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3D Games and the Innovator’s Dilemma

We are aware of Clayton Christensen’s innovator’s dilemma: Incumbent companies make incremental improvements to products by adding feature/function historically valued by the firm’s mainstream customers. At some point “the lines cross” and customers will no longer pay a premium for increased functionality. The dilemma is that the firm will continue to make incremental product enhancements. It does so for two reasons: (1) To remain competitive, since others in the industry are doing the same thing, and (2) Its technical core competencies does not allow the firm to do anything else.

Sony’s recent announcements at the E3 show of enhancements to the Playstation 3 are probably an example of the innovator’s dilemma. Sony added 3D gaming to the Playstation, and also introduced a Wii-style motion controller called Playstation Move. Playing 3D games requires a 3D display and players must wear the special 3D glasses, both of which seem to limit the market for 3D games. Move offers more sophistication that the existing Wii controller. Move will compete with Microsoft’s Kinect, also announced at E3.

The review of Sony’s announcement in PC World magazine captures the innovator’s dilemma risk. The headline for the story, published on June 16, 2010, is “Sony Playstation: The Kitchen Sink Approach Continues.” The lead paragraph states: “Tuesday’s press conference showed a company desperate to make its console the jack of all trades.” 3D gaming was described in the article as “glasses-wielding (and) nausea-indusing.”

The magazine described the pricing of Sony’s Move bundle as “a problem.” The camera plus main controller wand plus secondary controller retail for $130 – and that’s for a single player. Price for the Move bundle with the Playstation console is $399.

3D gaming may be a hit at some point. There’s clearly a crossing the chasm problem. 3D games need 3D TV’s, which are in the early stages of the early adopter stage. At some point the 3D glasses problem will be solved. 3D gaming needs a “killer ap” – a must-have game that will drive sales of 3D consoles.

The issue is the pricing. Prices of game consoles have been declining as the market has become saturated. Dedicated gamers (technology enthusiasts and the earliest of early adopters) will probably pay a premium for a 3D game consoles and 3D games. But what about the mass market? Somehow this looks like a repeat of the consumer electronics industry’s experience with Blu-Ray DVD players.

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