GameDaily chats with Intellivision CEO Tommy Tallarico about the business behind Amico and how the pandemic has affected operations.
Intellivision Amico, the retro console that revives the gaming brand of the ‘70s and ‘80s, is set to launch on October 10, 2020, and is already off to a good start despite a global pandemic. As first reported by GamesBeat, the VIP version of the console has received more than 10,000 preorders in its first few days. Intellivision plans to stop taking preorders this Friday at midnight, and for those interested, ordering direct ensures customers get the console more quickly (while eliminating those pesky retail margins for Intellivision, of course).
The cheapest of the VIP editions is being sold for $249 and requires a $100 deposit, which is completely refundable. The 10,000 figure is on top of 2,600 Founders Edition units that were sold back in January, and importantly, 100,000 purchase orders have now been placed by major retailers. The pandemic has temporarily forced Intellivision to halt purchase orders, however.
The 100,000 figure may sound like small potatoes, but in the context of Intellivision’s business, it’s an incredible start. While sold-in to retail is not the same as sold through to consumers, Intellivision CEO Tommy Tallarico told GameDaily on the phone today that his break-even point for the Amico console is a mere 180,000 units sold. That’s in stark contrast with high-powered consoles from companies like Sony and Microsoft.
“If we sell 100,000 we're high-fiving like crazy. To be frank, if we sell 35,000 or 50,000 units we're totally fine. Our break-even point for the entire project is about 180,000 units, over the lifetime of the thing, to be able to continue doing this for many years. We're going to blow that out of the water. We are very confident,” he remarked.
Wedbush Securities analyst Michael Pachter commented to GameDaily that he remains bullish on Amico as well. “I think that it’s likely the worst of the pandemic will be behind us by then, and it’s equally likely that retail stores will be open by then, so I expect consumers to embrace the concept for at least the first 100,000,” he said. “Let’s see how reviews come in, and if reviewers like Amico, it’s likely they will sell a lot more. I really don’t think that those figures are aggressive at all, since it comes with a bunch of games and the new games are under $10. My guess is that it will sell 1 million its first full year.”
Tallarico said that investors have willingly embraced Intellivision because the numbers make a lot of sense.
“People look at these numbers and go, 'Holy shit, so it costs about $5 million to make the hardware, soup to nuts, ok. The games you're making, they are only about $200,000 each.' The break-even point on these games at $10 or $15 each, you sell 10,000 to 15,000 units and you've got your money back. It's the exact opposite of AAA but that's the way the industry used to be, and all these indie developers are getting so screwed,” he stated.
Tallarico explained to GameDaily in 2018 that Amico’s business is being developed with developer-friendly terms in mind.
“[For devs] we are with you 100% from the beginning. So we say to the developer, 'Look, here's the deal. We believe in your project or we believe in you as a company, so we're going to pay for everything.' That's the first thing that's unique on our system. We pay. So there's zero financial risk for developers. Zero,” he noted at the time.
“And then the amount that we pay goes toward an advancement of royalties. But here's where the big differentiator is… The Intellivision Amico will never, ever have two games come out at the same time, ever. So we're all about quality over quantity.”
Intellivision has 50 games in development and expects about 30 to be ready for launch (six are packed in). The pandemic has not had any impact on software development, Tallarico said.
“You take a Last of Us type of project, how many people are there? Towards the end of a project, especially the last sprint, you gotta be in the room together. That is so important. Being in the room is a big part of development for those big games. But for our stuff, we have teams of 5-8 people and so it's a lot easier. From a software standpoint, it hasn't affected us at all, which is great,” he said.
Where the pandemic has had a palpable impact is on hardware. Not only has Intellivision had to cut off purchase orders from retailers for now, but pricing of components has become a major consideration. Things are starting to normalize in China but the pandemic led to a lot of firms snatching up components for electronics, which makes it harder for a small company like Intellivision when big companies like Apple, Samsung, Microsoft and others can suddenly get priority from factories.
“As we stand here today, we are on for 10/10/2020, and that could change in a month from now. The factories in China are 50% to 60% back up,” Tallarico said. “So everybody's buying up not only the factories and assembly lines, but this is the thing [people don't realize]... Here in America, we see what's happened with toilet paper, water bottles and masks, and everyone freaks out and buys everything they can. That's been happening in electronics over in China with components and memory. And what's happening is scarcity is now driving the prices up. I'm trying to keep this thing at $199, and it's impossible in this current phase, and that's partly why we did the VIP pre-orders."
Pricing for any new console is incredibly important, and it’s doubly so for a video game system designed to appeal to families. Tallarico is cognizant of this and doesn’t want to let the base price climb higher than $250.
“If we didn't sell a single unit because we couldn't manufacture, or the cost of components forces us to price at $300, then I'll hold it. I would rather hold it than try to gouge people because of this whole thing,” he stressed.
