raw parts, plus the cost to put it together and ship it. So building the hardware will cost at least $100, and probably more than that.
And speaking of manufacturing, everyone I know who has built hardware has found it to be far more difficult and expensive than anticipated. The biggest problem is typically not designing the hardware or building the prototype — it’s getting the thing manufactured so that it will actually work. A lot of things that work in your R&D lab can’t be manufactured at scale, and you usually don’t find that out until you try. The first run of production usually doesn’t work, and then you have to figure out what happened (at your cost, not the manufacturer’s). Having experienced hardware engineers and supply-chain people can help, but there has to be a large enough “screw up” budget. At the prices they’ve listed, I can’t see much room for that.
So who is team OUYA? Well, that’s not entirely clear (most of the people on the promo video are game developers). So, far as I can tell, the company doesn’t even have a website at this point (which is strange, considering that they aren’t exactly in stealth mode). From the Kickstarter page on OUYA, I’ve been able to determine that the CEO is one Julie Uhrman. Perusing her Linkedin, I see that she has about nine years’ experience in the gaming industry, so at least she has something that could be helpful in building a new platform. The problem is that none of that experience involved manufacturing hardware. If she is so experienced, and the opportunity so big, then why hasn’t she been able to raise money from institutional investors?
I also see that Yves Behar is involved, which is where the sleek design for the controller came from. A sleek design is important, but it’s not necessary to build a good console. The original Xbox did fine despite being pretty ugly and having a poorly designed controller (although it did have Microsoft’s marketing muscle behind it). And it isn’t clear that Behar is any more than just a consultant (OUYA is working with fuseproject, Behar’s consultancy). The Kickstarter page says that plenty of other people are involved, but they “would get fired if we tell you who they are.” So hopefully there is actually some real firepower behind the hype, but those people need to leave their existing jobs before they can work full-time on OUYA. Honestly, it kind of says something when a founder can’t get his or her team to quit their day jobs. I regularly see founders get great people to quit jobs and take huge pay cuts to work with them.
As it stands, OUYA has a team that’s obviously long on design and hype, and short on documented execution. Which makes sense given that they have been able to collect $4 million in “donations” with very little to show for it. For all we know, the “working prototype” could be a Tegra3 development kit with a USB controller attached.
I’m actually less worried about the BD deals than the manufacturing. If the team succeeds at building the hardware but can’t get anyone to develop for it, I’m sure that they will at least figure out how to get some existing Android games to run. So backers will get a working device with a small library. If, by contrast, they screw up on the hardware, the whole thing is completely useless, and no one ever gets anything. It doesn’t matter what cool launch titles are out there if the hardware isn’t right.
To be honest, unless they manage to poach someone senior from Apple’s supply chain to help with manufacturing, I don’t think that they have a shot of pulling this off for real.
Comparisons and conclusion
So how is this different from The Pebble or any of the other projects that raised a ton on Kickstarter? Well, in general, those were the products of experienced teams who had built comparable products in the past. The team behind The Pebble built a similar watch for the BlackBerry that, while simpler, showed their ability to produce. Some of the other high-grossing projects were video games by developers who have already built similar hits (Brian Fargo, who is building a sequel to Wasteland, built the original game and founded Interplay). And, to be fair, none of these high-grossing Kickstarter projects have delivered yet, so the jury is out on all of them. I faintly remember a metal iPhone case that completely killed the phone’s reception, and hope this won’t be one of those.
So I wouldn’t recommend putting your money on OUYA. If they are successful, you can buy the console when it comes out. When you figure in the probability of the team delivering a real, working product that lives up to the hype (estimated generously at 10%), the retail price would have to be $1000 for a commitment to be worth it. Since they have already hit the funding target, I would let them work out the kinks with the money they have already raised.