Mr. Hoyt,

Based on your most recent response, I feel I need to clarify things a bit, both for you and anyone reading this exchange.

My purpose in discussing topics like "A One-Console Future", "The Medium is the Massage" or "The 8th Art Form" is to stimulate thinking in our industry for the overall benefit of the industry. While I appreciate your interest in continuing this discussion in Lyon, the format of my presentation at GDC is not the right format for a public debate.

With respect to the balance of your last response, please note that in order for the scenario I described to occur there must be an agreed upon standard. The PC market is not standardized at all and thus fails as an example of what I am forwarding. This is a point that I discussed in my talk in Leipzig, and will once again cover in Lyon.

You have missed the point of commoditization of technology altogether. Stating that consoles are more different than previous generations from a hardware perspective is completely irrelevant. The key point of understanding is that their perceived difference to the consumer is getting smaller, so its differentiation (brand) and value falls rapidly. If they all play music, video, connect to the Internet, have force feedback, their similarities to the consumer become greater than their differences, because they all do the same things. The fact that these consoles are growing more similar in functionality only supports the idea that there is movement toward performance oversupply. Do we need the PS3, Xbox 360 or Wii to surf the net? It's nice, but I don't personally feel I need it.

In my previous response I also stated as another indicator of performance oversupply that more than 250 games were released during the month of November 2006 – too many games for consumers to play. You seemed to ignore that point altogether. I also used the cell phone as one example of commodification of technology. There are many others -- everything from DVD players to cars. For someone who claimed that I ignored the basic economics of the industry, you fail to distinguish between key aspects of macro and micro economics.

Additionally, I discussed trends of technology and commodification over time, and you forwarded the iPhone as how the cell phone is not a commodity. The iPhone is a completely new technology that has already dropped dramatically in price in order to compete in the intensely competitive cell phone market. I invite you to do a Google search on commoditization and cell phones – the literature is abundant:

"Michael Raynor and Clay Christensen in their The Innovator's Solution define this commoditization as a process that makes highly lucrative, 'differentiated and proprietary product into a commodity.' "Large established and extremely successful companies have become too good for their own good," Raynor told me in a phone conversation. "Argument is Intel is going to give me a faster chip, I am going to take it, but I am not going to pay for it. That is called commoditization. Intel understands that their ability to charge premium prices on processors is falling because they are overshooting what consumers can use. Nokia is facing that challenge in their business." - Mobile Mergers Article

The scenario I described does not require any of the console manufactures to bow out willingly. They likely will never willingly do this. However, the scenario I describe takes the view that market pressures and a changing game industry economy will become a powerful force that will require a one-console standard to occur, whether the first parties like it or not. I will quote a line from the definition I provided in my last letter for extra emphasis: "Commodification can be the desired outcome of an entity in the market, or it can be an unintentional outcome that no party actively sought to achieve."

While I have enjoyed the back and forth with you on this topic, it seems like we are going to have to agree to disagree. Time will be the final judge on this issue.

Denis Dyack,
President,
Silicon Knights.