At $250, people have continued to show interest and preorders have “exceeded expectations,” Tallarico said. But the pandemic has forced Intellivision to be “super strategic” in terms of hardware tweaks and overall operations.
“Right now, our tooling for our system is about $250,000, and that's all the tooling for the plastics and everything that needs to be made. So we paid that, and it's being created now, and what happens is one assembly line in China is able to crank out 35,000 machines a month, the way our system is set up. If we wanted to create a second line, then we'd have to spend another $250,000 for the tooling and then that would get us 70,000 units a month,” he explained.
It’s unclear if Intellivision is prepared to pay for a second line. At the moment, the company appears to be more concerned with making sure its hardware design is finalized.
“I'll give you an example,” Tallarico continued. “We have these capacitive touchscreens, and we do little tweaks to them and they get made in China, and then they get it back to us and we test the shit out of it, and then we might have a tweak and send it back, and that's how it was until about February. Then it was like, ‘Hey we have this tweak and the package just arrived last week in our office, and we have to quarantine it.’ So that's the kind of stuff that slows down our final, final [revisions]. The machine's like 98% done hardware-wise. We can go into tooling automatically because the shape and form is 100% done, but there are a few [small] hardware things or firmware stuff. But it's the components that screws us."
With all eyes on the PS5 and Xbox Series X this year, Tallarico is embracing Amico’s underdog status, but he’s also not bothered one bit by Sony or Microsoft grabbing the spotlight because he doesn’t truly view them as competition.
“They really are a completely different market. People say to me, 'Are you worried if you come out at $249 that people could buy a PS4 at $249, or that people could buy a Switch Lite at $199?' ... We're just targeting a bunch of different people,” he said.
Intellivision launching on October 10 does bring some advantages, as it’s undoubtedly a few weeks before either Microsoft or Sony launch at Holiday 2020, but Tallarico and his team never planned the launch date as a strategic move against the other consoles. How they arrived at 10/10/2020 was actually far more personal than anyone could have imagined.
As it turns out, three years ago when Tallarico and Stephen Roney (who worked on the original Intellivision and B-17 Bomber), were discussing the date, Tallarico mentioned that he had a sister, Karen, who had died at age 27 and had been born on October 10. At the same time, Roney also has a sister named Karen born on October 10; it was meant to be.
"In honor of my sister, it's such a special bonus for me,” Tallarico said. “It was more about that because three years ago we had no idea if Sony and Microsoft would even come out in 2020. Is it an advantage to us? Absolutely, because do you really want to come out the same week as those guys even if they're not 'competitors'? No I don't. From a PR standpoint, how hard is it for us to get on Jimmy Fallon or Conan that week when Sony is doing it? If we can get out six weeks ahead of them, it's a good thing."
Sony and Microsoft have both said that they are no longer super concerned about their own hardware launches, but there’s still a fair amount of uncertainty in the air, Tallarico mentioned.
"We originally were going to put 200,000 Amico systems into the market in the U.S. and Canada, Germany, U.K. and the Middle East as well. Those were the five territories. [From what I understand,] Sony and Microsoft were going to put out a million units worldwide each. I've heard they've backed that to 800,000 now because of the pandemic, and I heard a rumor over the weekend that Sony might do half a million or even push into 2021, but they're super worried that Microsoft is going to get a jump on them,” Tallarico said.
“Those two are playing the poker game like we've never seen before, but the reality is they have no idea how much their machines are going to cost. That's why they haven't announced [the price]. [Because of the pandemic] the price to build the machines has gone up to $800 or $900."
The reality for game companies in 2020 is that the pandemic has forced serious evaluation and readjustment for everyone’s business plans. And if that means the Amico console is scarce this year, Tallarico said he can live with that.
“Marketing is really attached to how many units we can get out there. If we can only crank out 35,000 units let's say, then our marketing is going to completely change. And so you have to back everything way off, and if the worst case scenario is the thing comes out, everybody loves it, and no one can find one of the store shelves anywhere, scarcity can be a nice thing to have in your back pocket as well. Look at what happened with the Wii,” he noted.
“We're okay to walk before we run because we're such underdogs. [Because of the pandemic] we had to restructure everything... because we have milestones with our investors too. We had to readjust everything to the point of, we need a Plan A and a Plan B. Plan A, we get 50,000 to 100,000 units out this Christmas, great. Plan B, what if this thing keeps going on? We're not going to risk ruining the entire company because we didn't plan ahead. So what if it has to come out next year? We still have $500,000 a month payroll... so we've gone back and restructured.”
It’s been 40 years since the original Intellivision console launched in 1980. There’s no denying that Amico has a challenging road ahead, but thanks to the way Tallarico and the new Intellivision company have structured the business, Amico appears to have more than a fighting chance.
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