Zeebo and the Brazilian job

Zeebo is finally coming to market, with the launch in Brazil underway. It’s a good time to look again at what we’re trying to achieve.

The whole purpose of Zeebo is to fill a void. In countries like Brazil, there are many people playing very old 2D consoles. Then there are a very small number of people playing new consoles, that retail for more than a thousand dollars a box.

However, there’s nothing that’s in the $200 to $250 spot, which is traditionally where a lot of consoles get sold in the United States, Western Europe and similar markets.

That’s the market we are trying to address.

For consumer electronics goods manufacturers, there is a big problem with a market like Brazil, which is also an opportunity. Put in very simple terms, if you ship a foreign finished product into Brazil there are huge import tariffs of more than 30% to 35%. That is crippling for manufacturers. Especially in a market where price is very important

But the idea is that Zeebo – the start-up company that Qualcomm funded – partners with a local company so the manufacturing assembly is done in that country. There’s no finished product that’s being shipped into the country and then sold. The components can be shipped in, the partner manufactures the console and sells it locally at an equivalent price of around $200 to $250 depending on currency fluctuations. And in Brazil, that’s one-third to one-fourth the price of other consoles (which sell for over $1,000 U.S.)

From a Qualcomm perspective, it’s business as usual. Zeebo is not unlike any other OEM model. Customers we have historically worked with include Motorola, Samsung and LG, making mobile handsets or cellular handsets based on our chipsets and software and technology.

That $200 price is aimed at a middle-class income, which is a very broad market, but for the sake of argument we’ll say a family that earns between $5,000 and $10,000 a year.

That isn’t a lot of money by the standards of, say, the U.S or Western Europe. But this is a market that’s very conscious of brand, of quality and of value.

Zeebo is aspirational. If someone is going to save $10 or $20 a month for a year or two years to buy a two hundred dollar machine, they want to feel like they are buying something of value. Zeebo is not PlayStation 3, of course, but it’s less than a quarter of the price. This is not a decision between an Xbox 360 or a Zeebo. That just doesn’t come into the equation.

At $200-$250, this value proposition is pretty compelling. You turn on your TV, turn on this product, it can get content right away. Software is bought and downloaded, rather than sold through retail. Even more broadly it’s not just about games. We actually want to expand beyond games to educational learning, messaging, and lots of other content.

The games themselves are of a quality that, I suppose, a Western games journalist would tag as being from a slightly earlier era; but not terribly old. I would say some time around the arrival of Nintendo 64.

The audience we are targeting are playing games from the pre-PlayStation 1 era; so this is a significant leap for those gamers. That these games look slightly retro to a Western audience is not relevant.

The reaction among our target audience is much the same as the reaction in the United States to the arrival of Quake or Tomb Raider or Mario 64, which was a very positive reaction and, in some ways, is still seen as a Golden Age among gamers today.

We’ve also got strong support from games publishers, who are understandably keen to open up new markers, which have traditionally been blighted by high prices and by piracy. Companies like Electronic Arts are attracted to the business plan and to the download-only nature of the model. And for small, independent developers, it’s impossible to market on existing consoles because the marketing costs are excessive and the piracy is rampant. In the case of Zeebo, neither are the case, so indie developers can create local games and get them to market exclusively on Zeebo.

So where is this going to go? The emerging markets represent the next billion consumers who’ll be entering the games market. Any company that can help to bring those consumers into the fold is in a good position and, I think, is doing something very positive for the industry as a whole and for the end-consumer, which is currently stuck between obsolete technology and out-of-reach price-points.

Put it another way. I don’t think the games market has any choice but to address this market in ways that are appropriate to the consumers and to their particular environment.