David Rosenthal: evaluation

Transcript context

…Seriously, Grand Theft Auto. Yup. Ultimately, despite all this hand wringing over these games and everything coming out with these CD add-ons, there is a fundamental problem with what Sega is doing here, and that is that add-on technology for consoles is never really a good idea because the business model of the video game console industry is a razor and blades model. The way that video game companies like Sega, Nintendo, and Sony in a minute, make all of their profits from the software sales, not from the hardware sales. You want to have as big of an installed base of consoles as possible to amortize the software sales across. When you're selling an add-on console, you are limiting the target market to the 30 million people that already own a Genesis. It will be smaller by definition than the market base that you've already created. This creates a huge problem because then developers don't want to make their best games for a limited install base of consoles. Consumers don't want to go buy a platform that's only going to have a very limited number of good games, and it quickly becomes a death spiral. The Sega CD sales, despite starting off relatively strong, stall out quickly. Sega only sells about 3 million Sega CD units versus the 30-plus million Genesis units that they've sold. This is a flop for them. Nintendo, by either luck, skill, or maybe just being slow and Nintendo, they never actually come out with the CD add-on for the Super Nintendo, and the Sony partnership falls apart. They avoid this disaster that Sega stumbles into. After the Sony partnership fell apart, didn't they form a new partnership with Philips to create the Nintendo CD thing?…

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