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Why does the Wii even exist?

Or put more generally, why do we have three different, completely incompatible video game consoles on the market right now, instead of multiple companies making video game consoles that play a single format? We have unified formats for CDs, DVDs and bananas, so why not video games?

Here's an article that discusses rumors that Microsoft was considering licensing other manufacturers to make their own versions of the 360 prior to its launch. On the surface this doesn't seem like such a bad idea. It'd remove the responsibility for manufacturing hardware from Microsoft's sloped shoulders and birdlike arms - they've never really proven themselves adapt at the sort of heavy lifting that manufacturing requires. Third party Xbox's could potentially be cheaper, and also, you know, work.

But for now it remains a rumor. Why have console manufacturers resisted licensing the manufacture of their consoles, and in general why haven't we moved towards a single standard, like the DVD? As is generally the nature with rhetorical questions, I've already prepared some answers...

One, the inability to maintain control of the price of the hardware - particularly the ability to sell it at a loss. In the video game industry it's fairly common for a manufacturer to sell their console at a loss for the first few years of production, a sacrifice they're willing to make to build up market share. But there's no way an external, licensed manufacturer would be willing to manufacture Xbox's and price them so low that they'd be losing money. Both the CDi and 3DO were licensed to outside manufacturers, and high prices are one of the reasons they failed (they also weren't much good at playing video games.) I guess this kind of scheme could work, if the licensing involved assorted payoffs and kick-backs from the licensor to the licensee in exchange for the licensor being able to set the price. Seems complicated though.

Two, video game content providers aren't as powerful or concentrated as movie or music content providers. The vast majority of American films are owned by 6 companies. When they throw their support behind a single format, that format becomes the standard - this is exactly how the HD-DVD and Blu-Ray battle was settled. I imagine the same thing happens in the music industry, but with greasier people at the negotiating table. Video game publishing has grown more and more consolidated over the last decade, but it's still nowhere near that level. No single console has been able to gain the overwhelming support of third parties since the NES.

Three, the pace of console development is a huge obstacle for any possible consolidation. The amount of negotiations, arm twisting, and legal kicks to the balls needed for hardware manufacturers to agree to a single standard is considerable, and can take years. For certain formats, that effort might be worth it. CD's have been around and kicking for 25 years or so, and DVD's for a dozen. But new console generations are separated by 5-6 years or so. To have to go through all that hassle every 5 years for the next generation of consoles? It might not be worth it. Now I wouldn't complain if the pace of console replacement slowed down - I don't think it's terribly healthy for the industry. But it will take more than this whiny asshole to stop that particular trend.

I should point out that I'm no economics major (my university career was spent mostly learning then rapidly forgetting computer science) so I may be missing something here. What do the rest of you Monday Morning Console Quarterbacks think?

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Chris Bucholz

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