Editor's note: This is a commentary written in response to Nvidia's Tuesday (July 22) launch of the Shield Tablet and Shield Wireless Controller.
What's the strategy?
First and foremost, Nvidia is a chip and GPU company that derives significant revenues from gamers. Its installed base of GeForce graphics GPUs runs into the 10s of millions, a majority of which are known to the company through its GeForce Experience support offering. A large majority of Nvidia's key customers operate on the PC platform, but as gamers increasingly share their gaming time with other smart devices including tablets, Nvidia is looking to connect the dots between its PC GPU and high-end Tegra chip business and also shift up the value chain to look for more commercial opportunities.
The Shield Tablet reflects this ambition and has multiple targets:
· To build on the Shield handheld console offer with a more flexible device attractive to a wider demographic
· To demonstrate the graphical power of the Tegra K1 chipset in a direct-to-consumer and curated way
· To bridge the gap between its PC gaming customers and their use of tablets; there is significant ownership overlap between these device groups
· To extend its influence for gamers beyond the PC into the tablet and TV gaming arenas; to protect its existing business and search for new growth opportunities
Our View of Its Strengths and weaknesses
Nvidia's Consumer Ecosystem: Nvidia has over 25 million direct consumer relationships through its GeForce Experience support offering - it can leverage these relationships to market the Shield Tablet. However, while this network of consumers is a useful starting point, Nvidia has no direct payment and billing relationship with these GeForce users, which undermines their value.
Pricing: Compared to other gaming tablets on the market, the price at $299/€299/£229 for the Wi-Fi version appears well pitched. We have already seen Xiaomi's Tegra K1-based MiPad enter the market at a moderately lower price point, but it is not curated for the gamer in the same way as the Shield Tablet is. However, pricing alone is not enough to entice adopters if the value proposition across content and services does not complete the picture for the consumer.
Content and Services: One major weakness of the Shield ecosystem is the lack of desirable games exclusives. Android games playable on the TV or ports of old PC games are not enough to sell this device to the dedicated gamer. The ability to stream games from a GeForce GTX equipped PC over home Wi-Fi via the device to the TV - in the same way the Shield console already does - is attractive, but only to a small sub-segment of PC gamers. If Nvidia can extend its cloud gaming proposition beyond a select beta test in California, then this would widen the desirability significantly.
Sales Channels: Nvidia's direct to consumer sales strategy is much less developed in markets outside North America. The company has significant work to do to build out its capability here.
Will it sell?
We do not believe that the Shield Tablet is a mass market proposition as it stands. Nvidia aims to serve what is a relatively niche consumer that is active in PC gaming and that wants to take some of that rich gaming experience to the tablet space. On the basis of functionality, flexibility and sales territory availability, Shield Tablet is expected to sell more than its cousin, the Shield Handheld.
In terms of its ability to disrupt the TV gaming space and the traditional console players, we do not expect it to trouble these platforms in its current guise. Extending the availability of Nvidia's GRID-based streaming games solutions to wider geographies and additional investment in content exclusives beyond those available today would make the product significantly more attractive to a wider group of consumers.
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