Why am I so convinced that the Nvidia Shield will be dead on arrival, and fail to dent the handheld market dominated by Sony Corporation (ADR) (NYSE:SNE) and Nintendo? Let’s take a look at the key facts.
Tech specs
Before I tear into the NVIDIA Corporation (NASDAQ:NVDA) Shield’s numerous flaws, let’s take a look at this product’s technical specifications. The console, which is powered by Nvidia’s Tegra 4 chip and has a 5-inch, high-definition multi-touch display, sports a full-size “console-grade” controller that closely resembles a Microsoft Corporation (NASDAQ:MSFT) XBOX 360 controller. It is also equipped with stereo speakers, WiFi, Bluetooth, a GPS, a microSD storage slot, a headphone jack and an HDMI output. The console runs on Google Inc (NASDAQ:GOOG) Android 4.2 (Jelly Bean) and is currently priced at $349.
The Shield is considerably bulkier than its primary handheld competitors – Sony Corporation (ADR) (NYSE:SNE)’s PS Vita and Nintendo’s 3DS. It is also much more expensive than both products – the PS Vita retails for $250 while the 3DS costs $170.
Pricing
That brings us to the first problem with the Shield. According to the next chart from VGChartz, the cheaper 3DS, which boasts a simulated 3D effect that does not require 3D glasses, is currently the best-selling handheld console worldwide, claiming 86% of the market, while the pricier PS Vita only has a 14% share. North American numbers are roughly the same.
By comparison, the aging full-size Microsoft Corporation (NASDAQ:MSFT) XBOX 360 and Sony Corporation (ADR) (NYSE:SNE) Playstation 3 consoles now sell for $300 and $250, respectively, with bundled games and extra peripherals. Even the basic version of Nintendo’s eighth-generation Wii U sells for $300.
This means that NVIDIA Corporation (NASDAQ:NVDA) is about to release the most expensive console in the market, in the handheld sector where price and portability – two areas where the Nvidia Shield is lacking – have proven to be more important than raw horsepower.
In other words, NVIDIA Corporation (NASDAQ:NVDA) wants to tear into a market already divided between two major players – Nintendo and Sony Corporation (ADR) (NYSE:SNE) – by offering a higher priced and bulkier product that it hopes somehow will gain traction and market share.
Software support
The second major dilemma that Nvidia faces is software support. Sony, Nintendo and Microsoft Corporation (NASDAQ:MSFT) have dedicated video game publishers, such as Activision Blizzard, Inc. (NASDAQ:ATVI), Electronic Arts Inc. (NASDAQ:EA), Square Enix, Konami and Capcom, that produce platform-specific games for their consoles. Handheld gamers need to own a PS Vita or 3DS to play their exclusive, hardware-specific software.
Since the Nvidia Shield is an unproven console, the only option that the company has is to tap into the Android ecosystem and market itself as an Android gaming platform. Yet there are already many Android gaming platforms, such as smartphones, tablets, and hybrid devices. Many of these mobile devices are also powered by the same Tegra 4 chip that the Shield is equipped with.
The other major problem is that Android games will always be designed specifically for touch screens, not hardware controllers. This means that Android games and apps will simply feel clumsy with a full-sized console controller attached to the bottom of the screen.
To compensate for these glaring problems, NVIDIA Corporation (NASDAQ:NVDA) is offering hardware-optimized games at its Android games site, TegraZone. There are several games that have already been optimized for a controller interface, but the meager collection pales in comparison to the 150 and 140 games released so far for the PS Vita and 3DS, respectively.
It’s all been done before
What’s more, Nvidia’s approach is not original. Sony attempted the exact same strategy when it released its Xperia Play smartphones, which were equipped with portable Playstation controllers and designed to play Playstation Mobile and optimized Android games. The Play and its successor, the Play 4G, were met with mixed reviews and lackluster demand, and have currently taken a backseat to Sony Corporation (ADR) (NYSE:SNE)’s more popular smartphones, such as the Xperia Z.
Meanwhile, Nokia Corporation (ADR) (NYSE:NOK) also attempted to release a handheld console, the Nokia N–Gage, back in 2003. That ill-fated device clumsily stumbled along for seven years before being discontinued, and was unable to make a dent in a market firmly controlled by Nintendo’s Game Boy Advance (2001) and Sony’s Playstation Portable (2004).
With the Shield, NVIDIA Corporation (NASDAQ:NVDA) is taking the same missteps as its predecessors. It is charging ahead and mistakenly assuming that the market is ready to welcome a new, expensive handheld console with open arms.
PC streaming
That brings us to the Shield’s purported “bleeding edge” technology – PC streaming, which will be in beta mode at the time of its June release.
PC streaming is not a new technology. Rather, it is the same remote desktop technology that Windows, Mac and Linux computers have possessed for years, which allows other computer users to remotely view and control other computers.
Yet OnLive, a company that specializes in streaming games over the Internet, recently made playing high-end, graphic-intensive games on lower-end PCs, smartphones or tablets a popular reality. OnLive runs the games on its own high-end hardware, then streams the video feed of the game back to the gamer over a high-speed connection. The gamer’s key presses are then transmitted back to OnLive’s servers, creating a cloud-based gaming experience that doesn’t require high-end graphics cards.
NVIDIA Corporation (NASDAQ:NVDA)’s PC-streaming technology utilizes the same technology, but requires gamers to install the PC games on their own computers, which must be equipped with higher-end graphics cards such as its own GTX 650. The games are then streamed over a local area network or across the Internet to allow gamers to play higher-end games such as Assassin’s Creed 3, Borderlands 2 and Batman: Arkham City on the Shield’s handheld screen. In this respect, the Shield is similar to Nintendo’s Wii U, which can play its console titles remotely on its controller’s second screen, as long as the gamer stays in range of the console.
In other words, the Shield gamer’s home PC must be turned on, an Internet connection must be established, and the PC cannot be used for any other purposes while the gamer is streaming the game – a clumsy experience that makes the Wii U’s portable screen experience feel streamlined by comparison.
The Foolish Bottom Line
Therefore, the Nvidia Shield is destined to fail due to its high price, bizarre form factor and limited software selection. While the Shield might be used by some consumers as a media center, thanks to its HDMI connectivity, or become an all-in-one homebrew and emulation device for hobbyists, it is unlikely to achieve mainstream popularity, simply because gamers are already accustomed to Nintendo and Sony Corporation (ADR) (NYSE:SNE)’s more established consoles. Meanwhile, mobile gamers are more likely to stick with their smartphones and tablets for Android gaming.
If the Nvidia Shield fails, it wouldn’t be a devastating loss for the company, since it only reportedly spent $10 million on R&D for the product. Yet I’m baffled as to whom the product was intended for and why NVIDIA Corporation (NASDAQ:NVDA) felt the need to challenge Sony and Nintendo, when it should simply concentrate on churning out graphics cards and mobile CPUs.
The article Why This Gaming Console Is Destined to Fail originally appeared on Fool.com and is written by Leo Sun.
Leo Sun has no position in any stocks mentioned. The Motley Fool recommends Google, Nintendo, and NVIDIA. The Motley Fool owns shares of Google. Leo is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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