Zeebo Takes Wireless Gaming to Emerging Markets

A $240 Zeebo console is launching in Brazil. As big as a paperback, the machine runs on a Qualcomm phone chip and downloads online games

By Kenji Hall

Reinaldo Normand is terrible at remembering dates, but Feb. 17, 2006, is one he won't easily forget. That afternoon he was chatting with colleagues during a break at the downtown São Paulo offices of Tectoy, a Brazilian gaming and electronics company, when an idea popped into his head. What if he were to make a living-room gaming console for emerging markets that would connect to the Internet over wireless phone networks and sell at prices middle-class families could afford? In Brazil, the choices weren't great: Consumers could pay $150 for a 20-year-old Sega (6460.T) console, $250 for a pirated version of Sony's (SNE) nine-year-old PlayStation 2, or $1,000 for the latest Xbox 360 made by Microsoft (MSFT).

Normand, who was then in Tectoy's mobile video games business, admits it was a crazy thought. In the $50 billion global video game industry, Sony, Microsoft, and Nintendo dominate the console market. They have spent billions of dollars developing the technology and marketing the machines and games that go with them. Their brands are well known globally. It would be financial suicide for a no-name with no money to take on such formidable tech giants.

But a half-hour later, Normand called his boss, Stefano Arnhold, who was traveling in Europe on a business trip. "I told him, 'We need to do this,'" Normand recalls. "'This will be a billion-dollar company. We need to find investors in America.'"

Multimillion-Dollar Investment

A day after Normand's epiphany, Mike Yuen was at his office in San Diego, writing up a business idea that bore similarities to Normand's. As a manager in the gaming division at mobile-phone chipmaker Qualcomm (QCOM), Yuen had often heard developers complain that playing games on the tiny screens of mobile phones was an unsatisfying experience. He was determined to do something about it.

Two men, separated by nearly 9,500 kilometers (5,900 miles), with a similar hunch. Normand would soon close the distance. He searched on Google for several U.S. chip companies' e-mail addresses and phone numbers. Months later, with help from a Qualcomm employee in Brazil, Normand found himself sitting across from Yuen in mid-2006, pitching a version of his idea. By March 2008, Qualcomm agreed to a multimillion-dollar investment in Normand's venture. "I realized the scope of what Reinaldo was planning and how similar it was to a concept I had been working on internally within Qualcomm," says Yuen, who is senior director of games and services.

On June 1, Qualcomm and Normand's venture, Zeebo, will begin selling their $240 console—also called Zeebo—in Brazil's second-largest city, Rio de Janeiro. About the size of a paperback book, the machine will run on a Qualcomm phone chip and download games from an online store. Each console will have three games pre-installed. The only way to get more games will be to buy them online and save them on the console. "The iPhone was our model," says Normand, Zeebo's founder and vice-president for development.

By September, the Zeebo is expected to hit stores in São Paulo and Mexico City, and next year it will be available in other Latin American countries as well as India. China and Russia could be added later. "We would be pleased with hundreds of thousands of units sold this year and millions sold next year," says John Rizzo, Zeebo's chief executive.

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