Written by: Bob Mandel
In recent years, personal gaming computers have penetrated everyday life in unprecedented ways. Because of extraordinary hardware developments facilitating dramatically expanded capabilities, the market has been decisively segmented: large, impersonal hardware companies sell low-end gaming computers to mass consumers for as little as $500 to $700, while small, personal boutique firms sell loaded units costing over ten times that much to high-end hardcore users. Recently, however, a fascinating merging of efforts has occurred between these two types of companies. This article analyzes the intriguing implications for PC gamers, utilizing extensive interview responses from key visionaries at the pivotal companies involved: Rahul Sood, chief technology officer at HP Gaming, and Susan Kittleson, director of global gaming strategy at Dell.
In March 2006, Dell announced the purchase of Alienware, and in September 2006, Hewlett-Packard announced the acquisition of VoodooPC. Thus, Dell and HP, the two largest computer resellers with a traditional focus on mainstream purchasers, each took a major step toward catering to the most demanding high-end gamers. Despite the superficial similarity between these companies’ moves, a crucial organizational difference is evident (aside from the reliance by Dell on direct sales and by HP on retail channels).
Kittleson says, “We think one of the key differences has been that Dell and Alienware have remained largely separate entities” whose high-end computers actually compete for the same market. Rather than pushing an agenda, Dell has allowed Alienware to continue to do what it does best.” In contrast, Sood says, “Right from the beginning, we decided to integrate Voodoo directly into HP. We are working together, not separately, to build this business. I’m not sure how competing against yourself can help.”
After initial forays into the high-end market with the XPS Renegade and the XPS 710 H2C, Dell’s current flagship computer is the XPS 720 H2C (“H2C” stands for “hot to cold” in reference to its water cooling system), whose price ranges from about $5,000 to just over $9,500. After spending over a year in development and canning the Blackbird 001, HP’s just-released flagship computer is the Blackbird 002 (named for the world’s fastest jet, the SR-71 Blackbird), whose announced price ranges from $2,500 to $7,100.
RATIONALE FOR MAINSTREAMING OF BOUTIQUE GAMING COMPUTERS
Generic economic industry incentives provide a first cut at explaining these moves. First, entering these niche high-end markets reaps higher profit margins, as many hardcore gamers appear ready to pay premium prices to get top-of-the-line hardware. Second, since sales predictions for business PCs are much flatter than for gaming rigs (as the machines last longer and the markets are saturated), moving into the high-end market might be the best bet for facilitating continued company growth. Third, developing high-end systems leads to status among consumers as a technology leader, modifying any image of large computer resellers being mundane suppliers of office equipment.