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Ouya $99 Game Device Undercuts Bigger Players in Consoles

Ouya Inc. releases a $99 video-game console today using Google Inc. (GOOG)’s Android operating system, testing whether low prices will cut into the market for Sony Corp. (6758), Microsoft Corp. (MSFT) and Nintendo Co. (7974) machines and titles.

Ouya’s biggest backers get the first devices today at an unveiling during the Game Developers Conference in San Francisco. Other investors will get theirs in the mail, according to the Santa Monica, California-based company. The player is expected to go on sale to the public in June.

Founder Julie Uhrman is betting the Ouya player will lure independent developers back to creating games for home use from tablets and smartphones, an area they flocked to in recent years. U.S. retail sales of game hardware, software and accessories fell 22 percent to $13.3 billion last year as consumers spent less on packaged titles and shifted to digital downloads and games on mobile devices.

“We hope to have content that appeals to core gamers and the mass market with exclusive content,” Uhrman, the company’s chief executive officer, said in an interview. “The challenge with Ouya is the business model -- it’s bringing the free-to- play model to the television and building an ecosystem of gamers and developers.”

About 55 games will be available with today’s release, according to Uhrman. The cube-shaped player uses a version of Android that requires developers to create applications and games just for the device. Games must be free, offer a free trial or have free add-ons, the company said.

Android Games

Android games typically have been free, with add-ons such as new levels costing as much as $20. Packaged games can cost as much as $60, or more with add-ons. Ouya plans to keep 30 percent of game sales, with developers getting the rest.

While the initial games aren’t as visually advanced as major console titles, Uhrman expects consumers to respond to the lower prices. An Android game can cost as much as $20,000 to develop, she said. Major console releases from game publishers run as high as $50 million.

A second Android-based, Kickstarter-funded product, called GameStick, will be introduced by midyear, according to its London-based parent, PlayJam Ltd. Last October, the project secured a $5 million investment from Adobe Ventures, GameStop Digital Ventures and Endeavour Ventures.

The Ouya will compete against home players including Nintendo’s new Wii U, which sells for $300 to $350 in the U.S. Sony plans to release PlayStation 4 later this year. The company’s current PlayStation 3 sells for about $300, as does the Xbox 360 from Microsoft.

Fundraising Effort

Nintendo and Sony declined to comment on the Ouya. Through a spokesman, Microsoft said it welcomed the innovation.

Ouya raised $8.6 million in July through Kickstarter.com, a Web-based funding service, becoming one of the site’s biggest projects. For its look and feel, Ouya hired industrial designer Yves Behar, whose Fuseproject firm worked on Jawbone’s Jambox Bluetooth speaker and UP health-monitoring wristband.

The Ouya comes with one controller, and can be played with as many as four at once, according to the company. It uses Nvidia Corp. (NVDA)’s Tegra processor, which is based on ARM Holdings Plc (ARM) designs.

Ouya also has an open-source media player, allowing the console to offer features such as Flixster, a video-streaming service that competitors also provide.

To contact the reporter on this story: Cliff Edwards in San Francisco at cedwards28@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net

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