Mike Yuen on Zeebo - the fourth home console: Part two

Part two of an extensive interview with Zeebo CEO Mike Yuen. You can read the first part here.

Sometimes the toughest part is making the call on what you can't do and have to cut out. We had the luxury of being Monday morning quarterbacks because we have seen what has already happened with existing platforms and services as well as business models and then had to decide what we would do in the first generation of Zeebo that would be good enough because we can't do everything.

Time to market was important for us, so with Zeebo we launched in Brazil without a browser or learning content. We also launched without a community service among other things.

But just five months later and for our launch in Mexico we now support a browser and have access to educational-oriented web sites.

We will continue to expand upon this as well as start to look at adding community, social networking, an ad network, and more in 2010. We like to think we have borrowed a little bit from the Internet model of being able to iterate quickly with new features and functionalities.

We initially started with the BREW gaming ecosystem of publishers and developers since I was very familiar with this from my days at Qualcomm. For the most part this community includes the big names such as EA, Namco, Capcom, etc. Some of these large publishers didn't quite know what to make of Zeebo the first time they saw it.

Certainly the mobile groups of the companies got it, but some weren't sure where it belonged - i.e., should it stay in mobile or should it be in the more traditional console side of the house?

We also have powerhouse casual gaming folks like PopCap supporting us as well as smaller indie developers. We also plan to pursue the social gaming folks as well since we believe we provide a unique channel for them to reach new audiences who don't readily have access to a PC or laptop in the home.

However, with Zeebo, because we can bring an Internet Cafe into the home, we can provide this on ramp.

I think it's still a little too early to say we have Zeebo specific developers, although I do believe once we grow our installed base then this is a very real possibility.

Think about it: we’re basically an operator with one phone so no more of that nightmare issue of porting to loads of handsets. We also have some developers like Fishlabs that have done great games for the iPhone and now have brought those titles over to the Zeebo.

We anticipate more of this, especially since we believe we don't have a piracy issue with our platform because of BREW. We've seen original content developed from scratch, games brought over from the PC, the iPhone, BREW, Symbian, and consoles all move over to Zeebo - however, what we generally find to be the best platforms to port from to Zeebo are the iPhone and Nintendo DS.

So for any publishers and developers who have high quality content on these two platforms, we encourage you to take a look at the Zeebo too.

Zeebo games are priced using Z credits (like points) and are priced at a small premium to what it would cost to buy pirated game disks in the region. They also utilise the Amazon Kindle model where the airtime to download the content is bundled into the price of the game.

The consumer doesn't have to sign up for any sort of data plan. It's all invisible to them. They see a piece of content they like, it costs so many Z credits, they select it and assuming they have enough Z credits in their account, they just download it wirelessly to their Zeebo system from the comfort of their home any time of the day or night.

Z credits can be purchased via prepaid refill cards sold at retail, via direct debit to a bank account, via credit card, and also in the case of Brazil via Boleto Bancario, which is like a money voucher.

Games generally sell for between USD $5-$15 in Mexico and Brazil which is a small premium to the non-warrantied and non-localised pirated content.

We're based on BREW so it's the same business model that many folks are already familiar with having delivered games to operators like Verizon Wireless and others.

The publisher/developer sets the DAP (like a wholesale price) and then we as a carrier can mark up to a retail price for the end consumer. The publisher/developer gets 80 per cent of the DAP. More importantly, we provide a mechanism for content providers to make money in regions of the world where piracy is rampant.

It's been positive thus far, although it's still early. I think we'll have a lot more interesting data once we get through the holiday season.

I think owners of Zeebos like the fact that there is an affordable system for them that is more than just a game machine. It's also maintenance free. There is no operating system or updates or plug ins to download and install or worry about.

It just runs like a cell phone runs. It also provides them with an opportunity to bring the Internet Cafe into the home as well as interactive learning.

For some countries like India, this really resonates because it provides parents with a way to help their child's education and ideally help get them into college where the end result is a better life for all.

The super hardcore gamers and bloggers are the most sceptical because we aren't attempting to win the megaflop and megapixel computer arms race, but they were like that for the Wii too, which give us great hope.

And in the end what really matters is: does the consumer have fun and do they have a good experience with the product and service regardless of what's underneath the hood?

Zeebo is currently available in Brazil (Rio de Janeiro) with pan Brazilian availability planned for mid/late November. We also launched nationally in Mexico on November 4th.

We're also now looking at some of the larger BRIC regions like India and China. We believe we have lots of opportunity with countries throughout Latin America, Southeast Asia, Eastern Europe, etc.

We're headed into the holiday season so we'll see which region, Brazil or Mexico, shows the fastest uptake. Of course, we'd like to see both countries do well.

From a gaming perspective it's the challenge any new platform faces. We have to grow our installed base to a meaningful size in order to create a virtuous ecosystem where content is created on its own and the ecosystem is self sustaining.

The nice thing is we have found lots of fans cheering for us because of our vision to create something iconic for the rest of the world and not just the developed countries. People like what we're attempting to do and are supportive.

However, in the end we do have to execute and create a viable marketplace. We get the benefit of the doubt now, but business is business and you have to produce sooner or later to earn the right to continue to do what you're doing.

Funny you should ask that question. We often get asked this question despite our focus being on emerging markets.

All I'll say for now is we're focused on the BRIC regions of the world today, but you can never say never, and who's to say what would happen if we are able to drive our product costs down, find the right in country strategic partners, find the right audience to target, offer the right set of applications and services, etc.

But for now, we're happy to focus on the 800 million people moving into the middle class and once we've made some headway, we might find some cycles to focus on those that have already arrived that are in our own backyards.

Hypothetically speaking, to some extent the same basic obstacles we face in emerging markets. Namely, price, content, marketing, distribution, and competition.

However, the enormous potential is as simple: if we can sell a Zeebo to one out of ten in the so called next billion, that's an installed base of 100 million units sitting in what we like to call the most valuable real estate in the world - connected to the TV in the living rooms of families in emerging markets of the world.

I'll keep this one short and simple. We're proud of the fact that we have a vision to provide a product and service that can enable an emerging market family's life to be better. Zeebo enables people to play, learn, and connect.

And we do that through cell phone technology, secure 3G wireless digital distribution, and locally and culturally optimised content specific to each country that is simple and easy to purchase.

Reinaldo Normand has re-located to Shanghai and is now splitting time between India and China to help us figure out our market entry strategy for these two huge regions, which we hope to launch in the coming years.

Bottom line is we're an ambitious lot at Zeebo and we want to change the world and make life better for our consumers.